Kiran Raj

The High Court of Kerala Single Bench of Justice Devan Ramachandran dismissed four Regular First Appeals that challenged the trial court’s judgment setting aside three registered sale deeds executed by a power-of-attorney holder without valid consideration. The Court confirmed that the sale deeds were the result of fraud and collusion, and declared them void under Section 15 of the Indian Contract Act. The Court upheld the trial court’s decree allowing the original owners to recover possession of the properties. Additionally, it allowed a connected cross objection in part, directing a remand to the trial court for determination on stamp duty sufficiency and the entitlement of the owners to litigation costs

The appeals before the High Court arose from a series of civil suits filed before the Sub Court, Nedumangad, concerning three sale deeds—Document Nos. 1126/2008, 1127/2008, and 1201/2008—registered at the Sub Registry Office, Vithura. These deeds were executed by the first defendant, acting under powers of attorney, in favour of the second and third defendants.

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The plaintiffs, who were the owners of the properties covered under the sale deeds, were residing in Bahrain at the relevant time. They alleged that the first defendant, their brother and attorney holder, had misused the powers of attorney and executed the sale deeds without their consent or knowledge. According to them, the attorney holder had been entrusted with certain signed stamp papers during a prior visit to Bahrain under the understanding that those would be used for legal formalities if a legitimate sale occurred with their approval.

The plaintiffs contended that they had not authorised the execution of any sale deeds in favour of the purported buyers, and that no sale consideration had ever been paid. They also produced two revocation deeds—dated 22.07.2008 and 30.07.2008—through which the powers of attorney were cancelled. These were registered with the Sub Registry Office in Poojappura and Vithura respectively. The plaintiffs alleged that despite these revocations, the sale deeds were subsequently registered by the attorney holder.

They further asserted that the buyers were close relatives of the attorney holder and were aware of the fraudulent nature of the transactions. It was alleged that the stamp papers used to prepare the sale deeds bore the plaintiffs’ photographs and signatures and had originally been given in blank form. The plaintiffs sought cancellation of the sale deeds and recovery of possession of the suit schedule properties.

In response, the attorney holder contended that he was authorised to sell the properties and had received instructions from the plaintiffs over the phone. He claimed that he had executed the sale deeds as part of legitimate property transactions, and that the consideration mentioned in the documents had either been paid through cheque or adjusted against amounts due to him by the plaintiffs. A cheque purportedly dated 29.04.2008 for ₹15 lakhs was produced in support of this claim.

The buyers filed separate written statements. The second defendant, in paragraph 8 of his pleading, alleged that the plaintiffs and the attorney holder had colluded to defraud him. In contrast, the third defendant fully supported the version presented by the attorney holder and confirmed that the sale was validly executed with his consent. Both defendants claimed to be bona fide purchasers and sought protection on the basis of being transferees for value.

The plaintiffs denied the authenticity of the alleged cheque and maintained that they had neither authorised the sale nor received any part of the consideration. They disputed the version that there were any outstanding financial obligations or adjustments as claimed by the attorney holder.

The trial court framed issues including whether the sale deeds were executed by misuse of authority, whether they were supported by consideration, and whether the buyers were bona fide purchasers. Oral and documentary evidence was recorded, including testimonies from the plaintiffs (PW1, PW2, PW3), the attorney holder (DW1), the buyers (DW2, DW3), and the attesting witness to the sale deeds (DW4).

In their testimonies, the plaintiffs reiterated that the documents were executed without their knowledge and that no consideration had passed. They explained that the powers of attorney were revoked after they learned of unauthorised activity. The cross-examination highlighted inconsistencies in the defence version and pointed to the lack of documentary evidence supporting the claims of payment.

The attorney holder stated that he had acted on oral instructions and relied on stamp papers allegedly delivered to him in June 2008. He also admitted that the sale deeds were executed using stamp papers bearing the plaintiffs' photos and thumb impressions, which had been given to him earlier. He did not produce any independent proof of payment or documentary evidence showing written consent to sell.

The second and third defendants, in their depositions, admitted that they had not conducted any due diligence before purchasing the properties. They confirmed that they had not verified Encumbrance Certificates, Possession Certificates, or similar documents. The third defendant further admitted that he fully trusted the attorney holder and acted on his directions.

The attesting witness to the sale deeds, DW4, identified as Sri. Japamani, testified that he was employed by the attorney holder and was residing in a shed located on the suit property. He acknowledged receiving ₹2 lakhs from the attorney holder and stated that he attested the sale deeds at the latter’s instruction. He denied being in the plaintiffs' employment, although the attorney holder had previously stated otherwise in his deposition.

The trial court found that the sale deeds had been executed without valid authority, that there was no reliable proof of consideration, and that the buyers were not bona fide purchasers. It held that the deeds were vitiated by fraud and liable to be declared void under Section 15 of the Indian Contract Act. The court allowed the plaintiffs to recover possession of the properties and dismissed the counterclaims filed by the defendants.

Following this decision, four Regular First Appeals were filed challenging the trial court’s findings and decree. A cross objection was also filed by the plaintiffs, disputing the trial court’s conclusion on the irrevocability of the powers of attorney, the refusal to impound certain documents, and the denial of costs despite a decree in their favour.

Justice Devan Ramachandran recorded that the trial court had rightly concluded that the three impugned sale deeds—Document Nos. 1126/2008, 1127/2008, and 1201/2008 of the Vithura Sub Registry—had been executed through fraud and without consideration. He stated: “The Trial Court has set aside the Sale Deeds... finding them to have been executed through fraud played on the Owners and further that they are not supported by any consideration, thus being liable to be declared void under the provisions of Section 15 of the Indian Contract Act.”

The power of attorney holder had claimed that he received instructions over phone from the owners to proceed with the sale. However, the Court noted that there was no written evidence of such instruction, and no witness from Bahrain was summoned to confirm it. Regarding the use of signed stamp papers, it was observed: “Sri. Shajideen says he received the stamp papers in June 2008, while the Owners assert they gave them in November 2007, prior to execution of Exhibits A6 and A7. This contradiction raises grave doubt.”

The Court also recorded that the selection of the buyers lacked explanation. “Strangely, neither did Sri. Shajideen, as DW1, say why and how his own nephew, without any discernible source of income, had been identified as a buyer.”

The depositions of the buyers were also examined. “The Buyers, as DW2 and DW3, expressly admitted that they had purchased the plaint schedule properties without even verifying the basic due diligence documents like the Encumbrance Certificates, Possession Certificates, etc.” In their written statements, contradictions were evident. One buyer alleged collusion between the owners and attorney holder, while the other adopted the attorney holder’s version entirely. “This singular factor is sufficient to hold against the Buyers.”

The Court stated that these contradictions and admissions undermined the claim that the buyers were bona fide purchasers. “These factors certainly make it impossible for any reasonable person to believe that the Buyers were bonafide purchasers... they are in it together with a common intent and purpose.”

Attention was drawn to the testimony of the fourth defendant, an attesting witness. The Court found his evidence unreliable and his allegiance evident: “He unequivocally conceded that Sri. Shajideen has paid him Rs.2 lakhs and that he attested the Sale Deeds as instructed by Sri. Shajideen.”

On the question of consideration, the Court held that the alleged payment of ₹16.95 lakhs was unsubstantiated. It recorded: “The facts not merely prove inadequacy of the sale consideration, but that no such consideration passed from the Buyers to Sri. Shajideen and that the whole transaction between them, leading to the Sale Deeds, was a mere complot for the latter to grab the plaint schedule properties.”

Referring to settled legal principles, the Court noted: “Even a sale deed, not supported by adequate consideration, is vitiated by the vice of Section 25 of the Indian Contract Act.” Citing Prasad and Others v. V. Govindaswami Mudaliar and Others, it added: “In such cases, not even a relief in equity can be granted to the vendees.”

The Court held that the mere production of the deeds did not validate the transactions. “When the facts are established, mere production and marking of the Sale Deeds, in which the sale consideration of ₹16.95 lakhs is shown, would be of no avail.”

In the cross objection, the owners had challenged the trial court’s finding that certain powers of attorney were irrevocable. The Court disagreed with the trial court and held: “These Powers of Attorney cannot be construed to be irrevocable and... the Sale Deeds could not have been executed on the strength of Exhibit A6/B11... after the subsequent Powers of Attorney, namely Exhibits A7 and B12, had been executed.”

The Court also addressed the sufficiency of stamp duty on the documents. It noted that the trial court’s observation—that there were no objections at the time of marking—was incorrect. “The deposition of DW1... clearly shows otherwise. Hence, it is perspicuous that this finding of the Trial Court was factually incorrect.”

As to litigation costs, the Court recorded that the trial court had denied costs without providing reasons. “It is now very well established that costs should normally follow the fate of a litigation and that when denying costs to the victorious party, the court should record the reasons for doing so, at least compendiously.”

In view of these findings, the Court concluded that the matters of stamp duty and costs required reconsideration by the trial court. It stated: “I do not, however, deem it appropriate for this Court to say any further on the merits of this issue... I deem it apposite to remand the suit to the Trial Court.”

The High Court dismissed all four Regular First Appeals, confirming the judgment and decrees issued by the Sub Court, Nedumangad. It declared that the sale deeds in question were void and affirmed the plaintiffs’ entitlement to recover possession. The Court recorded:

“I, consequently, dismiss the afore appeals as being without any merit, thus confirming the impugned judgments and decrees, with costs to Sri. Basheer M. Picha and Smt. Indira Basheer.”

The Court allowed Cross Objection No. 6 of 2016 in part. It held that the earlier powers of attorney could not be treated as irrevocable, that the trial court had erred in refusing to consider objections on stamp duty, and that the denial of costs required reconsideration. It ordered:

“This Cross Objection is allowed and the suit is remanded to the Trial Court solely for the consideration whether Exhibits B11, B12 and B39 documents are liable to be impounded and if the Owners are entitled to costs; which shall be done without being trammeled by my observations above.”

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It clarified that the remand was limited to those two issues only and that the trial court’s other findings would remain intact: “Needless to say, the impugned judgments and decrees in all other respects will remain in tact.”

The Court also fixed a date for appearance before the trial court: “The parties shall appear before the Sub Court, Nedumangad on 07.09.2020 to enable the said Court to comply with the directions herein expeditiously.”

Advocates Representing the Parties
For the Petitioners: Sri. R.S. Kalkura, Smt. R. Bindu, Sri. Harish Gopinath, Sri. M.S. Kalesh

For the Respondents: Sri. K. Shaj, Sri. Sajju S., Sri. S. Ajith Prabhav, Sri. S. Sreekumar (Senior Advocate), Sri. Pirappancode V.S. Sudheer

Case Title:  B.M. Rafi & Another v. Basheer M. Picha & Another (with connected appeals and cross objection)

Case Number: RFA No. 554 of 2015 with CO No. 6/2016, RFA Nos. 706, 835, and 890 of 2015

Bench: Justice Devan Ramachandran

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