Cancellation of registration in fraudulent transactions: MHC comments

The Court has mooted the introduction of a quasi-judicial appellate tribunal which would have the final say in disputes concerning such transactions.

The Madras High Court on Friday clarified the legal position when it comes to the cancellation of registration of fraudulent transactions, including fraudulent transfer of property (S Kanniammal @ Mangai v. State of Tamil Nadu)

Bearing in mind the recent passage of a Bill to amend the law governing registration of documents in Tamil Nadu, the Court also mooted the introduction of a quasi-judicial appellate tribunal which would have the final say in disputes concerning such transactions.

Justice R Suresh Kumar noted that the number of fraudulent transactions may have reduced over the years due to safeguards introduced in circulars by the Inspector General of Registrations in Tamil Nadu while exercising powers under the Registration Act, 1908.

However, “it cannot be said that such fraudulent transactions have been completely stopped or registration on such documents have been totally stopped,”  the Court observed.

While so, the Court noted further that remedies are limited when it comes to genuine or innocent landowners challenging the registration of fraudulent property transfers.

No relief under Article 226 to aggrieved property owners

Pertinently, the Court observed that as the law stands, such aggrieved parties cannot expect any relief from the High Court under Article 226 (writ jurisdiction) of the Constitution of India.

Summing up the legal position, Justice Suresh Kumar observed:
“As of now, the only remedy open to or available to them (aggrieved parties) is either the beneficiary out of the forged or fraudulent instruments, under which the title of the property transfers in their favour, should voluntarily come forward to re-convey the property in question to and in favour of the true owners or the true owners shall necessarily approach the competent Civil Courts to get a remedy by seeking a declaratory relief.”

In this regard, the Court pointed out the settled-position of law in the Full Bench Madras High Court decision in  Latif Estate Line India Ltd. v. Hadeeja Ammal and others * and the Supreme Court’s 2016 judgment in  *Sathya Pal Anand v. State of Madhya Pradesh.

In the Latif Estate case, the Madras High Court had noted that there is no provision in the Transfer of Property Act or in the Registration Act which deals with the cancellation of deed of sale. The Full Bench went on to rule that a deed of sale cannot be unilaterally cancelled by one party to the transaction and that such a cancellation deed cannot be registered. The proper course would be to re-convey the property by a deed of conveyance by the transferee in favour of the transferor.

Justice Kumar further recounted that in the Latif Estate case, the Court had concluded that a “complete and absolute sale can be cancelled at the instance of the transferor only by taking recourse to the civil court by obtaining a decree of cancellation of sale deed on the ground inter alia of fraud or any other valid reasons.”

This Full Bench ruling approved the earlier single-judge ruling of the Madras High Court in  GD Subramaniam v. The Sub-Registrar and others and deviated from an Andhra Pradesh High Court Full Bench ruling in  Yanala Malleshwari and others v. Ananthula Sayamma and others.

In the Sathya Pal case, the Supreme Court ruled that it is not open to the registering officer to cancel any registration, even if his attention is invited to some irregularity committed during the registration of the document. The aggrieved party can only challenge the registration and validity of the document before the civil court, the top Court had ruled.

Should genuine owners be driven to civil courts and engage in long legal battles?

The judge, however, struck an empathetic chord with the plight of genuine landowners being forced to endure decades of civil litigation in order to recover property illegally transferred out of their name.

“Merely because they are genuine owners of the immovable properties, should they be driven to the Civil Court, by thus, should they engage a long pending legal battle against the fraudsters and subsequent innocent purchasers or third parties, who might have fell prey with the fraudsters and by thus, to lead the civil case and conduct the case for decades together, to see the light of the day to get back the immovable property from such fraudsters?”,  the Court remarked.

Adverting to the facts of some of the cases before the Court, the judge also noted that the true owners of immovable property are often met with “agony and sufferance for years together without a final and complete remedy.”

Law proposed to empower registering authorities to cancel fraudulent registrations

The judge proceeded to take note that the State government had recently taken steps to empower registration authorities with the power to cancel fraudulently registered documents through the passage of a Bill to introduce the Registration (Tamil Nadu Second Amendment) Act, 2021.

Under Section 22B of the amendment Act, the registering officer can refuse to register forged documents, documents prohibited under any Act, any document relating to the transfer of any property attached by an authority or any other document that may be specified by the State through notification.

Section 77A empowers the Registrar to cancel documents registered in contravention of Section 22A (concerning registrations opposed to “public policy”) or Section 22B. Such cancellation can be done suo motu or on complaint. The provision adds that such cancellation may be done after the issuance of a show cause notice to persons likely to be affected by the cancellation and on consideration of replies received to such notice. This power can be exercised by the Inspector General, Registrations as well.

Appeals against any decisions taken under Section 77A can be challenged under Section 77B of the proposed law before the Inspector General of Registration or the State government.

Create quasi-judicial appellate forum to have final say on disputes involving fraudulent registrations

The High Court on Friday suggested that the State government also introduce a quasi-judicial forum or tribunal for second appeals against decisions taken under Section 77B of the proposed law.

Justice Kumar made the suggestion in view of concerns whether the summary procedures envisioned in Sections 77B and 77A of the proposed law would be sufficient to settle disputes involving the cancellation of allegedly fraudulent registrations.

“In order to have an effective judicial / quasi- judicial mechanism, as against the order of cancellation of instruments by registering authorities or order of refusal of cancellation of instruments by the registering authorities, in every revenue district, the concerned District Registrar (Registration) can be conferred with the power to act as an appellate authority. As against the order to be passed by such first appellate authority / District Registrar (Registration), further appeal shall lie before one or more Appellate Tribunal to be constituted in this regard,” the Court suggested.

The Court further suggested that such an Appellate Tribunal can be headed by a judicial person who is or has been a High Court Judge along with two members, one deputed from the Registration Department and not below the rank of DIG, Registration and the other from the Revenue Department not below the rank of District Revenue Officer.

The decision made by the Appellate Tribunal may be treated as final, the Court suggested. The Court added that for all practical purposes, the tribunal shall be treated as a Civil Court and that for regulating the procedure of deciding the appeal, the Code of Civil Procedure can be made applicable.

“If this kind of redressal mechanism is provided, it would be a viable and effective alternative redressal forum for number of persons who have been hitherto driven from pillars to posts for retrieval of their valuable immovable properties which they acquired either by way of inheritance or out of their legally hard earned fortune,”  the Court added.

Verdict on writ petitions before the Court

With these, among other observations, the Court proceeded to dismiss the petitions before it that sought directions to the registering authorities to cancel the registration of allegedly fraudulent property transfers.

“Till the amended provisions of 1908 Act, as discussed above, comes to effect, the prayer sought for to cancel any instrument registered already by a registering authority, cannot be granted by this Court, in view of the settled legal position as discussed extensively in the earlier part of this order,” the Court said.

Referring to some petitions challenging the refusal of the Registrar to register certain documents, the Court found that the appellate remedy under Section 72 of the Registration Act was the correct course.

A third category of cases, where grievance was registered against the Sub-Registrar for keeping the registration of some documents pending, was directed to be posted before the appropriate High Court Bench for a decision.

Read Full Judgement