2021 (6) TMI 1200 - HC - Indian Laws

Recording Fraudulent Registrations: administrative findings must be entered in registers and encumbrance certificates to protect true owners.

Final administrative findings that a registered document is fraudulent should be recorded in registration records and reflected in the Encumbrance ... Duty to record final finding of fraudulent registration in official indexes and encumbrance certificate - absence of power in Registration Department to cancel a registered documentDuty to record final finding of fraudulent registration in official indexes and encumbrance certificate - Recording of an authority's final finding that a registered document is fraudulent must be entered in the relevant registers and reflected in the Encumbrance Certificate - HELD THAT: - The Court held that where the competent Authority, after enquiry, has declared a registration to be fraudulent and that order has become final, the Registration Department must record that finding in the relevant indexes and make a corresponding entry or footnote in the copies of the document and in the Encumbrance Certificate so as to reverse the effect of the earlier registration and to apprise third parties. The Court relied upon the procedure set out in the Inspector General's circular which prescribes making an index entry and a footnote or linked scanned note to the document, and directed the third respondent to record the second respondent's final finding in the relevant books and ensure it is reflected in the Encumbrance Certificate. [Paras 4, 10, 11, 12, 14]The second respondent's finding that the document was fraudulent must be recorded in the relevant registers and reflected in the Encumbrance Certificate; the third respondent was directed to effect such entries.Absence of power in Registration Department to cancel a registered document - Whether the Registration Department has power to cancel a registered document - HELD THAT: - The Court noted that although the Registration Department does not possess power to cancel or recall a registered document (a position reflected in higher authority decisions and the Inspector General's circular), this lack of power does not relieve the Department from the obligation to record a final finding of fraud in its registers and encumbrance records. Recording the final finding operates to render the fraudulent document nonest in law for practical purposes without formal cancellation by the Department. [Paras 4, 8, 10, 11]The Registration Department may not cancel a registered document, but must record final findings of fraud in its registers and Encumbrance Certificate so as to neutralise the effect of the fraudulent registration.Final Conclusion: The impugned communication refusing to record the second respondent's final finding of fraud was quashed; the Registration Department is directed to record the final finding in the relevant books and ensure it is reflected in the Encumbrance Certificate, and the Inspector General is to circulate the procedural directions to Sub Registrar Offices. Issues: Whether, after a competent registration authority after enquiry has finally held that a registered transaction is fraudulent, that finding must be recorded in the relevant registers and reflected in the Encumbrance Certificate and whether the third respondent was justified in refusing to make such an entry.Analysis: The second respondent conducted an enquiry, found the impugned transaction to be fraudulent and rendered a final finding to that effect. The Registration Act, 1908 contemplates a mechanism for the Authority to deal with complaints of fraudulent registration. A finding that a registered document is fraudulent renders the document void in law and, where final, that finding should be recorded in the registration records so as to inform third parties and to prevent prejudice to the true owner. The Inspector General of Registration's circular dated 31.07.2018 specifically directs District Registrars to make index entries and footnotes in copies of documents where fraudulent registration is proved, and to prevent further registrations based on such fraudulent documents while permitting the genuine owner to proceed with registration. A refusal by the third respondent to record the final administrative finding, citing lack of power to cancel registrations, defeats the protective and corrective function contemplated by the statutory scheme and the circular, because declaring a transaction fraudulent and sending the party to a civil court to cancel the document would render the administrative finding ineffective for practical purposes.Conclusion: The impugned communication of the third respondent is quashed and the third respondent is directed to record the proceedings of the second respondent dated 30.04.2019 in the relevant books and ensure the same is reflected in the Encumbrance Certificate within two weeks; relief granted in favour of the petitioner.