The Supreme Court has held that a registered Sale Deed carries a formidable presumption of validity and genuineness, and courts must not “lightly or casually” declare such instruments as “sham.” The Court emphasized that the burden of proof to displace this presumption rests heavily on the challenger, requiring strong material particulars rather than “clever drafting” or nebulous averments.
In a judgment delivered on January 22, 2026, a Bench comprising Justice Manmohan and Justice Rajesh Bindal allowed the appeal filed by the legal representatives of the original defendant, Hemalatha, setting aside a Karnataka High Court order that had declared a 1971 registered Sale Deed and Rental Agreement as nominal and not intended to be acted upon.
The central legal issue before the Apex Court was the threshold required to declare a registered Sale Deed as a “sham” transaction and whether oral evidence contrary to the written terms of a registered document is admissible under Section 92 of the Indian Evidence Act, 1872.
The Supreme Court set aside the High Court’s judgment and restored the order of the First Appellate Court, thereby dismissing the suit filed by the Respondent-Plaintiff (Tukaram) which sought to declare the registered Sale Deed and Rental Agreement as null and void. The Court ruled that the transaction was an outright sale and not a mortgage by conditional sale.
Background of the Case
The dispute dates back to November 12, 1971, when the Respondent-Plaintiff, Tukaram (now deceased), executed a registered Sale Deed in favor of the Appellant-Defendant No. 1, Hemalatha, for a house in Bidar for a consideration of Rs. 10,000. On the same day, a registered Rental Agreement was executed whereby Tukaram became a tenant in the suit house.
Prior to this, in 1966, Tukaram had mortgaged the property to one Sadanand Garje. The sale to Hemalatha was ostensibly to discharge this mortgage.
After paying rent for 14 months, Tukaram defaulted. In 1974, the Appellants issued a legal notice demanding arrears of rent and possession. In his reply dated October 5, 1974, Tukaram admitted the default and sought time to pay. However, following eviction proceedings initiated by the Appellants in 1975, Tukaram filed a suit (O.S. No. 39 of 1977) seeking a declaration that the Sale Deed and Rental Agreement were “nominal, sham and not to be acted upon,” alleging the transaction was actually a loan/mortgage.
The Trial Court decreed the suit in favor of Tukaram. However, the Additional District Judge, Bidar, reversed this decision in 1999, holding the Sale Deed to be genuine. In a Second Appeal, the Karnataka High Court set aside the District Judge’s order and restored the Trial Court’s decree, relying on the Supreme Court’s decision in Gangabai v. Chhabubai.
Arguments of the Parties
Counsel for the Appellants argued that the terms of the registered Sale Deed were clear and unambiguous. Relying on Section 92 of the Indian Evidence Act, they contended that extrinsic oral evidence could not be admitted to vary the terms of a written contract. They pointed out that the Respondent had admitted his status as a tenant in his 1974 reply to the legal notice and had not raised the plea of the document being sham at that stage.
Senior Counsel for the Respondents argued that the transaction was never intended to be a sale but was a security for a loan. They claimed the value of the property was much higher than Rs. 10,000 and that the Respondent retained possession. They relied on the Gangabai judgment to argue that oral evidence is admissible to show that a document was never intended to be acted upon.
Court’s Analysis and Observations
The Supreme Court strictly scrutinized the pleadings and the conduct of the parties.
1. Presumption of Validity of Registered Documents: Writing for the Bench, Justice Manmohan observed:
“It is a settled position of law that a registered Sale Deed carries with it a formidable presumption of validity and genuineness. Registration is not a mere procedural formality but a solemn act that imparts high degree of sanctity to the document. Consequently, a Court must not lightly or casually declare a registered instrument as a ‘sham’.”
2. Strict Pleading Standards: The Court criticized the practice of challenging registered deeds based on vague allegations.
“The person alleging that a registered Deed is a sham must satisfy a rigorous standard of pleading by making clear, cogent, convincing averments and provide material particulars in his pleadings and evidence… clever drafting creating illusion of cause of action would not be permitted.”
3. Section 92 of the Evidence Act: The Bench distinguished the present case from Gangabai, noting that the Respondent-Plaintiff was a “wise man” who understood the difference between a mortgage and a sale, having executed both previously. The Court held that since the recitals in the Sale Deed were “clear, categorial and admit of no ambiguity,” the intent was an outright sale.
“If the sanctity of registered documents is diluted, it would erode public confidence in property transactions and jeopardize the security of titles.”
4. No Mortgage by Conditional Sale: The Court noted that the Sale Deed contained no condition for reconveyance or repurchase, which is mandatory under the proviso to Section 58(c) of the Transfer of Property Act, 1882, to constitute a mortgage by conditional sale.
“Consequently, this Court is of the opinion that the Sale Deed dated 12th November 1971 is not a mortgage by conditional sale.”
5. Conduct of the Respondent: The Court highlighted that the Respondent had paid rent for over a year and admitted his liability in the reply to the legal notice in 1974. The suit filed in 1977 was termed a “counterblast” to the eviction proceedings. The Court also noted that the Respondent’s own witness (his brother) deposed that the house was sold to pay off debts.
6. Suggestion for Reform: In a significant observation regarding systemic reforms, the Court suggested the use of technology to prevent litigation based on forgery or denied execution.
“Before parting, this Court deems it necessary to suggest to the Union and State Governments the urgent need for the digitization of registered documents and land records using secure, tamper-proof technologies such as Blockchain.”
Decision
The Supreme Court allowed the appeal, setting aside the High Court’s judgment and restoring the First Appellate Court’s decision. The suit filed by the Respondent-Plaintiff was dismissed with costs.
Case Details:
- Case Name: Hemalatha (D) by Lrs. v. Tukaram (D) by Lrs. & Ors.
- Case No: Civil Appeal No. 6640 of 2010
- Bench: Justice Manmohan and Justice Rajesh Bindal
