Supreme Court allows unregistered family settlement as corroborative evidence in property dispute: Korukonda Chalapathi Rao & Anr. vs. Korukonda Annapurna Sampath Kumar (2021)

LEGAL ISSUE: Whether an unregistered family settlement document can be used as corroborative evidence in a property dispute.

CASE TYPE: Civil (Property Dispute)

Case Name: Korukonda Chalapathi Rao & Anr. vs. Korukonda Annapurna Sampath Kumar

[Judgment Date]: October 1, 2021

Can an unregistered family settlement document be used as evidence in a property dispute? The Supreme Court of India recently addressed this question, focusing on whether such a document, though not registered, could be used as corroborative evidence to understand the conduct of the parties and the nature of possession of the property. The case involved a dispute between brothers over property rights, where an unregistered family settlement document was presented as evidence.

The Supreme Court bench comprised of Justice K.M. Joseph and Justice S. Ravindra Bhat, with the majority opinion authored by Justice K.M. Joseph.

Case Background

The case revolves around a property dispute between two brothers, the appellants, and their younger brother, the respondent. Initially, the brothers and their siblings had partitioned their family properties on 17th November 1980, with the respondent receiving the F-schedule property. However, later, the appellants claimed that the respondent had relinquished his rights to the property in a subsequent family settlement on 15th April 1986. The respondent, on the other hand, alleged that his signatures were fraudulently obtained on blank papers, which were later used to create the settlement document and a receipt dated 8th December 1993. The respondent filed a suit seeking declaration of title and eviction of the appellants from the property.

Timeline

Course of Proceedings

The trial court initially allowed the appellants to mark the unregistered family settlement document (Khararunama) dated 15th April 1986 and the receipt dated 8th December 1993 as evidence. However, the High Court set aside this order, stating that the documents were inadmissible due to the lack of registration and proper stamping. The High Court held that these documents, being unregistered and unstamped, could not be admitted as evidence.

Legal Framework

The case primarily involves the interpretation of the Registration Act, 1908, specifically:

• ✓ Section 17(1)(b) of the Registration Act, 1908: This section mandates the registration of non-testamentary instruments that create, assign, limit, or extinguish any right or interest in immovable property valued at Rs. 100 or more.
  “17(1)(b) non-testamentary instruments which purport or operate to create, assign, limit or extinguish whether in present or in future any right or interest whether vested or contingent of the value of Rs .100/- and upwards in an immovable property compulsorily registrable.”
• ✓ Section 17(1)(c) of the Registration Act, 1908: This section requires registration for non-testamentary instruments that acknowledge the receipt or payment of any consideration related to the creation, declaration, assignment, limitation, or extinction of any right, title, or interest.
  “17(1)(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; and”
• ✓ Section 49 of the Registration Act, 1908: This section outlines the consequences of not registering a document that is required to be registered. It states that such a document cannot affect any immovable property, confer any power to adopt, or be received as evidence of any transaction affecting such property, unless it has been registered. However, it also provides an exception for using an unregistered document as evidence of a collateral transaction.
  “49. Effect of non -registration of documents required to be registered. —No document required by section 17 1[or by any provision of the Transfer of Property Act, 1882 (4 of 188 2)], to be registered shall— (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: 54 [Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877) 55, 56 [***] or as evidence o f any collateral transaction not required to be effected by registered instrument.] ..”

The court also considered the concept of family arrangements and their admissibility in evidence, even if unregistered.

Arguments

Appellants’ Submissions:

• ✓ The appellants contended that the family settlement (Khararunama) dated 15th April 1986, was a mere record of an already agreed upon family arrangement and did not require registration.
• ✓ They argued that the respondent had admitted his signature on the Khararunama and the receipt dated 8th December 1993.
• ✓ They relied on the judgments in Subraya M.N. v. Vittala M.N. [(2016) 8 SCC 705] and Thulasidhara v. Narayanappa [(2019) 6 SCC 409], stating that an oral family settlement is valid and that a written document recording the settlement does not require registration if it is merely a memorandum of a past transaction.
• ✓ They further argued that even if registration was required, the unregistered document could be used as corroborative evidence to explain the conduct of the parties and the nature of possession.

Respondent’s Submissions:

• ✓ The respondent claimed that his signatures were obtained on blank papers, which were later used to create the family settlement and the receipt.
• ✓ He argued that the family settlement (Khararunama) required registration under Section 17(1)(b) of the Registration Act, 1908, as it involved the relinquishment of rights in immovable property.
• ✓ He contended that the document was inadmissible due to the lack of registration and proper stamping.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the family settlement document (Khararunama) dated 15.04.1986 and the receipt dated 08.12.1993, which were unregistered and unstamped, were admissible in evidence, and if so, to what extent?

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court:

• ✓ Subraya M.N. v. Vittala M.N. [(2016) 8 SCC 705]: This case established that an oral family settlement is valid and that a written document recording the settlement does not require registration if it is merely a memorandum of a past transaction. The Supreme Court of India held that an unregistered family settlement can be used as corroborative evidence to explain the conduct of the parties.
• ✓ Thulasidhara v. Narayanappa [(2019) 6 SCC 409]: This case reiterated the view that a written document of family settlement can be used as corroborative evidence even without registration. The Supreme Court of India followed the view in Subraya M.N. v. Vittala M.N.
• ✓ Kale v. Dy. Director of Consolidation [AIR 1976 SC 807]: This case outlined the essentials of a family settlement, including that it can be oral and that registration is required only if the terms are reduced into writing, unless the writing is a mere memorandum of a previously agreed settlement. The Supreme Court of India summed up the essentials of family settlement.
• ✓ Ram Charan v. Girja Nandini [AIR 1966 SC 292]: This case held that in a family settlement, each party takes a share in the property by virtue of an independent title, which is admitted by the other parties. The Supreme Court of India held that it is not necessary that every party taking benefit under a family settlement must have a claim to a share in the property.
• ✓ Krishna Beharilal v. Gulabchand [AIR 1971 SC 1041]: This case reiterated the view in Ram Charan v. Girja Nandini. The Supreme Court of India reiterated the view in Ram Charan v. Girja Nandini.
• ✓ Yellapu Uma Maheswari and Another v. Buddha Jagadheeswararao and Others [(2015) 16 SCC 787]: This case held that if a document itself creates or extinguishes rights in immovable property, it is compulsorily registrable. The Supreme Court of India found that the relinquishment of the right was made through the document, and hence the document was compulsorily registrable.
• ✓ Sita Ram Bhama v. Ramvatar Bhama [(2018) 15 SCC 130]: This case held that a document that relinquishes the rights of other heirs is compulsorily registrable under Section 17 of the Registration Act, 1908. The Supreme Court of India held that there being relinquishment, the document was compulsorily registrable.
• ✓ N. Varada Pillai v. Jeevarathnammal [AIR 1919 P.C. 44]: The Privy Council held that an unregistered document can be used to explain the nature of possession of a person.
• ✓ Kirpal Kaur v. Bachan Singh and Ors. [AIR 1958 SC 199]: The Supreme Court of India held that an unregistered document cannot be used to destroy the nature of previous possession.
• ✓ K. Panchapagesa Ayyar and Ors. v. K. Kalyanasundaram Ayyar and Ors. [AIR 1957 Madras 472]: The Madras High Court held that a compulsorily registrable but unregistered document is admissible for a collateral purpose but not to establish title to immovable property.
• ✓ Roshan Singh and Others v. Zile Singh and Others [AIR 1988 SC 881]: The Supreme Court of India held that a document that merely records a past partition is not an instrument of partition and does not require registration.
• ✓ SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. Private Ltd. [(2011) 14 SCC 66]: The Supreme Court of India held that an arbitration agreement in an unregistered document can be enforced as a collateral transaction.
• ✓ Muruga Mudallar and Ors. v. Subba Reddiar [AIR 1951 Madras 12]: The Madras High Court explained the term “affect” in Section 49 of the Registration Act, 1908.
• ✓ A.C. Lakshmipathy and others v. A.M. Chakrapani Reddiar and others [AIR 2001 Madras 135]: The Madras High Court held that a memorandum evidencing a family arrangement already entered into need not be stamped or registered.

Legal Provisions Considered by the Court:

• ✓ Section 17(1)(b) of the Registration Act, 1908: Mandates registration of non-testamentary instruments that create, assign, limit, or extinguish any right or interest in immovable property.
• ✓ Section 17(1)(c) of the Registration Act, 1908: Mandates registration of non-testamentary instruments that acknowledge the receipt or payment of any consideration related to the creation, declaration, assignment, limitation, or extinction of any right, title, or interest.
• ✓ Section 49 of the Registration Act, 1908: Outlines the consequences of non-registration of documents required to be registered.

Judgment

The Supreme Court held that the family settlement document (Khararunama) was a record of past transactions and did not by itself create or extinguish rights in immovable property. Therefore, it did not require registration under Section 17(1)(b) of the Registration Act, 1908. The court further held that the document could be used as corroborative evidence to explain the conduct of the parties and the nature of possession, but not as evidence of the transaction itself.

The Court observed:

“If the Khararunama by itself, does not ‘affect’ immovable property, as already explained, being a record of the alleged past transaction, though relating to immovable property, there would be no breach of Section 49(1)(c), as it is not being used as evidence of a transaction effecting such property.”

“Thus, the transaction or the past transactions cannot be proved by using the Khararunama as evidence of the transaction. That is, it is to be noted that, merely admitting the Khararunama containing record of the alleged past transaction, is not to be, however, understood as meaning that if those past transactions require registration, then, the mere admission, in evidence of the Khararunama and the receipt would produce any legal effect on the immovable properties in question.”

“As far as stamp duty goes, on our finding regarding the nature of the document, viz., Khararunama, being record of the alleged transactions, it may not require to be stamped.”

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of the Registration Act, 1908, and the nature of family settlements. The court emphasized the distinction between a document that creates or extinguishes rights in immovable property and a document that merely records past transactions. The court was also guided by previous judgments that allowed unregistered family settlements to be used as corroborative evidence.

The court’s reasoning was primarily based on legal interpretations rather than factual aspects of the case.

Logical Reasoning

Key Takeaways

• ✓ An unregistered family settlement document can be used as corroborative evidence to explain the conduct of the parties and the nature of possession of the property.
• ✓ Such a document cannot be used as direct evidence of the transaction itself if it affects immovable property and requires registration.
• ✓ The court emphasized the importance of distinguishing between a document that creates or extinguishes rights and one that merely records past transactions.
• ✓ Oral family settlements remain valid, and a written record of such a settlement may not require registration if it is merely a memorandum of a past transaction.

Directions

The Supreme Court directed the Trial Court to proceed with the trial and consider the unregistered family settlement document as corroborative evidence.

Dissenting Opinion

There was no dissenting opinion in this case. The judgment was delivered by a bench of two judges, with the majority opinion authored by Justice K.M. Joseph.

Conclusion

The Supreme Court’s judgment in Korukonda Chalapathi Rao & Anr. vs. Korukonda Annapurna Sampath Kumar clarifies the admissibility of unregistered family settlement documents in property disputes. The court’s decision allows such documents to be used as corroborative evidence, providing a more holistic understanding of the parties’ conduct and possession of the property. However, it also emphasizes that these documents cannot be used as direct evidence of the transaction itself, if they require registration under the Registration Act, 1908. This ruling provides a nuanced approach to the use of unregistered documents in property disputes and underscores the importance of understanding the nature and purpose of such documents.