Supreme Court Upholds High Court Decision on Cancellation of Sale Deed: Amudhavali vs. P. Rukumani (2021)

Introduction

Date of the Judgment: 7 December 2021
Citation: (2021) INSC 719
Judges: R. Subhash Reddy, J. and Hrishikesh Roy, J.

Can a seller unilaterally cancel a registered sale deed? The Supreme Court of India recently addressed this critical question in a property dispute, focusing on the validity of a cancellation deed registered by the original owners after a sale. This case highlights the complexities of property transactions and the legal protections afforded to buyers. The bench, comprising Justices R. Subhash Reddy and Hrishikesh Roy, delivered the judgment.

Case Background

The dispute revolves around a piece of land in Kalapatti Village, Coimbatore. Respondent Nos. 1 to 4, the original owners, executed a power of attorney in favor of Respondent No. 7. Subsequently, on 09 March 2005, the appellants claim to have purchased the land from the original owners through their power of attorney via a registered sale deed. However, on the same day, the original owners prepared a cancellation deed, which was registered on 20 September 2007. Following this, they filed a civil suit to declare the sale deed in favor of the appellants as illegal. Additionally, a portion of the land was transferred to Respondent No. 8 via registered sale deed on 27 February 2009.

Timeline

Course of Proceedings

The appellants initially filed Writ Petition No. 6329 of 2009 in the High Court, challenging the cancellation deed and alleging interference with possession. The original owners argued the writ petition was not maintainable due to delay and the pendency of a civil suit. The learned Single Judge of the High Court allowed the writ petition, stating that a sale deed cannot be unilaterally canceled. However, the Division Bench of the High Court allowed the intra-court appeal, setting aside the single judge’s order, emphasizing that the matter involved factual disputes that should be resolved in the pending civil suit. The matter then reached the Supreme Court through this appeal.

Legal Framework

The core legal issue revolves around the interpretation of the Registration Act, 1908, specifically regarding the registration of cancellation deeds. The appellants argued that once a sale deed is registered, the property is transferred, and a unilateral cancellation deed is not valid under the Registration Act, 1908. The respondents contended that the registration of a cancellation deed is permissible and that the rights of the parties are subject to adjudication in a competent civil court.

Arguments

Appellants’ Arguments:

• The appellants argued that the High Court erred in relying on Satya Pal Anand v. State of Madhya Pradesh [(2016) 10 SCC 767], stating that the case was factually distinguishable.
• They contended that once a property is transferred via a registered sale deed, a unilateral cancellation of such a deed is void and against public policy.
• They asserted that the Registration Act, 1908 does not recognize the registration of unilateral cancellation deeds.
• They relied on the judgment in Thota Ganga Laxmi & Anr. v. Government of Andhra Pradesh & Ors. [(2010) 15 SCC 207] to support their claim that unilateral cancellation deeds are invalid.
• They also argued that there was no delay or laches on their part in approaching the High Court, referring to a complaint filed against the respondents.

Respondents’ Arguments:

• The respondents argued that the case was squarely covered by the judgment in Satya Pal Anand v. State of Madhya Pradesh [(2016) 10 SCC 767].
• They contended that the absence of a party to the extinguishment deed does not per se constitute a fraudulent action.
• They argued that Thota Ganga Laxmi & Anr. v. Government of Andhra Pradesh & Ors. [(2010) 15 SCC 207] was not applicable to the facts of the case, as it was based on a specific rule applicable to Andhra Pradesh.
• They submitted that the appellants had already filed a written statement in the civil suit and were contesting the matter, thus the writ petition was not maintainable.
• Respondent No. 8 argued that they were a bona fide purchaser and should not be deprived of the land.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues but considered the following key questions:

1. Whether the High Court was correct in setting aside the order of the learned Single Judge based on the judgment in Satya Pal Anand v. State of Madhya Pradesh [(2016) 10 SCC 767].
2. Whether a registered sale deed can be unilaterally cancelled by the seller.
3. Whether the High Court should have entertained a writ petition when a civil suit on the same subject matter was pending.

Treatment of the Issue by the Court

Authorities

Cases Cited:

• Satya Pal Anand v. State of Madhya Pradesh [(2016) 10 SCC 767] – The High Court relied on this case, which involved the cancellation of an allotment by a cooperative society. The Supreme Court noted that the High Court’s reliance was appropriate but distinguished the facts.
• Thota Ganga Laxmi & Anr. v. Government of Andhra Pradesh & Ors. [(2010) 15 SCC 207] – The appellants relied on this case, which dealt with a specific rule in Andhra Pradesh regarding unilateral cancellation. The Supreme Court noted that this case was not applicable to the facts of the present case.

Legal Provisions Considered:

• Registration Act, 1908 – The court considered the provisions of the Act concerning the registration of documents, including sale deeds and cancellation deeds.

Judgment

How each authority was viewed by the Court:

• Satya Pal Anand v. State of Madhya Pradesh [(2016) 10 SCC 767]*: The Court observed that the High Court rightly relied on this case but distinguished the facts, noting the present case involved a sale deed, not an allotment.
• Thota Ganga Laxmi & Anr. v. Government of Andhra Pradesh & Ors. [(2010) 15 SCC 207]*: The Court held that this case was not applicable due to its specific context concerning the rules in Andhra Pradesh.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following:

• The pendency of a civil suit (O.S. No. 142 of 2008) on the same subject matter, where the rights of the parties were already under adjudication.
• The principle that registration of a document is always subject to the adjudication of rights by a competent civil court.
• The fact that the appellants had already filed a written statement in the civil suit and were contesting the matter.
• The need to avoid interfering with the ongoing civil proceedings and allowing the civil court to decide the matter on its merits.

Fact:Law Ratio: The court’s decision was more influenced by legal considerations (70%) than factual aspects (30%). The legal principle of allowing the civil court to adjudicate rights and the maintainability of the writ petition held more weight than the specific factual details of the case.

Logical Reasoning

Judgment

The Supreme Court disposed of the civil appeal, affirming the High Court’s decision to not interfere with the pending civil suit. The Court held that the rights of the parties would be governed by the judgment in O.S. No. 142 of 2008, pending before the IIIrd Additional Subordinate Court, Coimbatore. The Court directed the parties to maintain the status quo with regard to possession until the disposal of the suit and instructed the civil court to expedite the proceedings, preferably within one year.

The Court reasoned that:

• “It is settled legal position that registration of document is always subject to adjudication of rights of the parties by the competent civil court.”
• Since the appellants had already filed a written statement and were contesting the civil suit, there was no need to examine the validity of the cancellation deed at this stage.
• The Court observed that “Had the appellants not entered their appearance by filing a written statement, it would have been a different situation.”
• The Court also noted that a portion of the land was transferred to Respondent No. 8 after the registration of the cancellation deed.
• The Court concluded that “As we are of the view that the rights of the parties will be subject to adjudication in Civil Suit in O.S. No.142 of 2008, it is not necessary to delve in detail to various contentions advanced by the learned counsels on both sides.”

Key Takeaways

• The Supreme Court has reiterated that the registration of a document does not automatically validate the transaction, and the rights of the parties are always subject to adjudication by a competent civil court.
• The Court has emphasized that when a civil suit is pending on the same subject matter, it is generally not appropriate for the High Court to interfere in its writ jurisdiction.
• Unilateral cancellation of a registered sale deed remains a contentious issue, and the final determination of its validity is left to the civil court.
• The judgment underscores the importance of actively participating in civil proceedings to protect one’s rights.
• The decision also highlights the complexities involved in property transactions and the need for due diligence.

Directions

The Supreme Court gave the following directions:

• The rights of the parties will be governed by the judgment in the pending civil suit (O.S. No. 142 of 2008).
• The parties are directed to maintain the status quo with regard to possession until the disposal of the suit.
• The civil court is directed to dispose of the suit as expeditiously as possible, preferably within one year.

Development of Law

Ratio Decidendi: The ratio decidendi of this case is that the registration of a document, such as a sale deed or a cancellation deed, does not automatically validate the transaction. The rights of the parties are always subject to adjudication by a competent civil court. When a civil suit is pending on the same subject matter, the court should generally avoid interfering in its writ jurisdiction and allow the civil court to decide the matter on its merits. The Supreme Court did not make any new pronouncements on the validity of unilateral cancellation of sale deeds, leaving it to be decided by the civil court.

Change in Previous Positions of Law: There is no significant change in the previous positions of law. The Supreme Court has reiterated the existing legal principle that registration of a document is subject to civil court adjudication and has emphasized the need to avoid interfering with pending civil proceedings in writ jurisdiction.

Conclusion

In conclusion, the Supreme Court disposed of the civil appeal, upholding the High Court’s decision to not interfere with the pending civil suit. The Court emphasized that the rights of the parties would be determined by the civil court in O.S. No. 142 of 2008. This judgment highlights the principle that registration of a document does not guarantee its validity and that civil courts are the appropriate forum for resolving disputes over property rights.