CANCELLATION OF SALE DEED

Note: - Plaintiff to establish 3 conditions for suit under this section:

(i)The instrument is void or voidable against him.

(ii) He may have a reasonable apprehension that such instrument may cause serious injury.

(iii)Court must adjudicate the instrument as void or voidable.

The question whether an instrument can be said to be void or voidable against a person claiming relief under the aforesaid provision came to be considered by a Full Bench of the Madras High Court in the case of Muppudathi Pillai v. Krishnaswami Pillai. AIR 1960 Mad 1 (FB). At p. 4 it was observed:

".....It stands to reason that the executant of the document should be either the plaintiff or a person who can in certain circumstances bind him. It is only then it could be said that the instrument Is voidable by or void against him. The second aspect of the matter emphasises that principle. For there can be no apprehension if a mere third party, asserting a hostile title creates a document. Thus relief under Section 39 would be granted only in respect of an instrument likely to affect the title of the plaintiff and not of an instrument executed by a stranger to that title".

Proceeding with the discussion their Lordships pointed out the example of a trespasser purporting to convey the property in his own right and not in the right of the owner. In such a case, to my mind, agreeing with respect with their Lordships of the Madras High Court, the remedy of cancellation of such an instrument cannot be granted because such a relief would not remove the cloud upon his title by the instrument and the proper remedy to seek is a declaration of his own title or a declaration that the sale-deed is not binding or valid against him. It is only in the case of instruments which are either executed by a party or which purport to have been executed by a party or by a person who can bind him that the relief under Section 31 can be claimed in law because in such cases only can it be said, as observed by the Madras High Court also in the said case, "that there is a cloud on his title and an apprehension that if the instrument is left outstanding it may be a source of danger". They went on further to illustrate the point by observing that such cases may arise in the following circumstances: "A party executing the document, or a principal in respect of a document executed by his agent, or a minor in respect of a document executed by his guardian de jure or de facto, a reversioner in respect of a document executed by the holder of a limited estate, in respect of a document executed by the benamidar etc." Courts have also recognised in this respect the right to challenge and to pray for cancellation of a forged document which is purported to have been executed on his behalf. In all these cases there is no question of a document by a stranger to the title as in the present case and it can further be found that in all such cases a reasonable apprehension can be entertained that if such an instrument is left outstanding the same may cause the plaintiff serious injury. In the present case it cannot be successfully maintained that a reasonable apprehension can be entertained by the plaintiffs that if the sale-deed is left outstanding it may cast a cloud upon their title or cause them serious injury because the cloud upon their title will not be removed merely by a decree for cancellation of the instrument. The cloud will continue to hang over the plaintiffs by the hostile assertion of title by the executant of the sale-deed and those who claim a title to it. Therefore, the proper relief for the plaintiffs to seek in a case of this kind is a declaration of their own title or a declaration that the executant of the sale-deed in dispute has no title to the property.

. That a void or voidable instrument of transfer or instrument governing the relations between two or more persons, cannot be enforced, is recognized in common law. Under Section 17 of Specific Relief Act, a contract to sell any immovable property cannot be specifically enforced in favour of vendor, who knowing himself not to have any title to the property has contracted to sell the property. Similarly, when vendor enters into contract believing that he had a good title to the property but cannot at the time fixed by the parties give the purchaser the title free from reasonable doubt, the same cannot be enforced. Whether a person who suffers injury by reason of such void instrument has to necessarily seek cancellation of such instrument? Is it necessary that a person who suffers injury by reason of transfer of immovable property (contract), which is between two persons in respect of his own property and which is void on the face of it for the reason that the vendor of the said transaction has no authority to transfer the property to the vendee, to file a suit? Can he not execute and register a deed cancelling the offending sale deed?

The above queries need consideration of two aspects. When a suit for cancellation of an instrument/deed or document is maintainable? When such a suit at the instance of original owner is not maintainable and what are the other remedies to such a person? Sections 31 and 34 of Specific Relief Act are relevant. Contents of Section 31 are already given above and Section 34 of Specific Relief Act read as under.

34. Discretion of Court as to declaration of status or right:- Any person entitled to any legal character, or to any right as to any property, may institute a suit against any person denying, or interested to deny, his title to such character or right, and the Court may in its discretion make therein a declaration that he is so entitled, and the plaintiff need not in such suit ask for any further relief:

Provided that no Court shall make any such declaration where the plaintiff, being able to seek further relief than a mere declaration of title, omits to do so.

Explanation:- A trustee of property is a "person interested to deny" a title adverse to the title of some one who is not in existence, and whom, if in existence, he would be a trustee.

It is a misconception that in every situation, a person who suffers injury by reason of a document can file a suit for cancellation of such written statement. Two conditions must exist before one invokes Section 31 of Specific Relief Act. These are : the written instrument is void or voidable against such person; and such person must have reasonable apprehension that such instrument if left outstanding may cause him serious injury. Insofar as Section 34 of the Specific Relief Act is concerned, it is no doubt true that a person entitled to any right as to any property can seek declaration that he is so entitled to such right. Here again, the person who claims the right to property can institute a declaration suit only when the defendant denies or interested to deny the title of the plaintiff. The difference between the two situations is glaring. In one case, cancellation of deed can be sought in a Court only by a person who executed document and who perceives that such document is void or voidable. In the other case, even if a person is not a party to the document, he can maintain a suit for declaration.

The law, therefore, may be taken as well settled that in all cases of void or voidable transactions, a suit for cancellation of a deed is not maintainable. In a case where immovable property is transferred by a person without authority to a third person, it is no answer to say that the true owner who has authority and entitlement to transfer can file a suit under Section 31 of the Specific Relief Act for the simple reason that such a suit is not maintainable. Further, in case of an instrument, which is void or voidable against executant, a suit would be maintainable for cancellation of such instrument and can be decreed only when it is adjudicated by the competent Court that such instrument is void or voidable and that if such instrument is left to exist, it would cause serious injury to the true owner.

The persons who are not directly parties: In the case of Kedar Prasad vs Ganga Prasad And Ors. on 17 October, 1979 (Equivalent citations: AIR 1980 All 85) it was held by the honorable Allahabad High Court as under:

16. "Section 31 has been expressed in the widest terms. In my judgment, an instrument can be void or voidable even against persons who are not directly parties to it. Where, as here, one of the members of a family or co-sharers of a property purports to transfer the whole of the rights in a property belonging to a family or to a body of persons, the other members and persons having a right, title or interest in that property are clearly persons against whom such a transaction would be void or voidable, even though they may not be parties to it. That being so, on the instrument being adjudged void, the Court may, in its discretion, order the instrument to be cancelled. In B. Rajgorhia v. Central Bank of India reported in (1972) 76 Cal WN 807 (858) it has been held that this section is available to a person affected by an instrument even though he may not be a party to the instrument. To the same effect are the decisions reported in (1948) 52 Cal WN 389 (392) and AIR 1934 All 1071 (1072)."

18. "Learned counsel for the appellant cited two decisions, (1) in the case of M. Pillai v. K. Pillai reported in AIR 1960 Mad 1 (FB) and (2) in the case of Niasha Ghose v. Kari Siddek Ali reported in AIR 1963 Assam 4, in support of his submission that a suit under S. 31 of the aforesaid Act could lie only at the instance of a person who is a party to the instrument which is sought to be adjudged void and cancelled. I have perused the two decisions and in my view neither of these two decisions supports the broad proposition which the learned counsel for the appellant has contended for. These cases have clearly held that the relief under Section 31 of the aforesaid Act could be granted only in respect of an instrument which was likely to affect the title of the plaintiff and not of an instrument executed by a stranger to that title. On the facts of these cases, the two High Courts held that title of the plaintiff was not in any way affected by the impugned instrument. These cases are, therefore, of no assistance to the appellant. Section 31 of the Specific Relief Act speaks both of void and voidable instrument, and in my judgment, on the facts of the present case, the plaintiffs were clearly entitled to urged that the sale deed in question was void to the extent of their 4/5th share and was liable to be declared void to the extent of their share. As the sale deed had been executed by one of the co-sharers purporting to transfer the entire shop in favour of the appellants, the plaintiffs could justifiably entertain an apprehension it would cause serious injury to their rights. I, therefore find no illegality in the decree passed by the lower appellate court adjudging the sale deed as void and in ordering its cancellation to the extent of the share of the plaintiffs."

This article is based on judgment given by the honorable court in the following cases

Muppudathi Pillai v. Krishnaswami Pillai. AIR 1960 Mad 1 (FB).

Andhra High Court

Yanala Malleshwari And Ors. vs Ananthula Sayamma And Ors. on 24 October, 2006

Equivalent citations: 2006 (6) ALT 523, 2007 (1) CTC 97.

Allahabad High Court

Kedar Prasad vs Ganga Prasad And Ors. on 17 October, 1979

Equivalent citations: AIR 1980 All 85

Difference between suit for cancellation of an instrument and suit for declaration that instrument is not binding on plaintiff:

There is a difference between a suit for the cancellation of an instrument and one for a declaration that the instrument is not binding on the plaintiff, when the plaintiff seeks to establish, a title in himself and cannot establish that title without removing an insuperable obstacle such as a decree or a deed to which he has been a party or by which he is otherwise bound then quite clearly he must get that decree or deed cancelled or declared void in toto and his suit is in substance a suit for the cancellation of the decree or deed notwithstanding the fact that the suit may have been framed as a suit for a declaration. On the other hand, when the plaintiff is seeking to establish a title and finds himself threatened by a decree or a transaction between third parties, he is not in a position to get that decree or deed cancelled in toto. The proper remedy in such a case is to get a declaration that the decree or deed is invalid so far as he himself is concerned, and, therefore, he may sue for a declaration to that effect and not for the cancellation of the decree or the deed. See -- 'Vellayya Konar v. Ramaswami Konar', AIR 1939 Mad

894 (C).1 Rajasthan High Court Sukh Lal And Ors. vs Devi Lal And Ors. on 24 July, 1953

Equivalent citations: AIR 1954 Raj 170 Bench: Wanchoo, Modi

It is a misconception that in every situation, a person who suffers injury by reason of a document can file a suit for cancellation of such written statement.Two conditions must exist before one invokes Section 31 of Specific Relief Act. These are : the written instrument is void or voidable against such person; and such person must have reasonable apprehension that such instrument if left outstanding may cause him serious injury. Insofar as Section 34 of the Specific Relief Act is concerned, it is no doubt true that a person entitled to any right as to any property can seek declaration that he is so entitled to such right. Here again, the person who claims the right to property can institute a declaration suit only when the defendant denies or interested to deny the title of the plaintiff. The difference between the two situations is glaring. In one case, cancellation of deed can be sought in a Court only by a person who executed document and who perceives that such document is void or voidable. In the other case, even if a person is not a party to the document, he can maintain a suit for declaration.

Andhra High Court Yanala Malleshwari And Ors. vs Ananthula Sayamma And Ors. on 24 October,

2006 Equivalent citations: 2006 (6) ALT 523, 2007 (1) CTC 97 Bench: B Nazki, V Rao, G

Chandraiah

Factum of Title:

In Debi Pershad and Others Vs. Smt. Maika and Others, it was held that a suit filed by the plaintiff

cannot be decreed if the plaintiff fails to establish his title to the disputed property only on the basis of possession. The plaintiff in the present case has failed to establish his title to the disputed property and admittedly is also not in possession. Even if a decree is granted to the plaintiff as sought for and the documents as mentioned in the relied portion of the plaint are held to be void and declared cancelled even then no benefit would be derived by the plaintiff either with regard to the title of the suit property or with regard to the possession. Mere possession in itself or possessory title does not entitle a person to a decree for cancellation of a written instrument unless the person can show his title to the property also. The plaintiff is also admittedly out of possession of the property from 1972 and therefore, suit should have also been filed for delivery of possession. Mere order as sought for under Section 31 of the Specifef Act would not entitle the plaintiff to get the complete relief. On this count also the plaintiff has not been able to make out a case.

In case of Registered Document:

In the decision reported as (1995) 1 SCC 198 Ramti Devi Vs. UOI, the Supreme Court observed

"that to challenge a document which is a registered document, foundations have to be laid in the pleadings and thereafter, keeping in view the provisions of the Evidence Act, relevant and admissible evidence brought on record. It was opined that till a document, avoidance whereof is sought is got cancelled by a proper declaration, the registered document binds the parties."

56. In the decision reported as 1996 (7) SCC 766 Md. Noorul Hoda Vs. Bibi Raitunnisa & Ors., the Supreme Court observed that when the plaintiff seeks to establish a title to a property which cannot be established without avoiding the decree or an instrument the same stands as an insurmountable obstacle in his way, which otherwise binds him, though not a party, the plaintiff necessarily has to seek a declaration and have the decree, instrument or contract cancelled or set aside or rescinded. It was opined that Section 31 of the Specific Relief Act, 1963 regulates suits pertaining to cancellation of an instrument, which lays down that any person against whom a written instrument is void or voidable and who has a reasonable apprehension that such instrument, if left outstanding, may cause him serious injury, can sue to have it adjudged void or voidable and the court may in its discretion so adjudge it and order it to be delivered or cancelled. A similar view has been expressed in the decision reported as 2000 AIHC 1981 (AP) Habeeba Begum Vs. Gulam Rasool.

It is well-settled law that there is a presumption of a registered document being validly executed. A registered document would, therefore, prima facie, be valid in law. The onus of proof, thus, would be on a person who questions the same. There is a distinction between a void and a voidable document. A person is not required to seek cancellation of a document which is void, but he is required to seek cancellation of the document which is voidable. When a document is valid, no question can arise of its cancellation. Section 31 of the Specific Relief Act, 1963 refers to both void and voidable documents. It provides for a discretionary relief. [(2006) 5 SCC 353 Prem Singh & Others v. Birbal & Ors].

Necessary Party in the case of cancellation of sale deed:

It is settled law that when in respect of a transaction, a written document is executed, any kind of oral evidence, contrary to the document, is not admissible. The allegation of fraud if made by a party, must specify giving role of each person and all those involved in the fraud must be made a party. Bare allegation that plaintiff had not received the full consideration or that the plaintiff signed the documents without reading the contents there of, is not a ground for cancellation of the sale deed. If the plaintiff chooses not to read the documents, he does so at its own peril.

IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of Judgment May 05, 2008.

CS ( OS ) No. 714/ 2008

Jai Bhagwan verses Rajesh and Ors.

Jurisdiction of the Court:

Suit or action for cancellation of void document will generally lie in the civil court and a party cannot be deprived of his right getting this relief permissible under law except when a declaration of right or status and a tenure holder is necessarily needed in which event relief for cancellation will be surpluses and redundant. A recorded tenure holder having prima facie title in his favour can hardly be directed to approach the revenue court in respect of seeking relief for cancellation of a void document which made him to approach the court of law and in such case he can also claim ancillary relief even though the same can be granted by the revenue court.

Supreme Court of India, Shri Ram And Another vs Ist Addl. Distt. Judge & Ors on 7 February, 2001 Author: V N Khare, Bench: S.N.Variava, V.N.Khare

Smt. Bismillah vs. Janeshwar Prasad and others (1990) 1 SCC 207. In Gorakh Nath Dube (supra) which is strongly relied upon by learned counsel for the respondents, it was held thus.

.but, where there is a document the legal effect of which can only be taken away by setting it aside or its cancellation, it could be urged that the consolidation authorities have no power to cancel the deed, and, therefore, it must be held to be binding on them so long as it is not cancelled by a court having the power to cancel it.

The said decision is distinguishable and is of no help to the case of the respondents. The observation quoted above has to be understood in the context of the fact of the case. In the said case, the plaintiff had filed a suit for cancellation of the sale deed to the extent of half share claimed by the plaintiff and also an award of possession of the plaintiffs share. In the suit, it was alleged that the vendor had no title to the extent of half share in the land and, therefore, the sale deed to that extent is void. In the said case there was no prima facie title in favour of plaintiff and his title to the land and delivery of possession was required to be adjudicated.

On analysis of the decisions cited above, we are of the opinion that where a recorded tenure holder having a prima facie title and in possession files suit in the civil court for cancellation of sale deed having obtained on the ground of fraud or impersonation cannot be directed to file a suit for declaration in the revenue court reason being that in such a case, prima facie, the title of the recorded tenure holder is not under cloud. He does not require declaration of his title to the land. The position would be different where a person not being a recorded tenure holder seeks cancellation of sale deed by filing a suit in the civil court on the ground of fraud or impersonation. There necessarily the plaintiff is required to seek a declaration of his title and, therefore, he may be directed to approach the revenue court, as the sale deed being void has to be ignored for giving him relief for declaration and possession.

For the aforesaid reasons, we are of the opinion that the view taken by the High Court in allowing the writ petition suffers from serious infirmity. The appeal, therefore, deserves to be allowed. Consequently, the judgment under appeal is set aside. The trial court is directed to proceed with the suit on merits. There shall be no order as to costs.

the plaintiff had alleged various grounds for the cancellation of the sale deed, namely, that the sale deed was executed fraudulently by the defendants and was without any consideration and that Sita Ram had no intention nor did he willingly execute the sale deed in favour of the defendants. The plaintiff further alleged that the witnesses to the sale deed were interested persons and were the henchmen of the defendants. The plaintiff submitted that he was in physical possession of the property in question and prayed that the sale deed executed in favour of the defendants be cancelled.

7. Aggrieved by the decision of the applellate Court, the defendant has now filed the present second appeal. At the time of admission of the Second Appeal, the following substantial question of law was formulated, namely:--

1. Whether the learned lower appellate Court erred in law in reversing the judgment and decree of the trial Court and finding that the minor plaintiffs mother Kailashi Devi is the second wife of Sita Ram, when this factor was never pleaded in the plaint by the plaintiff and the factum of marriage either by custom or in accordance with any other provisions of law and had not been proved by the plaintiff in his evidence?

2. Whether the learned lower appellate Court erred in law in ignoring the provisions contained under Section 331 of the U. P. Z. A. and L. R. Act according to which the present Suit by the plaintiff is not maintainable in the Civil Court?

3. Whether the learned lower appellate court was justified in accepting the certified copy of the alleged Will dated 23-12-1981 without compliance with the provisions contained in Section 65 of the Indian Evidence Act?

44. In any case, in my view, the suit for cancellation of the sale deed was maintainable before the Civil Court. From a reading of the contents of the plaint, it is clear that the suit was not for adjudicating the rights of the plaintiff as Bhumidhars of the land in dispute, but was for cancellation of the sale deed on account of fraud and for non payment of any consideration.

45. The cause of action set up in the plaint clearly indicates that the suit was not for a declaration of any right but was for cancellation of the sale deed on account of a fraud being played by the defendants upon the father of the plaintiff. Thus, in my view, Section 331 of U. P. Z. A. & L. R. Act is not applicable. Even otherwise a decree for a declaration is not an effective alternate relief against a decree for cancellation of the sale deed. If Section 33 of U. P. Z. A. and L. R. Act is allowed to pervade, the provisions of Section 31 of the Specific Relief Act, 1963 would be rendered otiose.

49. In view of the aforesaid, I am of the view that a suit for cancellation of the sale deed which may be void or voidable in respect of agricultural land was maintainable in the civil Court. The question of law framed is decided accordingly.

Allahabad High Court, Hameed And Ors. vs Kanhaiya on 27 July, 2004 Equivalent citations: AIR 2004 All 405, 2005 (1) AWC 738

Author: T Agarwala

Bench: T Agarwala

Relevant section of Transfer of Property Act & Contract Act:

TRANSFER OF PROPERTY ACT : INVALID TRANSFERS:

17. Chapter II of TP Act contains two parts. Part-A deals with 'Transfer of property whether movable or immovable' (Sections 5 to 34). Part-B deals with 'Transfer of immovable property' (Sections 38 to 53A). A transfer as defined by Section 5 of TP Act is conveyance of property by one living person to one or more living persons or to him in present or in future. Section 6 of TP Act declares that property of any kind may be transferred except the transfer of property, which is prohibited by TP Act. Clauses (a) to (h) under Section 6 of TP Act, deal with some of prohibited transfers. Clause (h) lays down that "no transfer can be made (i) insofar as it is opposed to the nature of the interest affected thereby, or (ii) for an unlawful object, or consideration within the meaning of Section 23 of the Indian Contract Act, 1872, or (ii) to a person legally disqualified to be transferee." Section 7 of TP Act enumerates that every person entitled to transferable property or authorized to dispose of transferred property, not his own, can transfer the property provided he is competent to do so. Section 8 of TP Act deals with 'operation of transfer'. It is to the effect that a transfer of property passes forthwith to the transferee of the interest, which the transferor is then capable of passing in the property and legal incidents thereof. When such transfer is completed as per Sections 10 and 11 of TP Act, any restriction contained in the transfer deed disentitling the transferee from operating or disposing of his interest in the property would be void and when the interest is created absolutely in the transferee with a condition that such transferee can enjoy subject to conditions, the transferee can ignore such conditions. As per Section 4 of TP Act, all the provisions relating to contract in the TP Act shall be taken as part of the Indian Contract Act and Section 54 (Paragraphs 2 and 3), Sections 59, 107 and 123 of TP Act shall be read as supplemental to the Registration Act. At this stage, it is necessary to extract Sections 4, 5, 6(h), 7 and 8 of TP Act as under.

4. Enactments relating to contracts to be taken as part of Contract Act. - The chapters and sections of this Act which relate to contracts shall be taken as part of the Indian Contract Act, 1872 (IX of 1872).

(And Section 54, Paragraphs 2 and 3, 59, 107 and 123 shall be read as supplemental to the Indian Registration Act, 1908 (XVI of 1908).

5. "Transfer of Property" defined. - In the following sections "transfer of property' means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, and one or more other living persons and "to transfer property" is to perform such act.

In this section "living person" includes a company or association or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals.

6. (h) No transfer can be made (1) insofar as it is opposed to the nature of the interest affected thereby, or (2) for an unlawful object, or consideration within the meaning of Section 23 of the Indian Contract Act, 1872 (IX of 1872), or (3) to a person legally disqualified to be transferee.

7. Persons competent to transfer. - Every person competent to contract and entitled to transferable property, or authorized to dispose of transferable property not his own, is competent to transfer such property either wholly or in part, and either absolutely or conditionally, in the circumstances to the extent and in the manner allowed and prescribed by any law for the time being in force.

8. Operation of transfer. - Unless a different intention is expressed or necessarily implied, a transfer of property passes forthwith to the transferee all the interest which the transferor is then capable of passing in the property and in the legal incidents thereof.

Such incidents include, where the property is land, the easements annexed thereto, the rents and profits thereof accruing after the transfer, and all things attached to the earth;

And, where the property is machinery attached to the earth the movable parts thereof;

And, where the property is a house, the easements annexed thereto, the rent thereof accruing after the transfer, and the locks, keys, bars, doors, windows and all other things provided for permanent use therewith;

And, where the property is a debt or other actionable claim, the securities therefore (except where they are also for other debts or claims not transferred to the transferee), but not arrears of interest accrued before the transfer;

And, where the property is money or other property yielding income, the interest or income thereof accruing after the transfer takes effect.

18. As noticed above, Chapter II contains Part B as well, which deals with transfer of immovable property specifically. A brief summary of the provisions of Part B of Chapter II (Sections 38 to 53) is necessary. A reading of Sections 38, 41, 42, 43, 48 and 53 would show that in all cases, a sale of immovable property does not always absolutely result in transfer of property forthwith to the transferee. There is any number of exceptions to the principle adumbrated under Section 8 of the TP Act, apart from the two important conditions of the transfer, namely; "that the transferor is entitled to transfer or the transferor is authorized to dispose of the transferable property not his own". When the transferor or a person authorized by such transferor does not have any authority either because there is no such entitlement to transfer or because there is no such authority to transfer, the remedies of the true owner entitled to transfer but who has not done so, could be many. Under Section 38 of TP Act, a person who is authorized to transfer property only under specific conditions, but transfers the property for consideration though such conditions do not exist, as between the transferee and transferor, it is always open to the transferee to assume existence of such conditions if he has acted in good faith after taking reasonable care to ascertain the existence of circumstances. Further if an ostensible owner transfers the property with the consent of the persons interested in the immovable property, the transfer is valid and is not voidable on the ground that the transferor (ostensible owner) was not authorized to make it. That is the purport of Section 41 of TP Act. Under Section 42 of TP Act, the transferor (seller) can always reserve power to revoke the transfer and in such a case if subsequent transfer takes place with or without revocation, the subsequent transferee can always assume that in exercise of such revocation power the transferee revoked earlier transfer. Section 43 of TP Act contains the principle known as "feeding the estoppel", which means that if a person transfers the immovable property by a fraudulent and erroneous means, and such person subsequently acquires authority to transfer, the transferee is entitled for the transfer of the ownership, if the interest is acquired during the subsistence of the contract of transfer. Here again 'good faith' comes to the rescue of the transferee buying the property without there being a validly vested title in the transferor. Section 53 of TP Act speaks about fraudulent transfer. It reads as under.

53. Fraudulent transfer. -

(1) Every transfer of immovable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed.

Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration.

Nothing in this sub-section shall affect any law for the time being in force relating to insolvency.

A suit instituted by a creditor (which term includes a decree-holder whether he has or has not applied for execution of his decree) to avoid transfer on the ground that it has been made with intent to defeat or delay the creditors of the transferor shall be instituted on behalf of, or for the benefit of, all the creditors.

(2) Every transfer of immovable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee.

For the purpose soft his sub-section no transfer made without consideration shall be deemed to have been made with intent to defraud by reason only that a subsequent transfer for consideration was made.

19. Any transfer of immovable property made with intent to defeat or delay the creditors of the transferors and transfer made without consideration with intent to defraud a subsequent transferee are void and at the option of the subsequent transferee is voidable.

20. Chapter III of the TP Act contains Sections 54 to 57. All these provisions deal with "sale of immovable property". Section 54 of TP Act defines sale as transfer of ownership in exchange for a price paid or promised, or part paid or part promised. If the value of the property is Rs. 100 and upwards, sale shall have to be effected only by a registered instrument. A contract of sale of immovable property is a contract that a sale shall take place on terms settled between the parties and does not in itself create any interest in or charge of such property. Section 55 of TP Act contains the rights and liabilities of buyer or seller, which govern the sale as well as contract of a sale. As Section 55 of TP Act comes into play only when the terms of the contract are absent between the seller and buyer. If the sale is registered without there being a contract of sale to precede it, the seller and buyer are bound by the provisions in Section 55 of TP Act. Hence, it is to be concluded that as and when the immovable property is sold under registered document, the seller and buyer agree that the seller had a valid title and the buyer was receiving the valid title under the sale. Here, it is necessary again to refer to Chapter II of TP Act to notice various situations of there being purported valid sale and situations where the law cannot presume the transfer of property.

21. Unless and until, a person is competent to contract and entitled to transfer the property, a valid transfer of property cannot take place (Sections 5 and 7 of TP Act). As a necessary corollary, if the transfer of property is by a person without title or such transfer is opposed to nature of interest or for an unlawful object or consideration within the meaning of Section 23 of the Contract Act or transferee is legally disqualified to be transferee, title in the property does not pass to the transferee (Sections 6(h) and 8 of TP Act and Section 23 of the Contract Act). In the case of transfer by a seller having improper title in him, the situation would be different. Here again, there could be different circumstances. These are (i) a person having authority to transfer immovable property only under certain circumstances, when the transferee can assume that such circumstances existed at the time of transfer (Section 38 of TP Act); (ii) a transfer of property burdened with an obligation operating as an encumbrance on the land, is valid in so far as the transferee who was not put on a notice regarding such obligation even though the beneficiary of such burden of the property in law is entitled to the benefit of an obligation arising out of contract (Sections 39 and 40 of the TP Act); (iii) If the transfer is made by an ostensible owner (who on the face of it is inferred to be authoritative transferor of property) for consideration, the transfer shall not be voidable on that ground provided the transferee has taken reasonable care to ascertain that the transferor had power to make the transfer (Section 41 of the TP Act); (iv) In a transfer of property where the seller reserves the power to revoke the transfer, the subsequent purchaser can always proceed as if the transferor revoked earlier transfer (Section 42 of the TP Act); and (v) if a transfer takes place where the transferor had no title or imperfect title, the transferee is entitled to get all the interests which the transferor may acquire in the property subsequently provided transferee has acted in good faith for consideration without notice of the existence of the defect in the title (Section 43 of the TP Act). Apart from these situations, the transfer by a co-owner, joint owner or by a person having distinct interest in the transfer, is not rendered void and transferee in certain situations has a right to get the transfer validated. The Legislature has dealt with a variety of situations where, in a transfer, there could be passing of imperfect title. Therefore, Sections 10 and 11 of TP Act which render conditions of inalienability or conditions of non-transfer or conditions encumbering the transfer, cannot be read in isolation, they have to be read along with other provisions to which a reference is made hereinabove.

22. What would happen when the transfer is made by a person without any valid title? What would be the situation when a sale takes place by reason of the fraud played by the transferor and transferee, which drastically affects the person with absolute title and ownership? In situations such as these, does the law contemplate only remedy of seeking declaration or cancellation of the fraudulent transfer deed or does it enable the true owner to execute a deed nullifying the fraudulent transfer deed? When Sections 7 and 8 of TP Act contemplate that only person competent to contract and entitled to transfer property can transfer, any other transfer (otherwise than as contemplated under Section 7 of the TP Act) must be treated as void. Likewise, if a transferee reserves power to himself to revoke the transfer, such transfer/sale is not rendered void (in view of Sections 10 and 11) but the transferor can even revoke the sale deed without going to any Court.

INDIAN CONTRACT ACT : VOID TRANSFERS:

23. Before dealing further having regard to the Section 4 of the TP Act, which stipulates that the provisions of the TP Act relating to contract shall be taken as part of the Indian Contract Act, 1872, a reference need to be made to relevant provisions of the Contract Act. The Indian Contract Act is not a complete code dealing with law of contracts. Whenever the provisions of the Contract Act do not apply the, principles of English Law in turn would apply. See Bhavandas v. Girdharlal and Co. and Superintendence Co. of India v. Krishna Murgai . Be that as it is, sale of immovable property being contract, it is necessary to recapitulate the basic principles of contract. An agreement enforceable by law is a contract and agreement not enforceable by law is void, though an agreement enforceable at the option of one or more parties thereto becomes voidable. All agreements become contracts when there is a valid proposal and reciprocal acceptance of the proposal agreeing with the conditions subject to which one party makes the proposal and the other party accepts such proposal. A person who is of sound mind and who is not disqualified by any law is alone competent to contract. Sections 13, 14, 15, 16, 17, 18 and 19 of Contract Act define and explain the terms often used in the law of contract, namely, "consent", "free consent", "coercion", "undue influence, "fraud" and "misrepresentation" respectively. Sections 20, 24 to 30 describe the agreements/contracts, which are void. These are :

(a) where both parties to an agreement are under a mistake as to the matter of fact essential to the agreement;

(b) if the consideration and object of a contract is unlawful Section 23 enumerates considerations and objects which are lawful or which are not lawful;

(c) an agreement without consideration is void subject to certain exceptions contained in Section 25;

(d) agreement in restraint of marriage of a person other than a minor;

(e) an agreement restraining the other from exercising a lawful profession, trade or business;

(f) an agreement which restrains other party from enforcing the rights by taking legal proceedings in the Courts/Tribunals and

(g) agreements by way of wager and agreement the meaning of which is not certain or capable of being made certain.

Chapter IV of the Contract Act deals with the contracts, which must be performed. This chapter contains provisions regarding the contracts to be performed, by whom to be performed, time and place for performance, performance of reciprocal promises and appropriation of payments and contracts which need not be performed. Section 65 of the Contract Act lays down that when a contract becomes void, any person who has received any advantage under such contract is bound to restore it to the person from whom it was received. These principles cannot be ignored while dealing with the transfer of property, which is void for any of the reasons noticed hereinabove.

The Honorable Allahabad High Court

Kedar Prasad vs Ganga Prasad And Ors. on 17 October, 1979

(Equivalent citations: AIR 1980 All 85)

Registration of Unilaterally Executed Deed of Cancellation:

The Registration Act, 1908

Section 17 of the Registration Act, 1908

Section 31 of the Registration Act, 1908

The Transfer of Property Act, 1882

The Specific Relief Act, 1963

(i) A deed of cancellation of a sale unilaterally executed by the transferor does not create, assign, limit or extinguish any right, title or interest in the property and is of no effect. Such a document does not create any encumbrance in the property already transferred. Hence such a deed of cancellation cannot be accepted for registration. (ii) Once title to the property is vested in the transferee by the sale of the property, it cannot be divested unto the transferor by execution and registration of a deed of cancellation even with the consent of the parties. The proper course would be to re-convey the property by a deed of conveyance by the transferee in favour of the transferor. (iii) Where a transfer is effected by way of sale with the condition that title will pass on payment of consideration, and such intention is clear from the recital in the deed, then such instrument or sale can be cancelled by a deed of cancellation with the consent of both the parties on the ground of non-payment of consideration. The reason is that in such a sale deed, admittedly, the title remained with the transferor. (iv) In other cases, a complete and absolute sale can be cancelled at the instance of the transferor only by taking recourse to the Civil Court by obtaining a decree of cancellation of sale deed on the ground inter alia of fraud or any other valid reasons.

M/S.Latif Estate Line India Ltd vs Mrs. Hadeeja Ammal on 11 February, 2011

W.A. NOS. 592 & 938 OF 2009

W.A. NO. 592 OF 2009

LIMITATION FOR FILING SUIT OF CANCELLATION OF SALE DEED:

An ownership of a property is transferred by means of a registered sale deed as per Section 54 of the Transfer of Property Act, 1882. Every sale deed has an effect of divesting the transferor of the ownership of the property and the vesting of the ownership in the transferee. A sale deed by which the ownership rights in an immovable property are transferred can be ignored only under two circumstances. Firstly, if the sale deed is a nominal transaction or a paper transaction because the parties intended it to be so or secondly, if the document being the sale deed is void ab initio. It is in these two circumstances that it is not necessary to have the sale deed set aside inasmuch as the sale deed cannot have the effect of transferring ownership. However, in all other cases where it is pleaded that sale deed is a voidable document because it ought not to have been executed or there is a fraudulent transfer of title by means of the particular sale deed or for any reason which makes the transfer voidable (and not void), it is necessary that a suit has to be filed for cancellation of such a sale deed within a period of three years from the date a person comes to know of execution and existence of the sale deed which goes against the interest of such person. This is the mandate of Article 59 of the Limitation Act, 1963.

Delhi High Court, Sh. Mukhinder Singh (Deceased) ... vs Sh. Gurbux Singh & Ors. on 2 February, 2012

Author: Valmiki J. Mehta, RFA No.377 /2010, 2nd February, 2012

SH. MUKHINDER SINGH (DECEASED) THROUGH LRS. & ORS..... Appellants

The Supreme Court in the judgment reported as Prem Singh vs. Birbal 2006 (5) SCC 353 has held that Article 59 applies to voidable transactions and not void transactions.