Supreme Court Upholds Attachment of Property: Greater Bombay Co-operative Bank vs. Nagraj Ganeshmal Jain (2017)

Date of the Judgment: 26 July 2017

Citation: [Not Available in Source]

Judges: Madan B. Lokur, J., Deepak Gupta, J.

Can a person claim ownership of a flat based on an unregistered agreement to sell, especially when the property has already been attached by a bank for loan recovery? The Supreme Court of India recently addressed this question, focusing on the validity of property transfers without proper registration and the impact of prior attachment orders. The core issue revolves around whether a mere agreement to sell, without a registered deed, can supersede a bank’s prior claim on the property. This judgment was delivered by a two-judge bench comprising Justice Madan B. Lokur and Justice Deepak Gupta, with the opinion authored by Justice Deepak Gupta.

Case Background

The case involves a dispute over a flat in Mumbai. Shri Dhillon P. Shah and his wife, Smt. Shivangi Shah, were directors of M/s. Mahaganesh Texpro Private Limited. The Greater Bombay Co-operative Bank Limited (the Bank) had granted a cash credit facility of Rs. 2.25 crores to the company, with the directors acting as guarantors. When the company defaulted on the loan, the Bank initiated recovery proceedings. A recovery certificate for Rs. 2,98,94,363/- was issued on 30.08.2001. The Bank then issued a demand notice on 12.12.2001, which included the attachment of properties owned by the directors, including the flat in question. The attachment order was issued on 14.12.2001 and served on Shri Dhillon P. Shah and his wife. Mr. Dhillon P. Shah passed away on 20.07.2004.

Mr. Nagraj Ganeshmal Jain (Respondent No. 1) claimed ownership of the flat based on an alleged agreement to sell dated 04.10.1995 and claimed to be in possession since 12.04.1996. He applied for membership in the housing society on 20.01.2005, which was rejected. He then filed objections to the attachment order on 03.02.2005. The Bank contested his claim, questioning the authenticity of the agreement to sell.

Timeline:

Course of Proceedings

The Deputy Registrar allowed the appeal of Respondent No. 1 on 18.09.2006, directing the Society to admit him as a member. The Bank was not a party to these proceedings. Upon learning of this order, the Bank filed a Revision Application before the Divisional Joint Registrar on 16.07.2010. The Bank also contested the proceedings filed by Respondent No. 1 challenging the attachment order. The Bank requested that the alleged agreement to sell be sent to a handwriting expert. This was allowed on 12.11.2006. The forensic expert’s report dated 21.07.2010 indicated that the signature on the photocopy of the agreement did not appear to be that of Shri Dhillon P. Shah. Consequently, the objection petition filed by Respondent No. 1 was dismissed on 09.10.2010. However, the Revision Petition filed by Respondent No. 1 was allowed on 28.10.2013. The Bank then filed Writ Petition No. 195 of 2014 in the Bombay High Court, which was dismissed on 02.04.2014, leading to the present appeals before the Supreme Court.

Legal Framework

The Supreme Court referred to the Transfer of Property Act, specifically Sections 54 and 55, which stipulate that the sale of immovable property can only be made through a registered instrument. The Court emphasized that an agreement to sell does not create any interest or charge on the property. The court also discussed Section 53A of the Transfer of Property Act, noting that it can only be used as a defense in proceedings initiated by the transferor or someone claiming under them.

The relevant legal provision is:

• Section 54 of the Transfer of Property Act: “Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.
• Section 55 of the Transfer of Property Act [Not available in the source]
• Section 53A of the Transfer of Property Act [Not available in the source]

Arguments

Arguments of the Bank:

• The Bank argued that the alleged agreement to sell was doubtful, as the original document was not produced, and the signature on the photocopy did not match Shri Dhillon P. Shah’s signature, as per the forensic report.
• The Bank contended that no right, title, or interest in the flat could have been transferred by the said agreement, as it was not a registered deed of conveyance.
• The Bank highlighted that Shri Dhillon P. Shah and his wife never disclosed the alleged sale of the suit property during their lifetime, including during various legal proceedings.
• The Bank argued that the respondent No.1’s claim was a fabrication to wriggle out of the recovery proceedings.

Arguments of Respondent No. 1:

• Respondent No. 1 claimed that he had purchased the flat through an agreement dated 04.10.1995 and had been in possession since 12.04.1996.
• He contended that he had paid stamp duty on the agreement and should be recognized as the owner of the flat.
• He argued that the attachment order was not valid as the agreement of sale was executed prior to the attachment order.

[TABLE] of Submissions:

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a numbered list. However, the core issues addressed by the court were:

• Whether an unregistered agreement to sell transfers any right, title, or interest in immovable property.
• Whether the attachment order issued by the Bank was valid in light of the alleged agreement to sell.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court relied on the following authorities:

• Suraj Lamp & Industries (P) Ltd. Vs. State of Haryana (2012) 1 SCC 656 – Supreme Court of India: The Court referred to this case to reiterate that immovable property can be legally and lawfully transferred only by a registered deed of conveyance. The Court held that transactions of the nature of `GPA sales’ or `SA/GPA/will transfers’ do not convey title and do not amount to transfer.
• Section 54 of the Transfer of Property Act: The court relied on this provision to emphasize that a sale of immovable property can only be made by a registered instrument.
• Section 53A of the Transfer of Property Act: The court clarified that this section can only be used as a defense in proceedings initiated by the transferor or by any person claiming under him.

[TABLE] of Authorities Considered by the Court:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court, by relying on Suraj Lamp & Industries (P) Ltd. Vs. State of Haryana (2012) 1 SCC 656*, reiterated that an agreement to sell does not transfer any right, title or interest in an immovable property.
• The Court relied on Section 54 of the Transfer of Property Act* to emphasize that a sale of immovable property can only be made by a registered instrument.
• The Court relied on Section 53A of the Transfer of Property Act* to clarify that this section can only be used as a defense in proceedings initiated by the transferor or by any person claiming under him.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the legal principle that an unregistered agreement to sell does not transfer any right, title, or interest in immovable property. The Court also considered the factual aspects of the case, such as the doubtful nature of the agreement to sell and the conduct of the parties. The Court emphasized that the respondent No. 1’s claim was made after the attachment order and after the death of Shri Dhillon P. Shah, which raised doubts about the genuineness of the claim.

[TABLE] of Sentiment Analysis of Reasons:

Fact:Law Ratio:

Logical Reasoning:

The Court’s reasoning was based on the clear legal position that an agreement to sell does not convey ownership. It also considered the conduct of the parties and the doubtful nature of the agreement. The court rejected the argument that the prior agreement to sell invalidated the attachment order, emphasizing that only a registered sale deed can transfer ownership.

The Court observed:

“Immoveable property can be transferred only by a Registered document. There can be no transfer of any right, title or interest in any immoveable property except by way of a registered document.”

“Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of Sections 54 and 55 of TP Act and will not confer any title nor transfer any interest in an immovable property.”

“It is more than obvious that with a view to wriggle out of the recovery proceedings, after the death of Shri Dhillon P. Shah this document has been fabricated.”

Key Takeaways

• Importance of Registered Sale Deeds: This judgment emphasizes the critical importance of having a registered sale deed to transfer ownership of immovable property. An unregistered agreement to sell does not confer any title or interest in the property.
• Validity of Attachment Orders: A prior attachment order takes precedence over claims based on unregistered agreements to sell.
• Due Diligence: It is important for purchasers to ensure that all property transactions are properly documented and registered to avoid future disputes.
• Impact on Future Cases: This judgment reinforces the legal position regarding the transfer of immovable property and will serve as a precedent in similar cases.
• No rights based on unregistered documents: The court clearly stated that no rights can be claimed based on unregistered documents.

Directions

The Supreme Court set aside the order of the High Court and the revisional/appellate authority accepting the claim of respondent No.1 and rejected the claim of respondent No.1. It was held that respondent No.1 has no right, title or interest in the suit property and therefore, he cannot claim membership of the New Shrinath Kunj Housing Co-operative Society.

Specific Amendments Analysis

There is no discussion of specific amendments in the judgment.

Development of Law

The ratio decidendi of this case is that an unregistered agreement to sell does not transfer any right, title, or interest in immovable property. This judgment reinforces the established legal position and does not introduce any new principles. The court reiterated the importance of registered sale deeds for the valid transfer of immovable property as per Section 54 of the Transfer of Property Act. There is no change in the previous position of law. The court reiterated the precedent in Suraj Lamp & Industries (P) Ltd. Vs. State of Haryana (2012) 1 SCC 656

Conclusion

The Supreme Court held that an unregistered agreement to sell does not transfer any right, title, or interest in immovable property. The Court upheld the attachment order issued by the Bank and rejected the claim of Respondent No. 1. The judgment emphasizes the importance of registered sale deeds for valid property transfers and reinforces the legal position regarding the transfer of immovable property.