Supreme Court Clarifies Law on Unregistered Lease Agreements

 Analysis of K.B. Saha & Sons Pvt. Ltd v. Development Consultant Ltd (2008) 8 SCC 654

Introduction

The Supreme Court’s decision in K.B. Saha & Sons Pvt. Ltd v. Development Consultant Ltd (2008) 8 SCC 654 stands as a landmark judgment on the admissibility and legal effect of unregistered lease agreements in India. This case is frequently cited for its authoritative interpretation of Section 49 of the Registration Act, 1908, and its impact on landlord-tenant disputes, especially regarding the use of lease agreements that have not been registered as required by law.

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Whether unregistered document will be admissible in evidence for collateral purpose?

 Yes, unregistered documents are admissible in evidence for collateral purposes under the proviso to Section 49 of the Registration Act. While the general rule prohibits the admission of unregistered documents that are required to be registered, the law recognizes a specific exception for collateral purposes.

Legal Framework for Collateral Purpose

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Whether the court can look into unregistered lease deed to ascertain the nature and character of possession if it constitutes the main dispute for adjudication by it?

 In the case of Rai Chand Jain v. Miss Chandra Kanta Khosla [MANU/SC/0185/1991 : (1991) 1 SCC 422], dispute arose as to whether certain premises were let out for residential purpose or as to whether there was an oral agreement of letting out the premises to the tenant, for running a press. It was in that perspective, it was held in the said case that a lease deed though unregistered, could be considered for collateral purposes to show the purpose for which the premises was leased out. Thus, the lease deed was referred to for the sole purpose to defeat the claim of subsistence of an oral agreement. The ratio of this authority has been considered in the case of K.B. Saha and Sons Private Limited (supra) and we follow that ratio. In the case of Satish Chand Makhan (supra), another coordinate Bench of this Court declined to accept admissibility of an unregistered lease agreement for determining duration of the lease (9 years in that case) on the reasoning that terms of lease would not constitute collateral purpose. It was observed in this judgment that "nature and character of possession" could constitute collateral purpose but that was not the point which was directly in lis before this Court. In our opinion, nature and character of possession contained in a flawed document (being unregistered) in terms Section 107 of the 1882 Act and Sections 17 and 49 of the Registration Act can form collateral purpose when the "nature and character of possession" is not the main term of the lease and does not constitute the main dispute for adjudication by the Court. In this case, the nature and character of possession constitutes the primary dispute and hence the Court is excluded by law from examining the unregistered deed for that purpose. In respect of the suit out of which this appeal arises, purpose of lease is the main lis, not a collateral incident. {Para 13}

15. In this case, factum of creation of tenancy has been established. But the purpose of tenancy, so as to attract the six months' notice period Under Section 106 of the 1882 Act cannot be established by such evidence as in such a situation, registration of the deed would have been mandatory. The onus would be on the Defendant to establish the fact that manufacturing activity was being carried on from the demised premises. A mere statement by the DW-1 to which we have referred earlier or the purpose of lease as specified in the lease agreement would not be sufficient to demonstrate the purpose of lease to be for manufacturing. This could be proved by explaining what kind of work was being carried on in the factory shed. In such a situation also, the registration of the deed would have been necessary. In absence of such registration, tenancy would have been of "month to month" character. For these reasons, we do not think the High Court erred in law in dismissing the Defendant's appeal. The present appeal shall stand dismissed on the same rationale.

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. 6149 of 2023.

Decided On: 25.09.2023

Paul Rubber Industries Private Limited Vs. Amit Chand Mitra and Ors.

Hon'ble Judges/Coram:

Aniruddha Bose and Vikram Nath, JJ.

Author: Aniruddha Bose, J.

Citation: 2023/INSC/854, MANU/SC/1051/2023.

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Whether tenant can rely on terms of lease deed if it is unregistered?

The contention of the learned Counsel for the respondent that the aforesaid clause cannot be looked into for want of registration of the lease deed appears to be correct. Reliance has been placed on the observations of Fazal Ali, J. in Sachindra Mohan Ghose v. Ramjash Agarwalla MANU/BH/0077/1931 : AIR1932Pat97 that if a decree purporting to create a lease is inadmissible in evidence for want of registration, none of the terms of the lease can be admitted in evidence and that to use a document for the purpose of proving an important clause in the lease is not using it as a collateral purpose.

8. The learned Counsel for the appellant attempted to meet the point by saying that so far the consent of the landlord permitting sub-letting is concerned, it does not require registration and the clause, therefore, must be excepted from the requirement of registration and consequent exclusion from evidence. We do not see any force in this argument. The question whether a lessee is entitled to create a sub-lease or not is undoubtedly a term of the transaction of lease, and if it is incorporated in the document it cannot be disassociated from the lease and considered separately in isolation. If a document is inadmissible for non-registration, all its terms are inadmissible including the one dealing with landlord's permission to his tenant to sub-let. It follows that the appellant cannot, in the present circumstances, be allowed to rely upon the clause in his unregistered lease deed.

IN THE SUPREME COURT OF INDIA

Civil Appeal No.2443 of 1980

Decided On: 08.08.1989

Bajaj Auto Limited vs. Behari Lal Kohli

Hon'ble Judges/Coram:

L.M. Sharma and N.D. Ojha, JJ.

Citation: AIR 1989 SC 1806,(1989) 4 SCC 39.

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Whether tenant is bound to pay stamp duty on copy of lease agreement if it is insufficiently stamped?

 Countering the said submissions, Mr. Asan Ali Khan, learned Counsel for the respondent submitted that when admittedly Exs.R1 to R8 are copies of the originals of the lease deeds executed between the petitioner and the respondent and they are for a period not exceeding 11 months, they are not compulsorily registrable and as such they can be looked into for collateral purposes. According to the learned Counsel, the copy available with the respondent need not be stamped and the original available with the petitioner alone are liable to be stamped in accordance with Indian Stamp Act; even if it is insufficiently stamped, it can be looked into for collateral purpose, namely, to ascertain the address of the premises, which is leased out and the question of insufficiency of stamp duty can be gone into only at the time of final disposal of RCOP. 
At the outset it has to be pointed out that when an agreement of lease is executed between the landlord and tenant, normally, lease agreement is prepared in duplicate i.e., both are originals, signed by both the landlord and tenant. If that being so, it cannot be contended by the respondent that the agreement available with the tenant is only a copy and not the original and therefore it need not be sufficiently stamped. Therefore, the contention of the learned Counsel for the respondent that Exs.R1 to R8 need not be stamped as contemplated in the Indian Stamp Act but the original agreement available with the petitioner alone has to be stamped in accordance with Indian Stamp Act cannot be countenanced.
IN THE HIGH COURT OF MADRAS

C.R.P. (PD) No. 853 of 2010 and M.P. No. 1 of 2010

Decided On: 07.07.2010

V. Jayaraman Vs. K.A. Ubaidur Rahman

Hon'ble Judges/Coram:

K. Mohan Ram, J.

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Whether it is mandatory to pay stamp duty on lease agreement entered for 11 months?

 Here, in this case, the document viz., the lease agreement comes within the purview of Schedule I of Section 35(a) of the Indian Stamp Act. Though the lease agreement entered for 11 months need not be registered, for the purpose of marking the document even for collateral purpose, it should be duly stamped.Further, the Hon'ble Supreme Court in the decision reported in MANU/SC/0942/2008 : (2008) 2 MLJ 1115 (SC) (Thiruvengada Pillai Vs. Navaneethammal) has held that even if an agreement is not executed on requisite stamp paper, it is admissible in evidence on payment of duty and penalty under Section 35 or 37 of the Indian Stamp Act. Therefore, when an instrument which is not duly stamped is produced before the Court for the purpose of admitting the same in evidence, as per Section 35 of the Stamp Act, such instrument cannot be admitted in evidence and if the person who produces the document is willing to pay the stamp duty penalty, then a duty is cast upon the Court to impound the document and direct the party to pay penalty as per proviso (a) to Section 35 of the Act and follow the procedure contemplated under Section 38(1) of the Act. In case, the person refuses to pay penalty as fixed by the Court and requested the Court to send the document to the Collector for impounding and determination of penalty and also the stamp duty payable on that document, the Court has to send the document in original to the Collector as contemplated under Section 38(2) of the Stamp Act. On receipt of such document, the Collector has to follow the procedure contemplated under Section 40 of the Act."

IN THE HIGH COURT OF MADRAS

C.R.P. (PD)(MD) No. 1992 of 2017 and CMP (MD) No. 10029 of 2017

Decided On: 21.06.2018

 A. Rajaram  Vs.  P. Chinnakani

Hon'ble Judges/Coram:

J. Nisha Banu, J.

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Whether terms of registered agreement of sale can be varied by unregistered document?

The reliance of the counsel for plaintiff on the judgment of M/s. A. R.C. Overseas Pvt. Limited (2008 (2) All LJ 663) (supra) and the judgement of Hamda Ammal (supra) for the purpose of substantiating his argument that unregistered document can be admitted in evidence for collateral purpose, it is required to be stated that unregistered receipts, paper Nos. 77ka/1 and 78ka/1, were not the documents to be received in evidence for collateral purpose but these documents varied the terms of the original agreement to sell between the parties and therefore, they did not served any collateral purpose but were direct evidence, evidencing variation of the terms of contract, of a registered document and the terms of a registered document cannot be varied by a unregistered document executed in future.

IN THE HIGH COURT OF ALLAHABAD

Second Appeal No. 64 of 2001

Decided On: 02.07.2018

 Shanti Mishra  Vs. Samuel

Hon'ble Judges/Coram:

Siddhartha Varma, J.

Citation: AIR 2019 ALL 242

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Whether terms of lease can be proved on basis of unregistered lease agreement?

The defendants have nowhere admitted that the lease was for a specific term of nine years. On the contrary, they have pleaded that they were tenants holding over under Section 116 of the Transfer of Property Act. The unregistered draft lease agreement Ex. B-2 was clearly inadmissible in evidence under Section 49 of the Registration Act, except for the collateral purpose of proving the nature and character of possession of the collateral purpose of proving the nature and character of possession of the defendants. The documents Ex. B-2 was admissible under the proviso to Section 49 only for a collateral purpose of showing the nature and character of possession of the defendants. The proviso to Section 49 was however not applicable in the present case inasmuch as the terms of a lease are not a "collateral purpose" within its meaning. It follows that the unregistered draft lease agreement Ex. B-2 was inadmissible in evidence to prove the transaction of lease. It was also ineffectual to create a valid lease for a renewed term of nine years for want of registration as required under Section 17(1)(d) of the Registration Act.
IN THE SUPREME COURT OF INDIA

C.A. No. 10041 of 1983

Decided On: 27.10.1998

Satish Chand Makhan  Vs.  Govardhan Das Byas 

Hon'ble Judges/Coram:
A.P. Sen and E.S. Venkataramiah, JJ.
Citation: AIR 1984 SC 143

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Whether partition deed which is not stamped is admissible in evidence for collateral purpose?

 The trial Court has directed to exhibit the document styled as "partition deed". The Trial Court observed that the parties can use the said document for collateral purpose. If the document requiring compulsory registration is not registered, then the document can be used for collateral purpose in view of section 49 of the Registration Act. There would be no bar to refer said document for collateral purpose. However, even if the document is used for collateral purpose, the document is required to be stamped properly. Unless and until the document is stamped the document cannot be admitted in evidence. Reference can be made to section 34 of the Bombay Stamp Act. Reading the document, it appears that the document effects partition amongst the parties in front of panchas. In view of that even if said documents is used for collateral purpose, the document will be required to be stamped. 

IN THE HIGH COURT OF BOMBAY (AURANGABAD BENCH)

L.P.A. No. 44 of 2013 in W.P. No. 2705 of 2012 and Civil Appln. No. 3353 of 2013

Decided On: 08.12.2017

Ranchhod Dharamdas Mali Vs. Laxman Dharamdas Mali and Ors.

Hon'ble Judges/Coram:

S.V. Gangapurwala and S.M. Gavhane, JJ.

Citation: 2018(3) MHLJ 775

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Whether unregistered lease deed can be used for collateral purpose?

 Section 55 of the Rent Control Act deals with the tenancy agreement to be compulsorily registered. Sub section 2 of Section 55 of the Act is relevant here. It reads thus :

"The responsibility of getting such agreement registered shall be on the landlord and in the absence of the written registered agreement, the contention of the tenant about the terms and conditions subject to which a premises have been given to him by the landlord on leave and licence or have been let to him, shall prevail, unless proved otherwise."

10. From sub-section 2 of Section 55 of the Rent Control Act, it can be seen that registration of agreement is required to be at the behest of landlord and otherwise burden to prove tenancy or licence is on the tenant. Section 55(2) of the Rent Control Act cannot be read in isolation and has to be read in conformity with the provisions of Section 17 of the Registration Act. Section 17 of the Registration Act refers to the documents of which registration is compulsory. Sub-section (1)(d) relates to leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent.

11. Under Section 107 of the Transfer of Property Act such as lease is to be made only by a registered instrument. So far as the effect of non-registration of lease-deed is concerned, Section 49 in clear and unambiguous words speaks that it can be used only for collateral purpose. It means, the factum of tenancy and possession if disputed between landlords and tenant can be considered even on the basis of unregistered lease-deed, but when it touches the terms and conditions of lease-deed the same cannot be admitted and read in evidence.

IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Writ Petition Nos. 3270 and 3271 of 2016

Decided On: 24.07.2017

Prasram Vs. Deepak and Ors.

Hon'ble Judges/Coram:

Indira Jain, J.

Citation: 2017(6) MHLJ 883

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Whether tenant can claim that property was given to him in perpetuity if lease deed is unregistered?

 Per contra, Shri Anand Jaiswal, learned Senior Counsel for respondents submitted that supervisory jurisdiction in Article 227 of the Constitution of India is exercised for keeping the subordinate courts within the bounds of their jurisdiction and when a subordinate Court has assumed a jurisdiction or has failed to exercise its jurisdiction, which it does have or the jurisdiction though available is being exercised by the Court in a manner not permitted by law and failure of justice or grave injustice has occasioned thereby, the High Court may step in to the exercise its supervisory jurisdiction. Learned Senior Counsel submits that terms and conditions of an unregistered lease-deed cannot be read in evidence though the same can be used for collateral purpose and this being the clear position of law, the trial Court was absolutely justified in holding that unregistered lease-deed cannot be read in evidence and the terms and conditions of the unregistered lease-deed can not be gone into. According to the learned Senior Counsel, the observations of the first Appellate Court are in clear ignorance of the provisions of the Registration Act to the extent that terms and conditions of lease deed can be read in evidence. It is submitted that the observations per se against the provisions and mandates of law can be negatived and rectified in writ jurisdiction. 07] The next submission on behalf of respondents is that under Section 107 of the Transfer of Property Act, lease created from year to year or for any term exceeding one year or reserving a yearly rent can be only by a registered lease-deed. The reference is also made to the provisions of Section 17(1)(d) of the Registration Act relating to leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent. Learned Senior Counsel submits that under Section 17 of the Registration Act, registration of such a lease is compulsory and consequence of non-registration are found in Section 49 of the Act. The submission is that lease in the present case is an unregistered document and by virtue of Section 49 can be used only for collateral purpose and not beyond the scope of Section 49 of the Registration Act. In support of submissions, learned Senior Counsel pressed into service judgments of the Hon'ble Supreme Court in Shalini Shyam Shetty & anr vs. Rajendra Shankar Patil - [2010(8) SCC 329] and Park Street propertiesPrivate Limited vs. Dipak Kumar Singh & anr. - [(2016) 9 SCC 268].

08] With the assistance of the learned Counsel for the parties, this Court has gone through the impugned judgments and orders. Learned Counsel for petitioner could not demonstrate that the trial Court while appreciating the evidence adduced by the parties committed an error of law or manifest error apparent on the face of record. True, the first Appellate Court while appreciating the lease-deed between petitioner and respondents observed that when plaintiffs failed to get lease- deed [Exh.16] registered as per Section 55(2) of the Rent Control Act, contention of tenant about the terms and conditions subject to which premises have been given to him by landlord on leave and licence shall prevail, unless proved otherwise. 09] Section 55 of the Rent Control Act deals with the tenancy agreement to be compulsorily registered. Sub section 2 of Section 55 of the Act is relevant here. It reads thus :

"The responsibility of getting such agreement registered shall be on the landlord and in the absence of the written registered agreement, the contention of the tenant about the terms and conditions subject to which a premises have been given to him by the landlord on leave and licence or have been let to him, shall prevail, unless proved otherwise."

10] From sub-section 2 of Section 55 of the Rent Control Act, it can be seen that registration of agreement is required to be at the behest of landlord and otherwise burden to prove tenancy or licence is on the tenant. Section 55(2) of the Rent Control Act can not be read in isolation and has to be read in conformity with the provisions of Section 17 of the Registration Act. Section 17 of the Registration Act refers to the documents of which registration is compulsory. Sub-section (1)(d) relates to leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent. 11] Under Section 107 of the Transfer of Property Act such as lease is to be made only by a registered instrument. So far as the effect of non-registration of lease-deed is concerned, Section 49 in clear and unambiguous words speaks that it can be used only for collateral purpose. It means, the factum of tenancy and possession if disputed between landlords and tenant can be considered even on the basis of unregistered lease-deed, but when it touches the terms and conditions of lease-deed the same can not be admitted and read in evidence.

12] In view of the above settled legal position, this Court finds substance in the submission of learned Senior Counsel for respondents that the observations made by the first Appellate Court regarding terms and conditions of an unregistered lease- deed are per se against the law and error or law having brought to the notice needs to be corrected in writ jurisdiction. 13] In the present case, landlords have proved by cogent and overwhelming evidence their bona fide requirement and default on the part of tenant to pay rent regularly. On the other hand, tenant could not establish that it was a lease in perpetuity. The tenant has failed to demonstrate any perversity or illegality in the findings recorded by the trial Court granting decree for eviction and possession to the respondents.

Bombay High Court

Shri Prasaram S/O. Damduji Amte vs Shri Deepak S/O Madanmohan Gupta ... on 24 July, 2017

Bench: I.K. Jain

WRIT PETITION NO.3270 OF 2016

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Whether unregistered lease deed can be used for collateral purposes?

 So   far   as   the   substantial   question   of   law   at   Serial   No.2
regarding   admissibility   of   document   at   Exhibit   50   in   evidence   is
concerned, though such document is an unregistered document, it can
be used for collateral purposes and the decision of the Apex Court in
the case of  Anthony  v.  K.C. Ittoop  & Sons and others, reported in
(2000) 6 SCC 394, throws light in para 16 thereof on such issue,
which is reproduced below :
“16. Taking   a   different   view   would   be   contrary   to   the
reality when parties clearly intended to create a lease though
the document which they executed had not gone into processes
of registration.   That lacuna had affected the validity of the
document,   but   what   had   happened   between   the   parties   in
respect of the property became a reality.   Non­registration of
the document had caused only two consequences.  One is that
no lease exceeding one year was created.   Second is that the
instrument became useless so far as creation of the lease is
concerned.   Nonetheless   the   presumption   that   a   lease   not
exceeding one year stood created by conduct of parties remains
unrebutted.”    

In view of above, the non­registration of document would not come in
the way of the Court to hold that the relationship of “Landlord and
Tenant” between the plaintiff and the defendant No.1 in the present
case has been established, coupled with the other evidence available
on record.  The substantial questions of law at Serial No.2 is answered
accordingly.
There is no substance in this second appeal, and the same is
dismissed.  
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR
Second Appeal No.24 of 2002
Ganesh s/o Ramkisan Bairagi,

V
 Parwatabai wd/o Tukaram Appa Landge,

Coram : R.K. Deshpande, J.
Dated  : 16th June, 2016
Citation: AIR 2017 (NOC) 61 Bom

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When unregistered document will be admissible in evidence for collateral purpose?

Now, it is to be seen whether the document in question can be
admitted in evidence for collateral purpose. Proviso to Section 49 of the Act
provides that an unregistered document affecting immovable property and
required to be registered as per Section 17, may be received as evidence of any
collateral transaction not required to be effected by registered instrument. Thus,
an unregistered document is admissible in evidence only for that collateral
purpose which in turn is not required to be effected by a registered instrument.
The expression 'collateral purpose' is a very vague one and the Court must decide
in each case whether the purpose for which it is sought to use the unregistered
document is really collateral one or it is to establish indirectly the title, interest or
right to immovable property sought to be conveyed by the document. In this
regard, Hon'ble Supreme Court in the case of K. B. Saha & Sons Pvt. Ltd
Development Consultant Ltd reported in (2008) 8 SCC 654 has laid down
the following propositions : 
1. A document required to be registered, if unregistered is not
admissible into evidence under Section 49 of the Registration Act.
2. Such unregistered document can however be used as an evidence
of collateral purpose as provided in the proviso to Section 49 of the
Registration Act.
3. A collateral transaction must be independent of, or divisible from,
the transaction to effect which the law required registration.
4. A collateral transaction must be a transaction not itself required to
be effected by a registered document, that is, a transaction creating,
etc. any right, title or interest in immovable property of the value of
one hundred rupees and upwards.
5. If a document is inadmissible in evidence for want of registration,
none of its terms can be admitted in evidence and that to use a
document for the purpose of proving an important clause would not
be using it as a collateral purpose.
Hon'ble Allahabad High Court in the case of Ratan Lal Vs. Hari
Shankar reported in AIR 1980 Allahabad 180 has observed that 'collateral
purpose' referred to Section 49 of the Act has a limited scope and meaning. The
term would not permit the party to establish that the deed created, declared,
assigned, limited or extinguished a right to immovable property. The term
'collateral transaction' means a transaction other than creating, declaring,
assigning, limiting or extinguishing a right, interest or title in an immovable
property. Collateral purpose is that which is by the side or distinct from the main
purpose. In the present case, the petitioners are claiming that by way of the
document in question right of way was conferred upon them, they were allowed
to use it to have access to the land sold to them by respondent, but later on he
created hindrance in their use of the way. If the facts of the case are examined,
the suit being for permanent injunction and sole basis thereof being the document
dated 15.12.2000, which is not registered, on the strength of which the petitioners
are claiming their right of way over the other land of the respondent, the10
production of the said document cannot be said to be for 'collateral purpose'. This
is because the recital therein with regard to conferment of right of way is not
independent of or divisible from the transaction for the purpose to which the
document was executed, which is required to be registered. 'Collateral purpose' is
the purpose which is independent of or divisible from the purpose for which the
document was executed and of which the law required registration. A collateral
transaction must be independent of or divisible from the transaction to effect
which the law required registration. A collateral transaction must be a transaction
not itself required to be effected by a registered document, that is, a transaction
creating any right, title or interest in immovable property of the value of one
hundred rupees and upwards. In the present case, the purpose for which the
document in question is sought to be produced cannot be said to be a collateral
purpose.

REPORTABLE
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN
AT JAIPUR BENCH, JAIPUR.
S. B. CIVIL WRIT PETITION No.18594/2011.
Shree Chand & Ors. Vs. Civil Judge (Sr.Div.) & Anr.
Date of Order : 25.5.2016
HON'BLE MR. JUSTICE PRASHANT KUMAR AGARWAL
Citation:AIR 2016 Raj 191

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How to ascertain tenancy if lease deed is unregistered?

So   far   as   the   substantial   question   of   law   at   Serial   No.2
regarding   admissibility   of   document   at   Exhibit   50   in   evidence   is
concerned, though such document is an unregistered document, it can
be used for collateral purposes and the decision of the Apex Court in
the case of  Anthony  v.  K.C. Ittoop  & Sons and others, reported in
(2000) 6 SCC 394, throws light in para 16 thereof on such issue,
which is reproduced below :
“16. Taking   a   different   view   would   be   contrary   to   the
reality when parties clearly intended to create a lease though
the document which they executed had not gone into processes
of registration.   That lacuna had affected the validity of the
document,   but   what   had   happened   between   the   parties   in
respect of the property became a reality.   Non­registration of
the document had caused only two consequences.  One is that
no lease exceeding one year was created.   Second is that the
instrument became useless so far as creation of the lease is
concerned.   Nonetheless   the   presumption   that   a   lease   not
exceeding one year stood created by conduct of parties remains
unrebutted.”    

In view of above, the non­registration of document would not come in
the way of the Court to hold that the relationship of “Landlord and
Tenant” between the plaintiff and the defendant No.1 in the present
case has been established, coupled with the other evidence availableon record.  The substantial questions of law at Serial No.2 is answered
accordingly.
There is no substance in this second appeal, and the same is

dismissed.  No order as to costs.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR
Second Appeal No.24 of 2002
Ganesh s/o Ramkisan Bairagi,

V

Yeshoda wd/o Purushottam Landge,

Coram : R.K. Deshpande, J.
Dated  : 16th June, 2016
Citation: 2016(6) MHLJ 393

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What are essential requirements for valid family settlement?

 On the question of family settlement, a celebrated judgment of the Constitution Bench of the Hon'ble Apex Court was rendered in Civil Appeal No.37 of 1968, Kale and others Vs. Deputy Director of Consolidation and others, on 21.1.1976, reported in 1976 (2) Revenue Decisions 69. This judgment was unequivocal on the question of family settlement/arrangement and it is reigning the commands of law in this field even today. The significant points of the judgment are being cited as below:

"......By virtue of a family settlement or arrangement members of a family descending from a common ancestor or a near relation seek to sink their differences and disputes, settle and resolve their conflicting claims or disputed titles once for all in order to buy peace of mind and bring about complete harmony and goodwill in the family. The family arrangements are governed by a special equity peculiar to themselves and would be enforced if honestly made. The object of the arrangement is to protect the family from long drawn litigation or perpetual strifes which mar the unity and solidarity of the family and create hatred and blood between the various members of the family. Today when we are striving to build up an egalitarian society and are trying for a complete reconstruction of the society, to maintain and uphold the unity andhomogeneity of the family which ultimately results in the unification of the society and, therefore, of the entire county, is the prime need of the hour. A family arrangement by which the various contenders so as to achieve an equal distribution of wealth instead of concentrating the same in the hands of a few is undoubtedly a milestone in the administration of social justice. That is why the term 'family' has to be understood in a wider sense so as to include within its fold not only close relations or legal heirs but even those persons who may have some sort of antecedent title, asemblance of a claim or even if they have a spes secessionis so that future disputes are sealed for ever and the family instead of fighting claims inter se and wasting time, money and energy on such fruitless or futile litigation is able to devote its attention to more constructive work in the larger interest of the country. The Courts have, therefore, leaned in favour of upholding a family arrangement instead of disturbing the same on technical or trivial grounds. Where the Courts find that the family arrangement suffers from a legal lacuna or a formal defect the rule of estoppel is pressed into service and is applied to shut out plea of the person who being a party to family arrangement seeks to unsettle the settled dispute and claims to revoke the family arrangement under which he has himself enjoyed some material benefits.....

In other words to put the binding effect and the essentials of a family settlement in a concretized form, the matter may be educed into the form of following propositions :

(1). The family settlement must be bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family.

(2). The said settlement must be voluntary and should not be induced by fraud, coercion or undue influence;

(3). The family arrangement may be even oral in which case no registration is necessary;

(4). It is well-settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of the record or for information of the court for making necessary mutation. In such a case the memorandum itself does not create or extinguish any rights in immovable properties and therefore does not fall within the mischief of Section 17 (2) of the Registration Actand is, therefore, not compulsorily registrable;

(5). The members who may be parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be assumed and the family arrangement will be upheld and the Courts will find no difficulty in giving assent to the same;

(6). Even if bona fide dispute, present or possible, which may not involve legal claims are settled by a bona fide family arrangement which is fair and equitable is final and binding on the parties to the settlement.

A family arrangement being binding on the parties to the arrangement clearly operates as an estoppel so as to preclude any of the parties who have taken advantage under the agreement from revoking or challenging the same. Even if the family arrangement was not registered it could be used for a collateral purpose, namely, for the purpose of showing the nature and character of possession of the parties in pursuance of the family settlement and also for the purpose of applying the rule of estoppel which flowed from the conduct of the parties who having taken benefit under the settlement keep their mouths shut for full seven years and later try to resile from the settlement."

Uttaranchal High Court

Smt Rama Devi And Another vs Mahendra Pal And Others on 15 September, 2015

Citation: 2016 (114) ALR 852, 2016 130 RD27                                            

            Writ Petition (M/S) No. 689/2015

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Whether unregistered partition deed can be used for collateral purpose if it is not properly stamped?

Then the next question that falls for consideration is whether

these can be used for any collateral purpose. The larger Bench of

Andhra Pradesh High Court in Chinnappa Reddy Gari Muthyala

Reddy Vs. Chinnappa Reddy Gari Vankat Reddy , AIR 1969 A.P.

(242) has held that the whole process of partition contemplates

three phases i.e. severancy of status, division of joint property by

metes and bounds and nature of possession of various shares. In a

suit for partition, an unregistered document can be relied upon for

collateral purpose i.e. severancy of title, nature of possession of

various shares but not for the primary purpose i.e. division of joint

properties by metes and bounds. An unstamped instrument is not

admissible in evidence even for collateral purpose, until the same is

impounded. Hence, if the appellants/defendants want to mark these

documents for collateral purpose it is open for them to pay the

stamp duty together with penalty and get the document impounded

and the Trial Court is at liberty to mark Exhibits B-21 and B- 22 for

collateral purpose subject to proof and relevance.

Accordingly, Civil Appeal is partly allowed holding that Exhibits

B-21 and B-22 are admissible in evidence for collateral purpose

subject to payment of stamp duty, penalty, proof and relevancy.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8441 OF 2015

ARISING OUT OF

SPECIAL LEAVE PETITION (CIVIL) NO. 12788 OF 2014

YELLAPU UMA MAHESWARI  V BUDDHA JAGADHEESWARARAO & ORS.

Dated: October 08, 2015

Author: N.V. RAMANA, J.

Citation:(2015) 16SCC787

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Distinction between collateral purpose and collateral transaction for the purpose of stamp duty

The trial court in the present case has anaylsed the true import of “the provisions of the collateral purpose” with reference to the ratio of the judgement in K.B. Saha & Sons Pvt. Ltd., supra. Admittedly, execution of agreement to sell in favour of the respondent-plaintiff by the defendant-petitioner is accompanied by handing over of possession. If the facts of the present case are examined, the suit being for declaration and injunction and the sole basis thereof being the alleged sale deed, which is neither registered, nor stamped on the strength of which the plaintiff claim that defendants parted with possession and handover the possession thereof to the plaintiff, the production of the said document cannot be said to be for collateral purpose. This is because the re-citation therein with regard to transaction of sale is not an independent of or devisable from the transaction for the purpose of which the document is executed, which is required to be registered. Collateral purpose is the purpose which is independent of or devisable from, purpose for which document was executed and of which the law required registration. A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration. A collateral transaction must be a transaction not itself required to be effected by a registered document, that is, a transaction creating any right, title or interest in immovable property of the value of one hundred rupees and upwards. Section 35 of the Stamp Act has in this regard advisedly used the words “for any purpose whatsoever”, thus the purpose for which the document is sought to be admitted in evidence in the instant case would be relevant for invoking Section 35.

REPORTABLE

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN

BENCH AT JAIPUR

S.B.  CIVIL WRIT PETITION NO.7418/2012

Mahesh Chand vs. Judicial Officer & Ors.

DATE OF ORDER : :   1st May, 2015

HON'BLE MR. JUSTICE MOHAMMAD RAFIQ

Citation; AIR 2015 RAJ141

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When unregistered partition deed can be used for collateral purpose i. e,severance of joint status?

Much can be said in favour of the view which was taken by Thakore J. The point, however, which we have got to consider is what is a collateral transaction within the meaning, of the proviso toSection 49, Registration Act. The expression "collateral" transaction is used not in the sense of an ancillary transaction to a principal transaction or a subsidiary transaction to a main transaction. The root meaning of the word "collateral" is running together or running on parallel lines. The transaction as recorded would be a particular or specific transaction. But it would be possible to read in that transaction what may be called the purpose of the transaction and what may be called a collateral purpose, the fulfilment of that collateral purpose would bring into existence collateral transaction, a transaction which may be said to be a part and parcel of the transaction but nonetheless a transaction which runs together with or on parallel lines with the same.

An obvious illustration of this is the transaction which is recorded in the memo of partition before us. The transaction therein recorded was a transaction of partition of the moveable and immoveable properties belonging to the joint family. These properties were allotted to the shares of the respective members of the family. A partition was in fact effected by this document and that transaction took place under the terms of the document itself. The memo of partition thus required registration, and not being registered could not be admitted in evidence under the terms of Section 49, Registration Act. There wag, however, involved in this transaction itself a collateral transaction, viz., that of the severance of the joint status which transaction by itself did not require to be registered by any law for the time being in force. A severance of joint status could be effected under Hindu law in various modes, one of the modes being an unequivocal expression of an intention to separate. A partition could be effected orally as well as by a written document, and it would be open to a party to prove that there wag a partition or severance of joint status effected between the parties without its being effected by a registered instrument. A partition, i.e., severance of joint status, thus would be a collateral transaction, and would certainly tell within the proviso to Section 49, Registration Act.

The partition of immoveable property belonging to the joint family which requires to be effected by a registered instrument would be inadmissible in evidence under the main provisions ofSection 49, Registration Act, but the partition, i. e., the severance of joint status, which is not required to be effected by a registered instrument, would be a collateral transaction, evidence of which would certainly be admissible under the proviso to the section, and the memo of partition which was inadmissible for want of registration would certainly be admissible to prove the fact of such partition. With respect, therefore, we are not inclined to accept the opinion of Thakore J., and would prefer to follow the view expressed in Narmadabai v. Rupsing, which as already observed before, has been approved of and is in accordance with the decision of the Privy Council in Rajangam Ayyar v. Rajangam Ayyar.

Bombay High Court

Ramlaxmi Ranchhodlal vs The Bank Of Baroda Ltd. on 1 February, 1952

Equivalent citations: AIR 1953 Bom 50, (1952) 54 BOMLR 667, ILR 1953 Bom 339

Bench: Bhagwati, Dixit

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Whether unregistered rent note can be used for collateral purpose?

It is true that the non-registration of the rent note does not debar the use of a document that is compulsorily registerable for collateral purposes but that aspect would in the instant case pale into insignificance keeping in view the state of pleadings on the question of month of tenancy and the legal implications thereof.

Supreme Court of India

Shibani Basu vs Sandip Ray on 26 November, 2010

Bench: Markandey Katju, T.S. Thakur

Citation;AIR 2011 SC 509

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What will be effect of unregistered document on transaction effected by it?

It is laid down by the apex court in the case of K.B. Saha & Sons (P) Ltd. v. Development Consultant Ltd., MANU/SC/7679/2008 : (2008) 8 SCC 564, on a review of the case law on the point, thus:

"i. A document required to be registered if unregistered is not admissible in evidence under Section 49 of the Registration Act.
ii. Such unregistered document can however be used as evidence for a collateral purpose as provided in the proviso to Section 49 of the said Act.
iii. A collateral transaction must be independent of, or divisible from the transaction to effect which, the law required registration.
iv. A collateral transaction must be a transaction not itself required to be effected by a registered document, i.e., a transaction creating any right or interest in immovable property of the value of one hundred rupees or more.
v. If a document is inadmissible in evidence for want of registration, none of its terms can be admitted in evidence. To use such a document to prove a significant term of the transaction would not be using it for a collateral purpose."

These above established principles ought to have deterred the trial court from even permitting the document in question, Exhibit P.2 from being marked in evidence, even if the defendant had not raised an objection. It was the duty of the court to have prevented it. In any event, it cannot be acted upon, for it is not even duly stamped.

In the face of the above, the trial court has committed an error in placing reliance on Exhibit P.2 in decreeing the suit in favour of the plaintiff.

Equivalent Citation: 2015(2) AKR 393,AIR 2015(NOC)763 KAR

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

Regular First Appeal No. 828 of 2009

Decided On: 20.01.2015

 P.V. Krishnappa Vs. M. Ramaswamy Reddy

Hon'ble Judges/Coram:Anand Byrareddy, J.

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