Registered Sale Deed Has Strong Presumption Of Genuineness, Cannot Be Lightly Called 'Sham': Supreme Court

The Supreme Court held that a registered sale deed carries a greater presumption of validity and genuineness, and therefore cannot be lightly declared as 'sham' to oppose the sale transaction. “It is a settled position of law that a registered Sale Deed carries with it a formidable presumption of validity and genuineness. Registration is not a mere procedural formality but a solemn act that imparts high degree of sanctity to the document. Consequently, a Court must not lightly or casually declare a registered instrument as a “sham”, observed a bench of Justices Rajesh Bindal and Manmohan, while allowing the buyer's plea where the registered sale deed executed in her favour was disputed later on by the seller, terming it to be 'sham', without credible evidence. It was the case where the Respondent mortgaged his house with the Appellant to pay off his debt. When the Respondent failed to redeem the mortgage on the Appellant's demand, a registered sale agreement was entered, making the Appellant an exclusive owner of the house. However, the Respondent, already being in possession of the property, became the tenant of the Appellan,t and a rent agreement was executed. For 14 months, the Respondent paid rent and acknowledged this liability in 1974. However, when eviction proceedings began in 1975, he filed a suit in 1977, contending the sale was a sham, as it was actually a mortgage to secure a loan. The Trial and First Appellate Courts upheld the sale as genuine, but the High Court reversed this, treating it as a mortgage. The appellant then appealed to the Supreme Court. Setting aside the High Court judgment, the judgment authored by Justice Manmohan restored the First Appellate Court's decision and upheld the sale deed as a genuine transaction. It emphasised that registered documents carry a strong presumption of validity and cannot be lightly declared sham without cogent pleadings and convincing evidence. “…as both the Sale Deed and Rental Agreement in question are registered, there is a very strong presumption about the validity and genuineness of the documents in question.”, the court said. “...as all the recitals and the covenants in the Sale Deed are clear, categorial and admit of no ambiguity, this Court has no doubt that the intent of the parties while entering into the said Deed dated 12th November 1971 was to conduct an outright sale of suit house in favour of Appellant-Defendant No.1 for a valuable consideration of ₹10,000/- (Rupees Ten Thousand only).”, the court held. Accordingly, the appeal was allowed, and the First Appellate Court's decision was restored, which upheld the trial court's decision to treat sale deed as genuine.HeadnoteRegistered Documents – Presumption of Validity – Standard of Proof to Declare a Registered Sale Deed as "Sham" – A registered Sale Deed carries a formidable presumption of validity and genuineness. Registration is a solemn act imparting a high degree of sanctity to the document; therefore, courts must not lightly or casually declare it a "sham" - The burden of proof to displace this presumption rests heavily upon the challenger, requiring material particulars and cogent evidence to demonstrate that the Deed was never intended to operate as a bona fide transfer of title. [Paras 31 - 33]Pleading Standards – Order VI Rule 4 CPC – Rule Against "Clever Drafting" – A party alleging that a registered Deed is a sham must satisfy a rigorous standard of pleading by providing clear, cogent, and convincing averments with material particulars - Adopting a test akin to Order VI Rule 4 of the CPC, Supreme Court held that "clever drafting" creating an illusion of a cause of action is impermissible - Mere suspicion or nebulous averments without material particulars are insufficient to dislodge the presumption under Sections 91 and 92 of the Indian Evidence Act, 1872. [Paras 34, 35]Transfer of Property Act, 1882 – Section 58(c) – Mortgage by Conditional Sale vs. Outright Sale – No transaction shall be deemed a mortgage by conditional sale unless the condition for reconveyance is embodied in the document that effects or purports to effect the sale - In the absence of such a clause in the registered Sale Deed, the transaction cannot be construed as a mortgage by conditional sale. [Paras 44 - 49]Indian Evidence Act, 1872 – Sections 91 and 92 – Admissibility of Oral Evidence – Where the terms of a written registered document are clear and unambiguous, extrinsic evidence to ascertain the true intention of the parties is inadmissible - While oral evidence may be admissible to show a document is a "sham," the threshold for such a claim is extremely high and must be supported by strong evidence of surrounding circumstances, not subsequent conduct - Supreme Court suggested an urgent need for the Union and State Governments to digitize land records and registered documents using secure, tamper-proof technologies like Blockchain to minimize forgery and "clever drafting" that clogs the...

Registered Sale Deed Has Strong Presumption Of Genuineness, Cannot Be Lightly Called 'Sham': Supreme Court

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Yash Mittal

Registered Sale Deed Has Strong Presumption Of Genuineness, Cannot Be Lightly Called 'Sham': Supreme Court

Yash Mittal

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Yash Mittal

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