Registration of decrees: Determining the existence of ‘pre-existing right’

The Indian Registration Act, 1908 (“Registration Act”) mandates the registration of any non-testamentary instrument which inter alia creates any right, title, or interest in any immoveable property which is valued at more than one hundred rupees (Section 17(1)(b)) and any non-testamentary instrument which acknowledges the receipt or consideration on account of the creation of such right, title or interest (Section 17(1)(c)). Section 17(2)(vi) of the Registration Act exempts “any decree or order of a Court” from the requirement of registration under Section 17(1)(b) and Section 17(1)(c). The sole statutory exception to Section 17(2)(vi) is a compromise decree where the immoveable property forming a part of the decree was not the subject-matter of the suit. In other words, such a decree is the only form of decree which is not exempted from the requirement of registration under Section 17(1)(b) and Section 17(1)(c). (This exception was inserted in Section 17(2)(vi) with effect from 1st April 1930 and it legislatively overruled the Privy Council’s decision in Rani Hemanta Kumari Debi v. Midnapur Zemindari Co. Ltd.)

However, the Supreme Court in Bhoop Singh v. Ram Singh Major was conscious of the fact that Section 17(2)(vi), if interpreted literally, would allow parties to avoid the payment of registration charges and stamp duty by filing collusive suits and securing the transfer of immoveable property through a decree passed in a collusive suit. Therefore, the Court read into Section 17(2)(vi) a condition that the order or decree of the Court must not create a new right, title or interest in immoveable property for it to qualify for the exemption from registration under Section 17(2)(vi). It is only a decree or order of a court declaring a pre-existing right that will be exempted from the requirement of registration. This test was made applicable to compromise decrees and other decrees alike (except, of course, the statutory exception to Section 17(2)(vi), which was left untouched).

Two recent decisions of the Supreme Court, both authored by Ashok Bhushan J., throw light upon the Court’s approach to determining whether the decree merely declared a pre-existing right or created a new right in an immoveable property. At the same time, they cast a doubt on the continued applicability of the Bhoop Singh test. It is important to examine their facts in some detail.

In Mohammade Yusuf v. Rajkumar, the defendants in a suit relied upon a compromise decree passed in their favour in an earlier suit to establish their title over the land in dispute in the latter suit. The defendants argued that they had pre-existing title in the land on account of adverse possession and the compromise decree did not create title in their favour. The High Court held that adverse possession could not constitute the basis of title, and therefore, the defendants did not have title at the time the compromise decree was passed. Thus, the High Court ruled that the compromise decree created a new right in the land in favour of the defendants and required registration as per the dictum in Bhoop Singh. The Supreme Court reversed the High Court’s ruling and relying on Ravinder Kaur Grewal v. Manjit Kaur, it held that adverse possession could vest the title with the defendants. Without going into the issue of whether, on facts, the defendants’ claim of adverse possession (and consequently, the pre-existing title) was established, the Court held that the compromise decree was not collusive in nature and did not require registration under Section 17(2)(vi).

Next, in Gurcharan Singh v. Angrez Kaur, the appellants had filed a suit against one Bhajan Singh seeking declaration of title in respect of land owned by Bhajan Singh and relied on a registered will and a family settlement executed between the parties for this purpose. Bhajan Singh admitted both the documents in his written statement and the suit was decreed in favour of the appellants. In a suit subsequently filed by Bhajan Singh’s daughters against the appellants, one of the issues was whether the earlier decree was required to be registered. The Supreme Court simply relied on Bhajan Singh’s admissions to conclude that the appellants had pre-existing title in respect of the land. Consequently, the decree did not require registration.

The correct application of Bhoop Singh required the Supreme Court in Mohammade Yusuf and Gurcharan Singh to carry out a factual assessment of whether the party relying on the earlier decree had a pre-existing right in its favour. The Court failed to carry out this analysis in both the cases. In Mohammade Yusuf, upon ruling that adverse possession could, in law, constitute the basis of title, the Court simply assumed that the defendants had acquired title based on adverse possession and as a result, they had a pre-existing right. The lower courts had not arrived at any such finding on this issue at all. In Gurcharan Singh, the Court concluded the existence of pre-existing title from Bhajan Singh’s written statement, where he had admitted the will and the family settlement. However, as per the mandate of Bhoop Singh, the Court was required to carry out an independent examination of whether a family settlement was executed. Simply relying on the pleadings of parties in the earlier suit would defeat the principle laid down in Bhoop Singh. Bhoop Singh imposed the test of a pre-existing right to ensure that parties do not abuse the exception under Section 17(2)(vi) and use it as a tool for transferring immoveable property without payment of registration charges and stamp duty. If courts uphold a pre-existing right merely on the basis of pleadings in the suit, it would encourage parties to deploy a scheme where one party would assert the existence of the pre-existing right, even where such a right does not exist, and the other party would admit it. This would negate the principle and spirit of the dictum in Bhoop Singh.

Is there a justification for the Supreme Court’s approach in Mohammade Yusuf and Gurcharan Singh and its half-hearted application of the Bhoop Singh principle? It is arguably the Court’s subtle disapproval of the principle itself. In Mohammade Yusuf, the Court cited its decision in Som Dev v. Rati Ram, which had “held that all decree and orders of the Court do not require registration” except decrees which fell within the ambit of the statutory exception to Section 17(2)(vi). Citing Som Dev, the Court concluded that since the compromise decree in this case was outside the statutory exception to Section 17(2)(vi), the decree was not required to be registered. Mohammade Yusuf was subsequently relied upon in Gurcharan Singh, including for its reading of Som Dev.The Court in Gurcharan Singh concluded that the immoveable property in the decree formed a part of the subject-matter of the suit and was therefore, expressly covered by the phrase ‘any decree or order of a court’ in Section 17(2)(vi). Pertinently, the Court then held that “[w]hen legislature has specifically excluded applicability of Clause (b) and (c) with regard to any decree or order of a Court, applicability of Section 17(1)(b) cannot be imported in Section 17(2)(vi) by any indirect method.” This ‘indirect method’ can only be construed as a reference to the ‘pre-existing right’ test of Bhoop Singh.

Viewed in this background, it is evident that the Supreme Court’s perfunctory assessment of whether a pre-existing right existed in the facts of Mohammade Yusuf and Gurcharan Singh was, to use the Court’s own phrase, an ‘indirect method’ for diluting the Bhoop Singh principle. But, if the Court did not agree with Bhoop Singh, why did it not refer the issue of its correctness to a larger bench? The answer lies in some of its previous decisions. In K. Raghunandan v. Ali Hussain Sabir, the Court rejected the proposition that Som Dev (relied upon in Mohammade Yusuf and Gurcharan Kaur) was inconsistent with Bhoop Singh. Subsequently, in Phool Patti v. Ram Singh (I), the Court noted that there was some inconsistency between K. Raghunandan and Bhoop Singh, and that Bhoop Singh had been incorrectly decided as the terms of Section 17(2)(vi) do not permit the Court to read in the test of pre-existing right. Thus, the Court referred the issue of interpretation of Section 17(2)(vi) to a larger bench. However, the larger bench concluded that there was no inconsistency between K. Raghunandan and Bhoop Singh and refused to look at the interpretation of Section 17(2)(vi), thereby practically endorsing Bhoop Singh. Therefore, despite the ostensible disapproval of Bhoop Singh, the Courtin Mohammade Yusuf and Gurcharan Kaur did not expressly discard the test laid down in that judgment and distinguished it on facts. Bhoop Singh continues to be good law and the test of pre-existing right continues to subsist to determine whether a decree or an order of a Court is required to be registered under Section 17(1)(b) and 17(1)(c).

Published by Sharad Bansal

Advocate, Bombay High Court

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