Kerala HC: Third-Party Purchaser Not 'Bona Fide' If Collusion with Power of Attorney Holder in Fraudulent Transfers is Proven - 2025-08-31

Kerala High Court Voids Property Sales, Citing Collusion Between Wife and Purchaser in Defrauding Husband

KOCHI: The Kerala High Court, in a significant ruling on property law and agency, has cancelled a series of property sales, finding that they were the product of a fraudulent conspiracy between a man's wife, who held his Power of Attorney (PoA), and the purchaser. The Division Bench of Justice Sathish Ninan and Justice P. Krishna Kumar held that the purchaser could not be considered "bona fide" due to overwhelming evidence of collusion and a concerted effort to illegally transfer assets immediately after the PoA was revoked.

Case Background

The case revolves around Sidharthan, a businessman based in the UAE, who had entrusted his wife, Sindhu Sidharthan, with a general Power of Attorney to manage his extensive properties in Kerala, including a hotel. Suspecting misuse, he returned to India on February 7, 2007, and formally revoked the PoA at 10:30 a.m.

However, in a rapid series of transactions on the same day and the next, his wife executed multiple sale deeds, transferring valuable properties to Mevis Davies and some to herself. Sidharthan challenged these transfers at the Family Court, Thrissur, which set aside the transfers the wife made to herself but upheld the sales to Mevis Davies, deeming him a bona fide purchaser. Sidharthan appealed this part of the decision to the High Court.

Arguments of the Parties

Sidharthan (the Appellant) argued that the sales were sham transactions executed in haste to defraud him. His counsel contended that:

- His wife and Mevis Davies acted in concert, with Davies being fully aware of the impending revocation of the PoA.

- The timing of the transactions—some occurring just minutes after the PoA was cancelled at different Sub-Registrar offices—pointed to a premeditated plan.

- The sale consideration was manipulated, with money being siphoned from Sidharthan's own bank account, transferred to Davies, and then paid back to Sidharthan's account to create a facade of a genuine sale.

- Davies acted as an identifying witness for one of the fraudulent deeds his wife executed in her own name, proving their joint involvement.

Mevis Davies (the Second Respondent) maintained that he was a bona fide purchaser for value without notice of the PoA's revocation. His counsel argued that:

- The sale consideration was duly paid through bank transactions into Sidharthan's account.

- He was unaware of any dispute between the husband and wife or the cancellation of the PoA.

- The transactions were legitimate business dealings, and he was protected under Section 208 of the Indian Contract Act.

Court's Analysis and Pivotal Findings

The High Court meticulously analyzed the sequence of events, financial transactions, and the conduct of the parties, concluding that the claim of a bona fide purchase was untenable. The Bench highlighted several "striking features" that established collusion.

One of the most damning pieces of evidence was the "tearing hurry" in which the deeds were executed. The court noted:

"The fact that Sindhu Sidharthan and Mevis Davies executed four registered conveyance deeds, at three different Sub Registrar Offices located at considerable distances from each other, within less than four hours from the time of cancellation, clearly demonstrates mutual cooperation and a deliberate attempt to perform all acts within their reach to defeat the legal effect of such cancellation. This strongly supports an inference of a concerted agreement to commit wrongful and illegal acts."

The Bench also scrutinized the money trail, finding it reinforced the inference of collusion. In one instance, Sindhu Sidharthan transferred ₹25 lakhs from her husband's account to Davies. Davies then used ₹18 lakhs of this same money to "purchase" one of Sidharthan's properties. The court observed:

"In essence, the amount shown as consideration for the sale deed was nothing but money siphoned by the respondents from Sidharthan’s own account."

Applying the principle under Section 10 of the Indian Evidence Act , the court held that once there was reasonable ground to believe a conspiracy existed, the actions of one conspirator became relevant against the other. The totality of the circumstances—the rushed execution of deeds, suspicious financial dealings, lack of prior sale agreements, and Davies's role as a witness in the wife's self-transfers—irrefutably pointed towards a fraudulent scheme.

Final Verdict and Implications

The High Court allowed the appeals, issuing a declaration that the sale deeds in favour of Mevis Davies (Exts.A9, A23, and A20) stand cancelled. The court issued a permanent injunction restraining Sindhu Sidharthan and Mevis Davies from interfering with Sidharthan's possession of these properties.

However, in one appeal involving a property that Davies had subsequently sold to a third party (Sachidananda Menon), the court found the third party to be a genuine bona fide purchaser. In this instance, the court ordered Mevis Davies and Sindhu Sidharthan to jointly and severally compensate Sidharthan with ₹50 lakhs (the amount Davies received from the sale) plus interest.

This judgment serves as a strong precedent, underscoring that the protection afforded to a "bona fide purchaser" is not absolute and can be stripped away by evidence of collusion and fraudulent intent in transactions involving a Power of Attorney.