The Supreme Court has ruled that courts must exercise extreme caution before declaring a registered sale deed as “sham” or merely symbolic. In a long-running property dispute from Karnataka, the top court overturned a High Court judgment and restored the findings of the first appellate court, holding that the 1971 sale transaction in question was genuine and legally valid.
The judgment was delivered by Justice Rajesh Bindal and Justice Manmohan in Hemalatha (D) by LRs v. Tukaram (D) by LRs & Ors., a case that travelled through trial court, appellate court, High Court, and finally reached the Supreme Court after nearly five decades of litigation.
Background of the Case
The dispute centred around a residential house in Bidar, Karnataka. In 1966, the original owner, Tukaram, had mortgaged the property to raise money. Five years later, on 12 November 1971, a registered sale deed was executed in favour of Hemalatha for ₹10,000.
On the same day, a registered rental agreement was also signed, allowing Tukaram and his family to continue living in the house as tenants at a monthly rent of ₹200.
For more than a year, rent was paid. Problems began when rent payments stopped in 1973. In response, the purchaser initiated eviction proceedings under the Karnataka Rent Control Act. Soon after, Tukaram filed a civil suit claiming that the sale deed and rent agreement were nominal documents, executed only as security for a loan and never meant to transfer ownership.
Conflicting Court Findings
The trial court accepted Tukaram’s claim and declared the sale deed a sham. However, the first appellate court reversed this decision, stressing that oral evidence could not override a clear, registered document.
The Karnataka High Court later reinstated the trial court’s view, relying on earlier Supreme Court rulings that allowed oral evidence to prove a document was never intended to be acted upon.
This led Hemalatha’s legal heirs to approach the Supreme Court.
Supreme Court’s Observations
The Supreme Court framed the key issue clearly: What is the threshold for declaring a registered sale deed as a sham?
The bench emphasised that registration is not a routine formality. It creates a strong presumption of validity.
“A registered sale deed carries with it a formidable presumption of genuineness. Courts should not casually declare such instruments to be sham,” the bench observed.
The court underlined that merely using words like “fraud” or “nominal” in pleadings is not enough. Detailed facts and strong proof are mandatory.
It also criticised what it described as “clever drafting” aimed at creating an illusion of a legal dispute.
On Oral Evidence and Sale vs Mortgage
While acknowledging that oral evidence may sometimes be permitted, the court clarified that such evidence cannot be used lightly to defeat registered documents.
The bench pointed out that the 1971 sale deed contained no clause suggesting a mortgage by conditional sale. There was also no agreement for reconveyance mentioned in the document.
Referring to the Transfer of Property Act, the court said that if parties intend a mortgage by conditional sale, the condition must be written into the same document.
“When the language of the sale deed is clear and unambiguous, intent must be gathered from the document itself,” the court said.
Conduct of the Parties Matters
The Supreme Court gave significant weight to conduct after execution of the deed. Tukaram had paid rent, replied to legal notices admitting default, and never raised the plea of a sham transaction at the earliest opportunity.
The court also noted that one of Tukaram’s own witnesses admitted that the house was sold due to financial pressure.
“Subsequent conduct completely undermines the claim that the transaction was never intended to be acted upon,” the bench noted.
Final Decision
The Supreme Court allowed the appeal, set aside the Karnataka High Court’s judgment, and restored the decision of the first appellate court.
It held that the 1971 sale deed was a bona fide and valid transaction, not a sham or nominal document. The court concluded that the challenge was an attempt to defeat lawful eviction proceedings and failed to meet the strict legal standards required to invalidate a registered instrument
Case Title: Hemalatha (D) By LRS. v. Tukaram (D) By LRS. & Others
Case Number: Civil Appeal No. 6640 of 2010
