G. Dayanand Reddy v. G. Raveen Kumar

THE HON'BLE SRI JUSTICE M. SATYANARAYANA MURTHY CIVIL REVISION PETITION No.3186 OF 2016 ORDER:

This revision, under Article 227 of the Constitution of India, is filed against the Order dated 09.06.2016 passed in I.A. No.138 of 2016 in O.S. No.2209 of 2012 by the III Junior Civil Judge, City Civil Court, Hyderabad, whereby the document was admitted in evidence though it was not registered as per the provisions of Section 17 of the Registration Act, 1908 (for short, 'the Act').

02. For convenience of reference, the ranks given to the parties before the trial court will be adopted through out the Order.

03. The plaintiff filed suit for perpetual injunction against the defendant, who is the revision petitioner herein, restraining him from interfering with the possession and enjoyment of the schedule property. During trial, both the parties filed several documents in support of their claim and one such document is Memorandum Of Understanding, dated 29.11.2010, whereby the plaintiffs acknowledged the receipt of amount. The document was tendered in the evidence for marking, but the defendant raised objection that the contents of the document shows that it transferred right in immovable property, and thereby it is required to be registered in terms of Section 17 of the Act.

The trial court, after considering the terms and conditions of the document, without recording any finding as to, what is collateral purpose, received and admitted the document for collateral purpose. Aggrieved thereby, the present revision petition is filed raising several contentions and the main ground urged before this Court is that the trial court did not record any finding as to what is the exact meaning of collateral purpose, but received the document invoking the Proviso to Section 49 of the Act and drawn attention of this Court to several Judgments of the Apex Court and this Court, they are, S.KALADEVI V.

V.R.SOMASUNDARAM AND OTHERS[1], K.B. SAHA AND SONS PRIVATE LIMITED V. DEVELOPMENT CONSULTANT LIMITED[2], GOLLA DHARMANNA V. SAKARI POSHETTY @ WADOOR POSHETTY AND OTHERS[3], and contended that the document is tendered in evidence to prove his title to the property, hence it cannot be admitted for want of registration and also drawn the attention of this Court to paragraph 34 of the Judgment of the Apex Court in K.B. SAHA AND SONS PRIVATE LIMITED referred to supra.

04. Per contra, Sri C.Raghu, learned counsel, on behalf of Sri. T.Rajinikanth Reddy, learned counsel for the plaintiffs, who are the respondents herein, would contend that in a suit for bare injunction an unregistered sale deed can be received only to prove possession and placed reliance on the Judgment of the Apex Court i n PADMA VITHOBA CHAKKAYYA v. MOHD. MULTANI AND ANOTHER[4], K.R.SUBBARAYA MUDALIAR V. TIRUMALA TIRUPATHI DEVASTHANAMS, TIRUPATHI, CHITTOOR DISTRICT,[5] and VANGALA LAXMAMMA V. PASHAM NARSI REDDY AND OTHERS[6]. On the strength of the principles laid down in the Judgments referred to supra, it is contended that an unregistered document can be admitted in evidence.

Finally, it is contended that the contents of the document are relevant to decide the nature of transaction and none of the recitals of the document transferred or extinguished right in the immovable property, and therefore, the document is required not to be registered, since the regular registered sale deed agreed to be executed by the parties in respect of the property. Therefore, the document is not required to be registered even under Section 17 of the Act, and hence, there is no illegality in the order under challenge, warranting interference of this Court and prayed for dismissal of the revision petition.

05. Considering the rival contentions of both the learned counsel and upon perusing the material available on record, the sole point that arise for consideration is, "Whether an unregistered Memorandum of Understanding dated 29.11.2010 creates or extinguishes any right in the immovable property? If so, is it inadmissible in evidence for want of registration?"

POINT:

06. Section 17 of the Act deals with documents, which are compulsorily registerable, a) instruments of gift of immovable property; b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property; c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest. The other clauses of Section 17 of the Act are not necessary to decide the real controversy.

07. The terms of Memorandum of Understanding are relevant to decide whether the document falls within the ambit of Section 17 of the Act. The necessary conditions contained in page 3 of the Memorandum Of Understanding are extracted hereunder for better appreciation.

"NOW THEREFORE THIS MEMORANDUM OF UNDERSTANDING WITNESSETH AS UNDER:

1.

That the First Party hereby declares that he will construct a Commercial Complex on his entire property including the said property sold to the Second Party herein i.e. Portion of Shop No.A and the Second Party herein agreed for the same.

2.

That today the Second Party had handed over the possession of the said property to the First Party herein

for construction purpose.

3. That the First Party shall complete the construction work within nine months from the date of this MoU. 4.

It is mutually agreed between the First Party and Second Party that after completion of the said property, the First Party shall hand over the possession of One Shop of the said property on First Floor i.e. in the middle of the Complex and the First Party shall execute a fresh Registered Sale Deed in favour of the Second Party.

5.

It is mutually agreed between the First Party and Second Party that at the time of execution of Registered Sale Deed in respect of the Shop on First Floor in favour of the Second Party, the Second Party shall transfer the Portion of Shop No.A in the Cellar Floor in favour of the First Party or his nominee or nominees i.e. the property by virtue of the Registered Sale Deed Document No.2074 of 2010.

6. That a case vide R.C.NO.425 of 2008 is pending on the file of III Additional Rent Controller, City Small Causes Court, Hyderabad in between the Second Party herein and others in respect of shop No.15-6-619, hence the Second Party herein and others shall withdraw the said R.C. No.425 of 2008 after execution of the Registered Sale Deed in respect of Portion of Shop No.A.

7. That the Second Party shall hand over the possession of the Shop No.15-6-619 to the First Party after execution of Registered Sale Deed in respect of Shop No.A by the First Party in favour of the Second Party. Moreover the Second Party have received a sum of Rs.3,50,000/- (Rupees Three Lakhs Fifty thousand only) from the First Party towards settlement in respect of Shop No.15-6-619 and the Second Party having received the said amount had passed a separate receipt.

8. That this Memorandum of Understanding is executed in two original sets, one set shall be retained by the First Party and another set by the Second Party."

08. As seen from the terms and conditions of the Memorandum of Understanding, the First Party agreed to construct commercial complex in the entire property including the said property sold to the Second Party i.e. portion of shop No.A and the

Second Party herein agreed for the same and handed over the possession of the said property to the First Party for construction purpose. Finally, at clause 5 of MoU, it is mutually agreed between the First Party and Second Party at the time of execution of registered sale deed in respect of Shop on First Floor in favour of the Second Party, the Second Party shall transfer the portion of Shop No.A in Cellar Floor in favour of the First party or his nominee or nominees i.e. the property purchased under the registered sale deed, document No.2074 of 2010.

09. In the second page of MoU, the First Party acknowledged execution of registered sale deed in favour of the second party i.e. the plaintiff in the suit. This understanding is only with a view to transfer the premises in the Cellar Floor after construction and on such transfer, the plaintiff agreed to retransfer the shop No.A by the First Party, who is defendant in the suit, as this is only an agreement between the parties and it neither creates any interest nor extinguishes any right in the immovable property.

10. Clause (g) to sub-Section (1) of Section 17 of the Act contemplates that an agreement of sale of immovable property of the value of one hundred rupee and upwards is required to be registered. It came into effect from 01.04.1999 by virtue of A.P. Act 4 of 1999.

11. As seen from Clause (g) of sub-Section (1) of Section 17 of the Act, any agreement of sale of immovable property is required to be registered. In the present Memorandum of Understanding, the parties agreed for sale of shop in the first floor, the First Party agreed to transfer the shop in the first floor and in turn the Second Party agreed to retransfer shop No.A in favour of the First Party, who is the defendant in the suit. The said document falls within the ambit of Clause (g) to sub-Section (1) of Section 17 of the Act, though not falls under Clauses (a) and (b) to sub-Section (1) of Section 17 of the Act. When the parties agreed to transfer one part

of immovable property and retransfer the other in favour of the defendant with an undertaking to obtain registered sale deed for the purpose, certainly it would amount to agreement of sale and it falls within the ambit of Clause (g) to sub-Section (1) of Section 17 of the Act. Therefore, I am of the prima facie view that Memorandum of Understanding dated 29.11.2010 is an agreement for transfer of immovable property by one party to the other party and in turn retransfer shop No.A by the First Party in favour of the Second Party.

12. During hearing, Sri S.Balachand, learned counsel for the revision petitioner, drawn the attention of this Court to clause (7) of Memorandum of Understanding i.e. at page 4, whereunder the sale consideration agreed to be paid by the parties is mentioned i.e. Rs.3,50,000/-.

13. On the other hand, Sri C. Raghu, learned counsel for the respondents, who are the plaintiffs in the suit, drawn the attention of this Court to Clause (v) to sub-Section (2) of Section 17 of the Act to contend that the document is not an agreement of sale, but it is only a document to obtain regular registered sale deed. This clause has no application for the reason that both the parties agreed to transfer immovable property to one another, more particularly, the defendant/revision petitioner agreed to execute registered sale deed for the shop in first floor and the respondents/ plaintiffs are agreed to retransfer shop No.A besides payment of consideration of Rs.3,50,000/- mentioned at paragraphs 7 of the Memorandum of Understanding.

14. Therefore, I am unable to agree with the contentions of the counsel for the respondents/plaintiffs that it would not fall within the ambit of Clause (g) to sub-Section (1) of Section 17 of the Act and, prima facie held that it is an agreement for consideration of a sum of Rs.3,50,000/- relating to immovable property and falls within the ambit of Clause (g) to sub-Section (1) of Section 17 of the Act and

required to be registered.

15. The suit is filed for grant of permanent injunction in respect of shop No.A, which is the schedule property in the plaint, conveyed the same by executing registered sale deed in favour of the respondents/plaintiffs by the revision petitioner/defendant. In a suit for bare injunction, an unregistered document can be admitted in evidence as held by the Apex Court in PADMA VITHOBA CHAKKAYYA's case referred to supra at paragraph 8 as follows: "The endorsement of cancellation on the back of the sale deed in favour of Rajanna dated December 21, 1923, has been held, as already stated, to be inadmissible in evidence as it is not registered. The result of it is only that there was no retransfer of title by Rajanna to the second defendant, and the family would in consequence continue to be the owner, and that is why the appellant is entitled to redeem. But the endorsement, taken along with the sale deed by the second defendant in favour of the first defendant is admissible in evidence to show the character of possession of the latter."

16. Similarly in a Judgment of this Court in VANGALA LAXMAMMA's case referred to supra, at paragraphs 11 and 12, held as follows:

"11. The Registration Act, 1908 was enacted with the intention of providing orderliness, discipline and public notice in regard to transactions relating to immovable property and protection from fraud and forgery of documents of transfer. This is achieved by providing for consequences of non-registration.

Section 17 of the Registration Act clearly provides that any document (other than testamentary instruments) which purports or operates to create declare, assign, limit or extinguish whether in present or in future any right, title or interest whether vested or contingent of the value of Rs.100/- and upwards to or in immovable property. Section 49 of the said Act provides that no document required by Section 17 to be registered shall affect any immovable property comprised therein or be received as evidence of any transaction affecting such property, unless it has been registered. Registration of a document gives notice to the public that such a document has been

executed.

12. It is provided under Section 49 of the Registration Act that no document required by Section 17 or by any provisions of the Transfer of Property Act to be registered shall affect any immovable property comprised therein or be received as evidence of any transaction affecting such property unless it is registered. As per the provision made in the proviso to that Section such a document may be received as evidence of any collateral transaction not required to be effected by registered instrument. It has consistently been held by Courts of law that an unregistered document of transfer which is required to be registered and not registered is admissible in evidence to prove the date of entering into the fact of possession of the transferee and to show the character of his possession.

Though an unregistered document required to be registered under law is not admissible in evidence to claim any right under it, it would be admissible in evidence for a collateral purpose i.e. for a purpose other than that for which the document was created. It has always been held that a vendee under an unregistered sale deed, who comes into possession under it, though the document is inadmissible in evidence to prove title or any rights under it, it will be admissible in evidence to show the character of possession of the vendee viz.

, whether it is in his own right or whether it is with permission like that of a lessee or licensee and if he continues in such possession for over the statutory period he acquires title to the property not on account of the unregistered sale deed, but on account of the fact of his having been in possession for over the statutory period in his own right adversely to the real owner. Similarly, if a lessee comes into possession of immovable property under an unregistered lease deed which requires to be registered under law, certainly, it would be admissible in evidence to show the character of his possession, viz., that his possession is that of a lessee and therefore permissive in nature, since a lessor, who parts with physical possession to a lessee, under law is always considered to be in constructive possession through the lessee.

Therefore, so long as the possession of the lessee is permissive, he cannot prescribe any title hostile to his lessor."

17. A similar view was expressed at paragraph 37 of the Judgment of the Apex Court in K.R. SUBBARAYA MUDALIAR's

case.

18. If the principle laid down by the Apex Court and other Courts are applied to the present facts of the case, an unregistered document can be admitted in evidence in a suit for bare injunction for collateral purpose.

19. Now the question is, what is collateral purpose? Proviso to Section 49 of the Act did not define the meaning of collateral transaction. But meaning of collateral is that secondary, incidental, subsidiary, auxiliary, ancillary, unessential, immaterial, parallel, attendant, supportive.

20. Therefore, the collateral transaction can be said to be secondary or incidental or subsidiary to the main transaction. The word 'collateral purpose' is defined by the Apex Court in K.B. SAHA AND SONS PRIVATE LIMITED's case referred to supra. In S.KALADEVI's case referred to supra, the Apex Court reiterated the similar view and at paragraph 34, the principles laid down in K.B.SAHA AND SONS PRIVATE LIMITED's case are extracted hereunder:

"1. A document required to be registered, if unregistered is not admissible into evidence under Section 49 of the Registration Act.

2. Such unregistered document can however be used as an evidence of collateral purpose as provided in the proviso to Section 49 of the Registration Act.

3. A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.

4. A collateral transaction must be a transaction not itself required to be effected by a registered document, that is, a transaction creating, etc. any right, title or interest in immovable property of the value of one hundred rupees and upwards.

5. If a document is inadmissible in evidence for want of registration, none of its terms can be admitted in evidence and that to use a document for the purpose of proving an important clause would not be using it as a collateral purpose."

21. Hence, the meaning of collateral purpose or collateral transaction must be an independent or divisible from the transaction to the effect of the law required by the Act.

22. In the present facts, the Memorandum of Understanding was executed for transfer of interest in immovable property in future by executing registered sale deed by the First Party, who is the defendant in the suit, in favour of the Second Party, who is the plaintiff, and in turn the Second Party, agreed to retransfer shop No.A in the Cellar Floor in favour of the first party, the defendant. The dispute is only with regard to shop No.A in the Cellar Floor, not with regard to the portion proposed to be constructed in the first floor.

23. In the two Judgments of the Apex Court, S.KALA DEVI's case and K.B. SAHA AND SONS PRIVATE LIMITED's case referred to above, the Full Bench Judgment of the Apex Court in PADMA VITHOBA CHAKKAYYA's case was not even referred and the earlier Judgment of the Apex Court in PADMA VITHOBA CHAKKAYYA's case is by a full Bench consisting of three Judges, whereas later judgments are by Division Bench. Therefore, the law declared by the Apex Court in the Judgment of larger Bench is still binding precedent on this Court and applying the principle laid down by the larger Bench, in PADMA VITHOBA CHAKKAYYA's case, an unregistered document can be admitted in evidence in a suit for bare injunction.

But, in the said judgment, the Court did not discuss anything about the collateral purpose as provided under the Proviso to Section 49 of the Act, but without defining the collateral purpose, only based on the principle laid down in PADMA VITHOBA CHAKKAYYA's case, an unregistered document which would not create any interest or extinguish any right or title in immovable property, the document can be admitted. But the trial court admitted the document only on the ground that such document can be admitted for limited purpose.

24. It appears that advocates for both the parties did not draw the attention to various precedents of the Apex Court and the other High Courts before the trial court. Therefore, the trial court is of the view that the Memorandum of Understanding dated 29.11.2010 is admissible in evidence.

25. Sri S. Balchand, learned counsel for the revision petitioner, has drawn the attention of this Court to another Judgment in GOLLA DHARMANNA's case, wherein this Court, while dealing with Section 35(a) of the Indian Stamp Act, at paragraph 12 held that an unregistered document is not admissible, though stamp duty and penalty was not paid and such demand would not cure the defect of non registration.

26. There is no dispute regarding the law laid down by the Apex Court and this Court, but, however, for limited purpose of proving possession in a suit for bare injunction, a document can be admitted following the principle laid down in PADMA VITHOBA CHAKKAYYA's case referred to supra.

27. In a recent Judgment rendered by the Apex Court in SUBRAYA M.N. v. VITTALA M.N. AND OTHERS[7] held that binding family arrangements dealing with immovable property worth more than rupees hundred can be made orally and when so made, no question of registration arises. If, however, it is reduced to the form of writing with the purpose that the terms should be evidenced by it, it required registration and without registration it is inadmissible; but the said family arrangement can be used as corroborative piece of evidence for showing or explaining the conduct of the parties. Therefore, the document can be used as a piece of evidence though not registered, and it is admissible for the above limited purpose.

28. Hence, I hold that the Memorandum of Understanding dated 29.11.2010 can be admitted for limited purpose of proving

possession and not for any other purpose. Accordingly, the revision petition is liable to be dismissed, since I find no illegality in the order passed by the trial court.

29. In the result, the civil revision petition is dismissed and the trial court is directed to decide the matter independently uninfluenced by the observations hereinabove.

30. Miscellaneous petitions, if any, pending in this revision shall stand closed.

___________________________________ M. SATYANARAYANA MURTHY, J Date: 11.08.2016 BV [1] (2010) 5 SCC 401 [2] (2008) 8 SCC 564 [3] 2013 (5) ALD 490 [4] AIR 1963 SC 70 [5] 2004(5) ALD 322 [6] 2010(3) ALT 165 [7] AIR 2016 SC 3236