BHARAT INDU vs HAMID ALI KHAN - 1920 Supreme(SC) 38

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1920 Supreme(SC) 38

PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD BUCKMASTER, LORD PHILLIMORE, AND SIR JOHN EDGE.
BHARAT INDU - Appellant
Versus
HAMID ALI KHAN - Respondents
On Appeal from the High Court at Allahabad.
Decided On : May. 14. 1920.

Important Points

A mortgage is validly registered if the registration officer verifies execution with a principal suffering from bodily infirmity, curing any initial irregular presentation by a messenger. Appellate courts may reverse findings on sham transactions if evidence of the party's financial solvency negates the motive for fraud.

Subject

Civil Law - Property Law

Act Referred

ANDHRA PRADESH RULES FRAMED UNDER REGISTRATION ACT: S.32, S.33

Headnote

(A) Transfer of Property Act, 1882 - Section 59 - Indian Registration Act, 1877 - Sections 32 and 33 - Registration of mortgage - Power of attorney - Authentication - Where a power of attorney is presented by a servant of the principal, but the registration officer subsequently visits the principal, who is suffering from bodily infirmity, and the principal admits the execution and completion of the document, such registration is valid - The principal is treated as the real presenter of the document - Strict compliance with registration forms is necessary to prevent fraud, but an inoperative initial presentation by a messenger does not invalidate a subsequent valid presentation by the principal.

(B) Evidence - Fictitious transaction - Consideration - Finding of trial court that a mortgage was a sham transaction without consideration - Appellate court may reverse such finding if additional evidence regarding the financial status of the parties (e.g., existence of surplus assets) suggests that the party had no motive to create a fictitious mortgage for protection against creditors.

Facts of the case:
A suit was brought to enforce a mortgage by sale. The defendants challenged the validity of the mortgage on two grounds: first, that it was not duly registered because the power of attorney used by the agent to present the document was not properly authenticated; and second, that the mortgage was a sham transaction without consideration, intended to defraud creditors. The trial court found the registration valid but the transaction fictitious. The High Court reversed this, finding the transaction genuine.

Findings of Court:
The registration was held to be valid as the registration officer personally verified the execution with the ill principal. Regarding the nature of the transaction, the court upheld the High Court's finding that the mortgage was genuine, noting that the mortgagor possessed sufficient assets to make a fictitious mortgage unnecessary.

Issues: Whether the mortgage was duly registered under the Indian Registration Act, 1877, despite the initial presentation of the power of attorney by a servant; and whether the mortgage was a fictitious transaction without consideration.

Ratio Decidendi: The court held that while the initial presentation by a servant was inoperative, the subsequent visit by the registration officer to the principal's residence, where the principal admitted execution, constituted a valid presentation. Furthermore, an appellate court can interfere with a trial court's finding of fact on the genuineness of a transaction if it possesses material information (such as the financial solvency of the party) not available to the trial court.

Result: Appeal dismissed with costs.

Legal Category Hierarchy

Advocates:
Solicitors for appellants :Barrow, Rogers & Nevill. Solicitor for respondents: Douglas Grant.

Judgement

Appeal from a judgment and decree of the High Court (March 5, 1915) reversing a decree of the Subordinate Judge of Bareilly (February 19, 1912).

The suit was brought by the first respondent, as assignee of a mortgage executed on August 30, 1895, by one Wilayat Ali Khan, the claim being to enforce the mortgage by sale. The defendants by their written statements denied the execution of the mortgage, and alleged that the registration of the mortgage and of the power of attorney under which it was presented for registration were invalid. They also alleged that there was no consideration for the mortgage, and that it was a fictitious transaction for the purpose of defrauding the mortgagors creditors.

The facts appear from the judgment of their Lordships.

The mortgage bore an indorsement signed by the special sub-registrar as follows " This document was presented for registration at the office of the sub-registrar, tahsil Mirganj, district Bareilly, at 3 p.m. on this Thursday, January 2, 1896, by Daud Ali, son of Saiyid Munauwar Ali, .... general attorney of Hakim Mohammad Wilayat Ali Khan, under a general power of attorney, dated November 1 and registered November 4, 1885." There was also an indorsement stating that Daud Ali, acting under the power of attorney, admitted the execution and completion of the mortgage and the receipt of the entire amount mentioned therein.

The general power of attorney dated November 1, 1885, included a specific power to get all documents signed by the principal registered. It bore an indorsement signed by the sub-registrar and by Wazir Beg as follows " This general power of attorney was presented at the office of the sub-registrar of Aonla, district Bareilly, on Wednesday, Novem ber 4, 1885, alter 12 oclock in the day, for registration and authentication by Wazir Ali, a servant of Wilayat Ali Khan, who said that the executant was ill and that he was going to deposit the commission fee and that this power of attorney might be registered on the spot." Also a further indorsement signed by the sub-registrar and by Wilayat Ali Khan as follows " Friday, at 3 oclock, I personally went to the dwelling-place of Hakim Muhammad Wilayat Ali Khan, in muhalla Qilla, kasba Aonla, and read out the contents of this power of attorney to Hakim Muhammad Wilayat Ali Khan. Thereupon Hakim Muhammad Wilayat Ali Khan, .... admitted the execution and completion of this power of attorney, and asked that after registration the document might be given to Daud Ali. I personally know the executant. To-day, on November 4, 1885, this power of attorney was completed in my presence and I registered it. The executant is suffering from ague and is not strong enough to go about. November 4, 1885."

The Subordinate Judge held that the mortgage was genuine and validly registered, but that it was invalid, in that it was made without consideration and was a fictitious transaction. He accordingly dismissed the suit.

The High Court on appeal found on the evidence that the transaction was bona fide and genuine, and made a decree for sale. The learned judges did not deal with the question of registration.

1920. April 20. De Gruyther K.C. and Dube for the appellants. The mortgage was not duly registered as required by s. 59 of the Transfer of Property Act, 1882. Daud Ali was not competent to present the mortgage for registration under s. 32 of the Indian Registration Act, 1877, since the power of attorney was not duly authenticated under s. 33 of that Act. The executant of the power of attorney did not present it for registration; the only presentation was by Wazir Ali on November 4, and that was invalid. The decision of the Board in Jambu Parshad v. Muhammad Aftab Ali Khan (L. R. 42 I. A. 22.) is conclusive that there was no presentation of, and consequently no jurisdiction to register, the power of attorney. Further, the requirement of s. 33 that a power of attorney should be executed in the presence of the registration officer was not