2021 (10) TMI 1478 - SC - Indian Laws

Unregistered family settlement admissible to prove possession but not title under Section 49; Order XIII Rules 3-4 CPC

Korukonda Chalapathi Rao & Anr. Versus Korukonda Annapurna Sampath Kumar

SC allowed the appeal and set aside the impugned judgment, holding that an unregistered family settlement (khararunama) recording a past transaction may ... Requirement of refistration u/s 17(1)(b) of the Registration Act, 1908 - unregistered family settlement “Khararunama” - record of past transaction - admissible evidence or not - HELD THAT:- Order 13 Rule 3 of the Code of Civil Procedure, 1908 enables the Court to reject any document which is considered irrelevant or otherwise inadmissible recording the ground of such rejection. Order 13 Rule 4 of the Code provides for the procedure when a document has been admitted in evidence. Section 49 deals with the effect of non-registration of documents which are compulsorily registrable under Section 17 of the Registration Act and Transfer of Property Act. Section 49(a) of the Registration Act declares that an unregistered document which is compulsorily registrable cannot ‘affect’ any immovable property comprised therein. The unregistered document can be used as evidence of any collateral transaction. This is however subject to the condition that the said collateral transaction should not itself be one which must be effected by a registered document. It is this expression contained in the proviso which leads us to ask the question as to what would constitute a collateral transaction. If it were collateral transaction, then an unregistered document can indeed be used as evidence to prove the same. Would possession being enjoyed or the nature of the possession on the basis of the unregistered document, be a transaction and further would it be a collateral transaction? - this question is posed as the contention of the appellants is that even if the Khararunama dated 15.4.1986 cannot be used as evidence to prove the factum of relinquishment of right which took place in the past, the Khararunama can be looked into to prove the conduct of the parties and the nature of the possession which was enjoyed by the parties. In N. Varada Pillai v. Jeevarathnammal [1918 (6) TMI 3 - THE PRIVY COUNCIL], the Privy Council Court took the view that though unregistered, the document could be used to explain the nature of the possession of a person. In the said case, in fact, two widows, who were in possession of the property in equal shares applied to the Collector that they had given away the property as Stridhan to a lady and that the orders may be issued for transferring the property to her. The property was so transferred on the basis of the petition. On the question whether the transferee had obtained title by adverse possession while finding the unregistered petition before the Collector could not be admitted to prove a gift, the fact that transferee was continuing as a donee and owner was gleaned from the said petition to support the case of adverse possession. As far as Section 49(1)(c) of the Registration Act is concerned, it provides for the other consequence of a compulsorily registrable document not being so registered. That is, under Section 49(1)(a), a compulsorily registrable document, which is not registered, cannot produce any effect on the rights in immovable property by way of creation, declaration, assignment, limiting or extinguishment. Section 49(1)(c) in effect, reinforces and safeguards against the dilution of the mandate of Section 49(1)(a). Thus, it prevents an unregistered document being used ‘as’ evidence of the transaction, which ‘affects’ immovable property. If the Khararunama by itself, does not ‘affect’ immovable property, as already explained, being a record of the alleged past transaction, though relating to immovable property, there would be no breach of Section 49(1)(c), as it is not being used as evidence of a transaction effecting such property. However, being let in evidence, being different from being used as evidence of the transaction is pertinent. No doubt, when there has been a partition, then, there may be no scope for invoking the concept of antecedent right as such, which is inapposite after a disruption in the joint family status and what is more an outright partition by metes and bounds. In this regard, it is to be noticed that the appellants and the respondents, admittedly, partitioned their joint family properties. This is clear from the Khararunama wherein it is stated that they have divided the joint family properties. The properties, which are mentioned in the Khararunama, became the separate properties of the respondent. The impugned Judgment is set aside subject to the observations as contained in this Judgment - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a written family settlement (Khararunama) that records past adjustments and relinquishments between family members is a compulsorily registrable instrument under Section 17 of the Registration Act and therefore inadmissible under Section 49 if unregistered and understamped. 2. Whether a written but unregistered document recording a past family arrangement can be admitted in evidence for collateral purposes - for example, to explain the conduct of the parties or the nature of possession - without violating Section 49. 3. Whether a contemporaneous receipt evidencing payment in connection with a family settlement is a document requiring registration and stamp formalities, and if unregistered/unstamped, whether it is inadmissible as primary evidence or admissible for collateral purposes. 4. Application of the doctrine distinguishing a document that effects a change in rights (an instrument of partition/transfer) from a memorandum that merely records a past arrangement, and the legal tests to determine which category a particular document falls into. ISSUE-WISE DETAILED ANALYSIS Issue 1: Registrability of a written family settlement that records past adjustments Legal framework: Section 17 mandates registration of non-testamentary instruments that purport or operate to create, assign, limit or extinguish rights in immovable property. Section 49 renders unregistered compulsorily registrable documents incapable of affecting immovable property and generally inadmissible as evidence of transactions affecting such property, subject to stated provisos. Precedent Treatment: The Court applied established principles from prior decisions distinguishing (a) bona fide family settlements (which can be oral and need not be registered) and (b) written instruments that by their own force operate as declarations of will creating/extinguishing rights (which require registration). The Court followed the line of authority holding that a writing which merely records a previously completed arrangement is not necessarily a registrable instrument, whereas a writing that itself embodies or effects the change is registrable. Interpretation and reasoning: The Court examined the wording of the Khararunama and found it to be a recital of past events and arrangements ('we have given away', 'we have been enjoying', etc.), not a document that by its own operation creates or extinguishes rights. The test applied focused on substance over nomenclature: does the document, by its own force, purport to create/declare/assign/limit/extinguish any property right? If no, it is a memorandum of past arrangement and not compulsorily registrable. Ratio vs. Obiter: Ratio - the Khararunama, on the facts and textual analysis, is a memorandum recording antecedent transactions and thus does not attract mandatory registration under Section 17. Obiter - general observations on antecedent title post-partition and certain comparative references. Conclusions: The Khararunama in the present facts does not, by itself, affect immovable property within the meaning of Section 17 and hence is not rendered inadmissible solely for being unregistered; it is a record of past transactions and may be admitted for permissible purposes subject to other statutory requirements. Issue 2: Use of an unregistered written family memorandum as corroborative or collateral evidence Legal framework: Section 49 proviso allows unregistered documents required to be registered to be received as evidence of (a) a contract in a suit for specific performance or (b) any collateral transaction not required to be effected by a registered instrument. Case law limits 'collateral' to purposes that do not indirectly produce the substantive effect which registration would otherwise mandate. Precedent Treatment: The Court followed precedents permitting use of unregistered writings as corroborative evidence to explain arrangements or the conduct/possession of parties, while reiterating the salutary rule that such use must not amount to a back-door effect equivalent to creating/extinguishing rights which would require registration. Interpretation and reasoning: The Court applied the collateral-purpose test: an unregistered memorandum may be looked into to explain the arrangement and nature of possession or conduct, so long as reliance on it does not attempt to establish by it the substantive transaction affecting immovable property. The Court emphasized the distinction between admitting a document in evidence (as a piece of evidence) and using it to prove the transaction itself (which is barred). Ratio vs. Obiter: Ratio - an unregistered family memorandum that records past transactions may be used as corroborative evidence of conduct/possession and to explain the arrangement under the proviso to Section 49, provided it does not serve to effect the substantive transaction sought to be proved. Obiter - illustrative references to varied fact-scenarios from earlier cases concerning scope of collateral use. Conclusions: The Khararunama may be admissible to explain the conduct and nature of possession and as corroboration of other evidence; it cannot be used to directly establish a transaction that creates or extinguishes rights in immovable property if that transaction requires registration. Issue 3: Admissibility and formal requirements of the receipt evidencing payment Legal framework: Section 17(1)(c) brings within compulsory registration instruments which acknowledge receipt/payment of consideration connected to creation/assignment/limitation/extinction of rights. Stamp law requires appropriate stamping for evidentiary admissibility. Precedent Treatment: The Court applied and distinguished precedents treating receipts and documents that evidence consideration: if the receipt is only evidence of payment of consideration for a past arrangement and does not itself create/operate rights, its character must be tested on substance. Prior decisions allow receipts to be used as corroborative evidence in appropriate cases but require registration/stamping where the instrument itself effects or acknowledges a registrable transaction. Interpretation and reasoning: The receipt in this case was executed on a nominal revenue stamp and recorded payment connected to the alleged past vacatur/consideration. Having held that the Khararunama records past transactions and does not itself effect change, the Court found that the receipt, as attendant evidence of payment for that past arrangement, does not automatically convert into a registrable instrument affecting title. On the question of stamp duty, the Court observed that a memorandum recording an already completed family arrangement need not necessarily be stamped/registered. Ratio vs. Obiter: Ratio - a receipt evidencing past payment connected to a recorded family adjustment may be admissible in evidence as corroboration where the document does not itself effect change in immovable property; stamping/registration requirements depend on the true nature and effect of the instrument. Obiter - comments on the sufficiency of a nominal revenue stamp in different contexts and references to earlier authorities. Conclusions: The receipt, in the factual matrix and on the Court's characterization of the family memorandum as recording past transactions, is not rendered inadmissible merely because it is unstamped/partial stamp, provided its use is limited to collateral/corroborative purposes and does not attempt to establish directly a registrable transfer or relinquishment. Issue 4: Application of the instrument-vs-memorandum test and consequences for evidence/admissibility Legal framework: The decisive test is substantive - whether the document, by its own force, operates to create/declare/assign/limit/extinguish rights. Mere use of past-tense recitals or the label 'settlement' is not determinative; the content and legal effect are decisive. Order 13 Rules and Section 49 govern rejection/admission of documents. Precedent Treatment: The Court adhered to the established test from prior jurisprudence that distinguishes a memorandum of past events (admissible to prove past fact/corroborate possession) from an instrument that effects a change (requiring registration). The Court followed cases approving collateral use while warning against evasion of Section 49. Interpretation and reasoning: Applying the test, the Court analyzed the Khararunama's language (recitals of prior acts, admissions of past payments, statements of enjoyment) and concluded it describes antecedent adjustments rather than effecting fresh legal change. The Court emphasized that permitting admission of such a memorandum for collateral purposes does not contravene the statutory bar so long as it is not used to prove the registrable transaction itself. Ratio vs. Obiter: Ratio - the instrument-versus-memorandum test governs registrability and admissibility; on the facts the Khararunama is a memorandum of past arrangement and admissible for collateral/corroborative purposes. Obiter - cautionary observations about when admission would impermissibly circumvent registration requirements. Conclusions: The Court applied the substantive test and held that the document is a record of antecedent transactions, may be admitted consistent with Section 49's proviso for collateral purposes (explaining possession and conduct), and does not require registration as an instrument that itself effects a property right change. Accordingly, the impugned order excluding the documents was set aside and the Court allowed their admission subject to the statutory limits explained above.