Mallika Vs R. Nallathambi & Ors. (Supreme Court of India)
10-Year Silence, Uncancelled GPA & No Proof of Loan Repayment- Supreme Court Upholds Sale Transactions Against Fraud Allegations
The Supreme Court dismissed the appeal challenging multiple sale deeds executed through General Powers of Attorney (GPAs), holding that mere allegations that GPAs were executed as security for loans cannot invalidate registered sale transactions in the absence of cogent evidence proving loan repayment, fraud or misuse of fiduciary position. The Court emphasized that the burden initially lies on the person alleging fraud and sham transactions.
The appellant had claimed that agricultural lands purchased in 1996 were never intended to be sold and that the GPAs executed in favour of the respondents in 1997 and 1998 were merely collateral security for loans of ₹2 lakh and ₹5 lakh carrying 18% interest. According to the appellant, the respondents misused those GPAs to execute sale deeds among close relatives and family members without genuine consideration.
The Trial Court accepted the appellant’s version and declared the sale deeds void. However, the First Appellate Court reversed the decree after finding that the appellant failed to prove repayment of loans, discharge of liabilities or continued possession over the properties. The Madras High Court thereafter dismissed the second appeal holding that no substantial question of law arose.
Before the Supreme Court, the appellant strongly argued that the First Appellate Court violated Order XLI Rule 31 CPC by failing to properly frame points for determination and also contended that the respondents, being GPA holders occupying a fiduciary position, had failed to establish bona fides of the transactions.
Rejecting these contentions, the Supreme Court held that substantial compliance with Order XLI Rule 31 CPC was sufficient and observed that the appellate court had in fact undertaken detailed re-appreciation of oral and documentary evidence before reversing the Trial Court decree.
The Court further held that the appellant completely failed to establish foundational facts necessary to shift the burden onto the respondents. Significantly, no documentary evidence proving loan repayment, payment of interest or discharge of debt was produced. Even the Trial Court itself had recorded a categorical finding that repayment of alleged loans was not proved.
A major factor against the appellant was her own failure to enter the witness box despite making serious allegations of fraud, forgery and misuse of signed blank papers. The Supreme Court upheld the adverse inference drawn by the appellate courts relying upon Vidhyadhar vs. Manikrao, observing that a party possessing special knowledge of facts cannot avoid examination while alleging fraudulent conduct.
The Court also found the appellant’s conduct highly suspicious because although registered sale deeds and mutation entries existed since 1998, the suit challenging the transactions was filed only in 2008 after nearly a decade. During this long period, the GPAs remained uncancelled, mutation entries continued in purchasers’ names and several subsequent transfers took place openly through registered documents without objection.
While clarifying that mutation entries alone do not confer title, the Supreme Court observed that long-standing revenue records coupled with registered sale transactions and prolonged inaction become relevant circumstances while assessing possession and conduct of parties.
Holding that no perversity or substantial question of law arose from the findings of the First Appellate Court and the High Court, the Supreme Court ultimately dismissed the appeal and upheld the validity of the impugned sale transactions.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
