Registration Of Vehicle By Subsequent Purchaser Cannot Be Cancelled Because Initial Registration Was Done With False Representation: Bombay HC

The Bombay High Court has held that where a vehicle has been purchased by an innocent subsequent buyer, and the buyer has fulfilled all statutory requirements, including payment of customs duty, interest, and fine imposed by the Settlement Commission, the vehicle's registration cannot be cancelled merely because the initial registration was obtained on the basis of forged documents. The Court observed that the purchaser cannot be made to suffer consequences of a fraud committed by others, particularly when the authorities failed to consider the binding findings of the Settlement Commission under the Customs Act.

Justice N.J. Jamadar was hearing a petition filed by Imran Humayun Chandiwala challenging orders of the Registering Authority and the Appellate Authority cancelling the registration of a car originally imported under a forged bill of entry by falsely claiming diplomatic exemption. The vehicle was later purchased by the petitioner in December 2020. The Directorate of Revenue Intelligence seized the car in August 2021. The petitioner paid customs duty, interest, and fine, and obtained release of the vehicle. Despite this, the Transport Authorities cancelled the registration under Section 55(5) of the Motor Vehicles Act, 1988.

The Court held that once the Settlement Commission had concluded that the petitioner had no role in the fraud and had granted immunity under Section 127H of the Customs Act, that finding was conclusive under Section 127J and binding on all authorities. The Transport Authorities were therefore obligated to consider the Settlement Commission's findings before taking action.

“… the Petitioner made the reparation for the illegal acts of his vendor. Prima facie, the Petitioner was not involved in the illegal import of the vehicle. The authorities under the Act, 1988, therefore, ought to have taken into account the order passed by the Settlement Commission,” the Court observed.

The Court observed that the registration of the vehicle in the name of the Petitioner could not have been cancelled on the sole premise that the initial registration in the name of Meenarani Devi was obtained by making a false representation, and on the basis of forged documents.

The Court also examined Section 42(2) of the Motor Vehicles Act, which deals with registration of vehicles imported by diplomats, and held that upon discovery of fraud in the initial registration, the appropriate course was not cancellation against an innocent purchaser but re-registration under the ordinary process prescribed by Section 40. It observed:

“… if the vehicle had changed hands and came to be registered in the name of an innocent purchaser who pays the customs duty, interest and fine, as ordered by the Settlement Commission, then the vehicle ought to be registered under the provisions of Section 40 of the Act, 1988, lest the consequences of fraudulent action would befall an innocent purchaser.”

Accordingly, the High Court quashed the impugned orders and restored the registration of the vehicle. The petition was allowed without costs.

Case Title: Imran Humayun Chandiwala v. State of Maharashtra & Ors. [WRIT PETITION NO.12921 OF 2025]

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