Sunday, October 17, 2010

Supreme Court on Lis Pendens and Registration of Documents

In a recent decision, Har Narain v. Mam Chand (Civil Appeal Np. 995-996/2003, judgment dated October 8, 2010), the Supreme Court has discussed and reviewed the law relating to the doctrine of lis pendens. The essential facts were that the first respondent was the owner of certain property (land) which he mortgaged to the appellant. Subsequently, the first respondent executed a sale deed purporting to transfer the property to certain bona fide purchasers for consideration. After the execution of the sale deed but before the registration of the same, the appellant filed a suit seeking to restrain the first respondent from alienating the property. In other words, the sequence of events was such, that on the date of filing of the suit, a sale deed had been executed but had not been registered. The registration was completed subsequently. The case of the appellant was that as the registration was subsequent to the filing of the suit, the sale was affected by lis pendens.

The doctrine of lis pendens, embodied in Section 52 of the Transfer of Property Act, 1882, effectively provides that during the pendency of a suit in which any right to immovable property in is question, the property cannot be transferred by any party to the suit so as to affect the rights of other parties. The contention of the appellant was that the transfer took place on the date of registration (the document being compulsorily registrable); and accordingly, the doctrine of lis pendens applied. The trial court found that although registration was subsequent to the filing of the suit, the execution of the sale deed was prior to filing; and accordingly, the doctrine of lis pendens would not be applicable. It found that under Section 47 of the Registration Act, 1908, registration dates back to the date of execution. Accordingly, the trial court found that the sale in favour of bona fide purchasers for consideration would be protected; as after the registration, the same would be deemed to have been effected on the date of the execution of the sale deed itself. The judgment of the trail court was affirmed on first appeal, and also on second appeal. The Supreme Court allowed the appeal, and held that the doctrine of relating back had no application in the facts of the case. Accordingly, the transfer was hit by lis Pendens. The Court observed:

“A similar issue though in a case of right of pre-emption was considered by the Constitution Bench of this Court in Ram Saran Lall & Ors. v. Mst. Domini Kuer & Ors., AIR 1961 SC 1747, by the majority of 3:2, the Court came to the conclusion that as the mere execution of the sale deed could not make the same effective and registration thereof was necessary, it was of no consequence unless the registration was made. Thus, in spite of the fact that the Act, 1908, could relate back to the date of execution in view of provisions of Section 47 of the [Registration] Act, 1908, the sale could not be given effect to prior to registration. However, as the sale was not complete until the registration of instrument of sale is complete, it was not completed prior to the date of its registration…”

The Court then extracted certain observations from the decision of the Constitution Bench:

“Section 47 of the Registration Act does not, however, say when sale would be deemed to be complete. It only permits a document when registered, to operate from a certain date which may be earlier than the date when it was registered. The object of this section is to decide which of two or more registered instruments in respect of the same property is to have effect. The section applies to a document only after it has been registered. It has nothing to do with the completion of the registration and therefore, nothing to do with the completion of a sale when the instrument is one of sale. A sale which is admittedly not completed until the registration of the instrument of sale is completed, cannot be said to have been completed earlier because by virtue of Section 47 the instrument by which it is effected, after it has been registered, commences to operate from an earlier date.”

Following this decision, it was held that the relevant date to be seen for determining the applicability of the doctrine of lis pendens in cases where the document of transfer is compulsorily registrable is the date of the registration and not the date of the execution of the document. While this is not a new proposition as such, given the precedent cited by the Court, it is interesting to see how this fits in with the wording of Section 47 of the Act. Before coming to Section 47, it is worth noticing, that under Section 54 of the Transfer of Property Act, 1882, a sale in the case of tangible immovable property with a value greater than Rs. 100 “can be made only by a registered instrument”. Thus, registration is not a formality but is an essential element in the transfer of property. This gives additional support for the reasoning of the Court; insofar as property cannot be said to have been transferred prior to registration. However, Section 47 of the Registration Act states:

“47. Time from which registered document operates.- A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration.”

The Constitution Bench in the decision cited earlier has stated that the section “only permits a document when registered, to operate from a certain date which may be earlier than the date when it was registered…” On the plain language of the section, however, the section does not “permit” a document to operate from an earlier date; it mandates – as opposed to merely permits – that every compulsorily registrable document shall operate from the date of execution. This brings us to the question of what meaning should be ascribed to the word “operate” – what does it mean for a document to “operate”? It appears that ‘shall operate from’ is equivalent to ‘be effective from’. On that reading, the position of law currently existing is perhaps not in keeping with the literal meaning of the words. This is perhaps one of the many instances where courts have chosen to eschew a literal meaning in favour of a purposive one in order to serve the ends of justice.

2 comments:

Renganath said...

The judgement may be justified even technically by arguing that where a party cannot prospectively transfer pending a suit, a fortiori he cannot (do an act which has the effect of) retrospectively transfer. Of course, there is the Art.142 argument as well, but I personally am not for that.

Anonymous said...

I agree- there is much to be said for that view too. Regarding the article 142 argument- there too, I agree with you; I do not think that principles involving interpretation of statutes or common law concepts should be settled on the basis of Article 142 as such.