Supreme Court Clarifies Registration Requirements for Compromise Decrees in Property Disputes: Mohammade Yusuf vs. Rajkumar (2020)

Date of the Judgment: 05 February 2020
Citation: 2020 INSC 118
Judges: Ashok Bhushan, J. and M.R. Shah, J.
Can a compromise decree, which settles a property dispute, be used as evidence if it is not registered? The Supreme Court of India recently addressed this question in a case involving a property dispute in Madhya Pradesh. The core issue revolved around whether a compromise decree, which was passed in 1985, required registration under Section 17 of the Registration Act, 1908, to be admissible as evidence in a subsequent suit. The two-judge bench, comprising Justices Ashok Bhushan and M.R. Shah, delivered the judgment.

Case Background

The case originated from a property dispute in Village Kitvani, Mandsaur. In 1984, Habib Kha, the father of the appellants, filed a suit (Suit No. 250-A of 1984) seeking a declaration and injunction for a 7 biswa area of survey No. 203. This land was adjacent to his land in survey No. 223. Although the land was recorded in the names of the defendants, Habib Kha claimed possession. A compromise decree was passed on 04 October 1985, declaring Habib Kha’s right over the 7 biswa area, with the remaining land belonging to the defendants. The appellants, Habib Kha’s sons, continued to possess the land.

In 1998, the respondents filed a suit (Suit No. 90-A of 2006) against the appellants for a perpetual injunction concerning two areas of 825 sq. ft. and 1650 sq. ft. within survey No. 203. The respondents had sold these areas to other respondents, who were then added as plaintiffs. The appellants countered, claiming forceful dispossession of the 1650 sq. ft. area, which they said had been in their family’s possession since 1951. They filed a counterclaim for recovery of possession.

During the evidence stage, one of the appellants, Mohammade Hafiz, attempted to present the 1985 compromise decree as evidence. The respondents objected, arguing that the decree was inadmissible due to lack of registration. The trial court agreed with the respondents, holding that the decree required registration under Section 17(1)(e) of the Registration Act, 1908, and was therefore inadmissible. The appellants then filed a writ petition, which was dismissed by the High Court.

Timeline:

Course of Proceedings

The trial court, on 07 January 2015, ruled that the compromise decree dated 04 October 1985 was inadmissible as evidence because it was not registered as required under Section 17(1)(e) of the Registration Act, 1908. The appellants challenged this order in the High Court of Madhya Pradesh at Indore, but the High Court dismissed their writ petition on 13 February 2017, agreeing with the trial court that the decree required registration. The High Court also noted that the original suit was based on a plea of adverse possession, which, according to a previous Supreme Court ruling, could not be used to claim a declaratory decree. The High Court relied on the judgment of this Court in Gurdwara Sahib Vs. Gram Panchayat Village Sirthala and Another, (2014) 1 SCC 669. The appellants then appealed to the Supreme Court.

Legal Framework

The core legal issue revolves around Section 17 of the Registration Act, 1908, which deals with the registration of documents. Specifically, Section 17(1) lists the documents that require mandatory registration. Section 17(1)(b) states that non-testamentary instruments that create, declare, assign, limit, or extinguish any right, title, or interest in immovable property worth ₹100 or more must be registered. Section 17(1)(e) includes non-testamentary instruments transferring or assigning any decree or order of a Court when such decree or order purports or operates to create, declare, assign, limit or extinguish any right, title or interest in immovable property.

However, Section 17(2) provides exceptions to these requirements. Section 17(2)(vi) states that nothing in clauses (b) and (c) of sub-section (1) applies to “any decree or order of a Court except a decree or order expressed to be made on a compromise and comprising immovable property other than that which is the subject-matter of the suit or proceeding.”

The relevant sections of the Registration Act, 1908 are as follows:

“17. Documents of which registration is compulsory.— (1) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act came or comes into force, namely:—
(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; and
(d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent;
(e) non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award 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 one hundred rupees and upwards, to or in immovable property:
Provided that the State Government may, by order published in the Official Gazette, exempt from the operation of this sub-section any lease executed in any district, or part of a district, the terms granted by which do not exceed five years and the annual rents reserved by which do not exceed fifty rupees.
(2) Nothing in clauses (b) and (c) of sub-section (1) applies to—
XXXXXXXXXXXX
(vi) any decree or order of a Court except a decree or order expressed to be made on a compromise and comprising immovable property other than that which is the subject-matter of the suit or proceeding; or”

Arguments

The appellants argued that the compromise decree of 1985 did not require registration as it fell under the exception provided in Section 17(2)(vi) of the Registration Act, 1908. They contended that the decree was related to the subject matter of the suit and therefore was not required to be registered. They relied on the exception in Section 17(2)(vi) which exempts decrees related to the subject matter of the suit from registration.

The respondents argued that the compromise decree required registration under Section 17(1)(e) of the Registration Act, 1908. They argued that since the decree was based on a plea of adverse possession, it did not declare any pre-existing rights and thus required registration. They relied on the judgment of the High Court and the case of Gurdwara Sahib Vs. Gram Panchayat Village Sirthala and Another, which stated that a declaratory decree based on adverse possession is not maintainable.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

“Whether the compromise decree dated 04.10.1985 was required to be registered under Section 17 of the Registration Act, 1908 or not?”

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court held that the compromise decree dated 04.10.1985 did not require registration. The Court reasoned that the decree related to the property that was the subject matter of the suit and thus fell under the exception provided in Section 17(2)(vi) of the Registration Act, 1908. The court distinguished the facts of the case from Bhoop Singh Vs. Ram Singh Major and Others, where the decree was held to require registration because it created new rights for the first time. The court also noted that the High Court’s reliance on Gurdwara Sahib Vs. Gram Panchayat Village Sirthala and Another was incorrect, as that judgment had been expressly overruled by a three-judge bench in Ravinder Kaur Grewal and Others Vs. Manjit Kaur and Others.

The court emphasized that Section 17(2)(vi) specifically exempts decrees related to the subject matter of the suit from the registration requirements. The court also referred to Som Dev and Others Vs. Rati Ram and Another, which clarified that decrees related to the subject matter of the suit do not require registration.

The Supreme Court stated:

“When registration of an instrument as required by Section 17(1)(b) is specifically excluded by Section 17(2)(vi) by providing that nothing in clause (b) and (c) of sub-section (1) applies to any decree or order of the Court, we are of the view that the compromise decree dated 04.10.1985 did not require registration and learned Civil Judge as well as the High Court erred in holding otherwise.”

The Court set aside the orders of the Civil Judge and the High Court and directed the trial court to exhibit the compromise decree dated 04.10.1985.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of Section 17(2)(vi) of the Registration Act, 1908 and the overruling of the judgment in Gurdwara Sahib Vs. Gram Panchayat Village Sirthala and Another. The Court emphasized that the compromise decree in question was directly related to the subject matter of the suit. The Court also noted that the decree did not create new rights for the first time, rather it declared the existing rights of the parties.

Logical Reasoning

Key Takeaways

• ✓ A compromise decree that pertains to the subject matter of a suit does not require registration under Section 17 of the Registration Act, 1908.
• ✓ The exception provided in Section 17(2)(vi) of the Registration Act, 1908, exempts such decrees from mandatory registration.
• ✓ The ruling in Gurdwara Sahib Vs. Gram Panchayat Village Sirthala and Another regarding adverse possession has been overruled, clarifying that a person in adverse possession for 12 years acquires title.

Directions

The Supreme Court directed the trial court to exhibit the compromise decree dated 04.10.1985 as evidence.

Development of Law

The Supreme Court clarified that a compromise decree related to the subject matter of the suit does not require registration, reinforcing the exception in Section 17(2)(vi) of the Registration Act, 1908. This judgment also reaffirms the position that a person in adverse possession for 12 years acquires title, as established in Ravinder Kaur Grewal and Others Vs. Manjit Kaur and Others.

Conclusion

The Supreme Court allowed the appeal, setting aside the orders of the Civil Judge and the High Court. The Court held that the compromise decree dated 04.10.1985 did not require registration as it fell within the exception of Section 17(2)(vi) of the Registration Act, 1908. This decision clarifies the registration requirements for compromise decrees and reaffirms the legal position on adverse possession.