sajikoduvath

Res Judicata: Should Substantially the ‘Same Issue’ Must Have Been ‘Adjudicated’ in the Former Suit

Saji Koduvath, Advocate, Kottayam.

Abstract

The authoritative modern decisions reflect a ‘strict and technical’ interpretation of res judicata, in contrast to earlier broader views that required only a ‘decision on the same matter‘, or a ‘similar issue‘ in both suits.

The modern trend, in substance, requires the following:

The ‘same issue‘ must have been adjudicated in the former suit.
Finding on the issue in the earlier suit must have been ‘necessary or essential‘.
That is, the issue must have been heard and decided consciously.
The parties should have had an opportunity to meet the contentions on the matter.

Sec. 11 of the Code of Civil Procedure deals with Res Judicata. It reads as under:

“Res Judicata -No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court.”

Res Judicata: The Issue Should Have Been ‘Necessary to be Decided’

In PMA Metropolitan v. Moran Mar Marthoma, AIR 1995 SC 2001, it is held as under:

“57. It is fairly settled that the finding on an issue in the earlier suit to operate as res judicate should not have been only directly and substantially in issue but it should have been necessary to be decided as well.”

Should the Matter be in “Actual Issue”, Or Need be in “Substance” alone

Sec. 11 CPC says as to “suit or issue in which the matter directly and substantially in issue“. There are two views in the matter.

Earlier Broader View: Sufficient if a similar issue arises

In Gulabchand Chhotalal Parikh v. State of Bombay, AIR 1965 SC 1153, it is held as under:

“We therefore hold that on the general principle of res judicata, the decision of the High Court on a writ petition under Art. 226 on the merits on a matter after contest will operate as res judicata in a subsequent regular suit between the same parties with respect to the same matter.”

In Abubakar Husein Mulani v. Jafar Ahmad Mulani, 2010-1 CivCC 324; 2010-1 MhLJ 243; 2010-6 RCR(Civ) 1008, it is observed as under:

“In view of the settled legal position, the finding of the appellate Court in the said Appeal No.304/1984 would operate as a res judicata if a similar issue arises between the said plaintiffs and the defendant No.1 in future…”

In Nayan Bhebli v. Bhutnath Sardar, 2014-5 CHN 594, it is held as under:

“It is not necessary that a distinct issue should be raised. It is sufficient if the matter was in issue in substance [Md. Ali v. Upendra 58 CLJ 196].”

In Mohd. Saeed v. Munnu Khan, AIR 2014 All. 125, it is held as under:

“Identity of matter in issue, i.e. the matter directly and substantially in issue in the subsequent suit must be the same matter which was directly and substantially in issue in the former suit either actually (Expln 3) or constructively (Explan 4).
“The subject-matter and the causes of actions of the two suits may be different but the issues may be the same. Expln III refers to direct res judicata and Expln. IV to constructive res judicata. It is not necessary that a distinct issue should be raised. It is sufficient if the matter was in issue in substance.

In Ravi Azta v. Union of India (TS Chauhan, J.), ILR 2018-2 (HP) 129, it is observed as under:

“13. The doctrine of res judicata is applied to give finality to ‘lis’ and in substance means that an issue or a point decided and attaining finality should not be allowed to be reopened and re-agitated twice over. The literal meaning of res is ‘everything that may form an object of rights and includes an object, subject-matter or status; and res judicata literally means ‘a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment. Even otherwise, the provision of CPC, more particularly, those contained in Section 11 are not exhaustive and contain only the general principles of res judicata.”

Modern Trend (Stricter Approach): Same Issue Must Have Been Adjudicated in the Former Suit giving due emphasis to ‘directly and substantially in issue‘

In M. Siddiq v. Mahant Suresh Das, 2020-1 SCC 1, paras 439 and 446 are noteworthy. They read as under:

439. The applicability of Section 11 is premised on certain governing principles. These are:
- .(i) The matter directly and substantially in issue in the suit should have been directly and substantially in issue in a former suit;
- (ii) The former suit should be either between the same parties as in the latter suit or between parties under whom they or any of them claim litigating under the same title;
- (iii) The court which decided the former suit should have been competent to try the subsequent suit or the suit in which the issue has been subsequently raised; and
- (iv) The Issue should have been heard and finally decided by the court in the former suit.

446. There is absolutely no merit in the contention that the principles of constructive res judicata will bar the subsequent suits. The parties were distinct. The claim in the earlier suit was distinct. The basis of the claim was indeed not that which forms the subject matter of the subsequent suits.

In Srihari Hanumandas Totala v. Hemant Vithal Kamat, AIR 2021 SC 3802; 2021-9 SCC 99, it was held as under:

“26. Section 11 of the CPC enunciates the rule of res judicata: a court shall not try any suit or issue in which the matter that is directly in issue has been directly or indirectly heard and decided in a former suit? Therefore, for the purpose of adjudicating on the issue of res judicata it is necessary that the same issue (that is raised in the suit) has been adjudicated in the former suit. It is necessary that we refer to the exercise taken up by this Court while adjudicating on res judicata, before referring to res judicata as a ground for rejection of the plaint under Order 7 Rule 11.
Justice R C Lahoti (as the learned Chief Justice then was), speaking for a two Judge bench in V. Rajeshwari v. T.C. Saravanabava, (2004) 1 SCC 551, discussed the plea of res judicata and the particulars that would be required to prove the plea. The Court held that it is necessary to refer to the copies of the pleadings, issues and the judgment of the former suit, while adjudicating on the plea of res judicata:
“11. The rule of res judicata does not strike at the root of the jurisdiction of the court trying the subsequent suit. It is a rule of estoppel by judgment based on the public policy that there should be a finality to litigation and no one should be vexed twice for the same cause.
xxx xxx xxx
… Their Lordships of the Privy Council in Kali Krishna Tagore v. Secy. of State for India in Council, (1887-88) 15 IA 186 : ILR 16 Cal 173 pointed out that the plea of res judicata cannot be determined without ascertaining what were the matters in issue in the previous suit and what was heard and decided. Needless to say, these can be found out only by looking into the pleadings, the issues and the judgment in the previous suit.”
(See also: Prem Kishore v. Brahm Prakash, 2023 SCC Online SC 356, 2023-3 MLJ 200 (SC))

Conscious Adjudication of an Issue alone Constitutes Res Judicata

In Erach Boman Khavar v. Tukaram Shridhar Bhat, 2013-15 SCC 655, it is held that the doctrine of res judicata can only apply when there has been a conscious adjudication of the issue on the merits. It is held as under:

“39. From the aforesaid authorities it is clear as crystal that to attract the doctrine of res judicata it must be manifest that there has been a conscious adjudication of an issue. A plea of res judicata cannot be taken aid of unless there is an expression of an opinion on the merits. It is well settled in law that principle of res judicata is applicable between the two stages of the same litigation but the question or issue involved must have been decided at earlier stage of the same litigation.” (Quoted in: Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited, 2022-2 SCC 401)

In Jamia Masjid v. K. V. Rudrappa (DY Chandrachud, Vikram Nath, Hima Kohli, JJ.), AIR 2021 SC 4523; 2022-9 SCC 225, the pragmatic approach to be adopted in this matter is laid down as under:

“In order to adjudicate on the applicability of the plea of res judicata vis-à-vis the first suit, it is necessary that we decide on the following three issues:
.A. The scope of the first suit which was instituted under Section 92 of the CPC;
B. Whether the parties in the first suit and the instant proceedings are the same; and
C. Whether the issue of title over the suit property was conclusively decided in the first suit.”

For Res Judicata – Adjudication of the Issue must have been Material and Essential

If only finding is “Necessary”, then only it is “Directly and Substantially” in issue.

In Sajjadanashin Sayed v. Musa Dadabhai Ummer, (2000) 3 SCC 350, the Supreme Court held that to attract res judicata on an earlier finding, the matter must have been directly and substantially in issue and that the finding on an issue came “collaterally or incidentally” would not ordinarily be res judicata. It was pointed out that if only the issue was “necessary” to be decided for adjudicating on the principal issue and had actually been decided, then only it would have to be treated as “directly and substantially” in issue; and that it is also necessary that the judgment was in fact based upon that decision.

(Sajjadanashin Sayed v. Musa Dadabhai Ummer, (2000) 3 SCC 350, is quoted and followed in: M.S. Ananthamurthy v. J. Manjula (Neutral Citation: 2025 INSC 273.)

In Sajjadanashin, it is pointed out as under:

“Where title to property is the basis of the right of possession, a decision on the question of possession is res judicata on the question of title to the extent that adjudication of title was essential to the judgment; but where the question of the right to possession was the only issue actually or necessary involved, the judgment is not conclusive on the question of ownership or title.”

Referring to Sajjadanashin Sayed, it is observed in Nand Ram v. Jagdish Prasad: AIR 2020 SC 1884 that a material test to be applied is whether the court considered the adjudication of the issue material and essential for its decision.

Referring to Sajjadanashin Sayed, it is observed in Union of India Vs. Vijay Krishna Uniyal, 2017-12 SCALE 704, that one has to examine the plaint, the written statement, the issues and the judgment to find out if the matter was directly and substantially in issue.

Alternative Pleadings on Title and Adverse Possession: Mutually Inconsistent or Mutually Destructive?

Saji Koduvath, Advocate, Kottayam.

Abstract

The answer is that such claims are mutually destructive and defeat each other.
However, in cases involving alternative pleadings of ‘title’ and ‘adverse possession’, it appears that our Apex Court tends to favour the doctrine of ‘mutual inconsistency’ over ‘mutual destructiveness’— perhaps as a pragmatic approach to manage and circumvent the inherent complexities arising from conventional pleading practices in such matters.

Introduction

The plea on claim of title and that on adverse possession are inherently contradictory and cannot logically coexist within the same suit, as they originate from fundamentally different legal premises.

The simultaneous assertion of both claims would be akin to advancing the following two mutually exclusive assertions:

(i) “I lawfully own the property.”
(ii) “I do not own it lawfully, but I have acquired title by possessing it unlawfully for a sufficient period to attract the doctrine of adverse possession.”

Origin and Nature of Enjoyment Make Certain Dual Pleas Inconsistent

In Kerala State v. Brijit (A. Hariprasad, J.), ILR 2018-2 (Ker) 483; 2018-2 KHC 521; 2018-2 KLT(SN) 53, it is pointed out as under:

“53. As we all know, there are certain claims which are mutually inconsistent and exclusive, like
- easement by prescription and easement of necessity,
- ownership and easement,
- lease and license, etc.
In the case of easement by prescription and easement of necessity, origin of the rights are entirely different. Easement right by prescription arises by proving the ingredients under Section 15 of the Easements Act, 1882, whereas a claim for easement of necessity, under Section 13, essentially arises out of severance of the tenements by transfer, partition or bequest. It is therefore clear that they cannot be claimed together as they originate from different sources.
Likewise, easement and ownership cannot be claimed together for the reason that easement is a right not claimable on one’s own property going by the definition in Section 4 of the Easements Act.
Lease and license also cannot be claimed together because a lease is a transfer of property falling within the provisions of the TP Act and a license is in the nature of a permission granted to one person for doing something in or upon the immovable property of the grantor, under the provisions of Section 52 of the Easements Act, which does not involve a transfer of property. Such incompatible rights originate from different sources and, therefore, nature of their enjoyment also would be different.”

The pleas of title and adverse possession are based on fundamentally different legal principles that cannot coincide without inherent contradiction.

Government of Kerala v. Joseph, AIR 2023 SC 3988,
Karnataka Board of Wakf v. Government of India, AIR 2004 SC 2096; 2004-10 SCC 779,
P. T. Munichikkanna Reddy v. Revamma, AIR 2007 SC 1753; 2007-6 SCC 59 (S.B. Sinha, J.);
Narasamma v. A. Krishnappa, AIR 2020 SC 4178; 2020-15 SCC 218.

The Laws of ‘Doctrine of Election’ and ‘Doctrine of Waiver’

Saji Koduvath, Advocate, Kottayam.

Part I – Introduction

The ‘Doctrine of Election’ is an Obligation

An ‘election’ is the obligation imposed upon a party by Courts of Equity to choose between two inconsistent or alternative rights.

No Contradictory Stands in the Same Case

A litigant can take different stands at different times but cannot take contradictory stands in the same case.

Suzuki Parasrampuria Suitings Private Limited v. Official Liquidator of Mahendra Petrochemicals Limited, 2018-10 SCC 707.

‘Mutually Destructive‘ Pleas Cannot Co-exist

When two propositions are presented in a party’s pleadings that contradict or destroy each other, and both cannot be true simultaneously, they are considered “mutually destructive”. Such inconsistency renders both pleas unreliable, and consequently, both are liable to be rejected. Example:

1. Claim of title and adverse possession.
2. Claim of title and benefits under Section 60(b) Easements Act.
3. Easement by prescription and easement of necessity.
4. Ownership and easement.

Following cases dealt with ‘mutually destructive‘ pleas:

Steel Authority of India Ltd v. Union of India, AIR 2006 SC 3229, 2006-12 SCC 233
Damodhar Narayan Sawale v. Tejrao Bajirao Mhaske, AIR 2023 SC 3319
Vimal Chand Ghevarchand Jain v. Ramakant Eknath Jajoo, 2009-5 SCC 713
Narayan Sawale v. Tejrao Bajirao Mhaske, AIR 2023 SC 3319
Biswanath Agarwalla v. Sabitri Bera, 2009-15 SCC 693
Gautam Sarup v. Leela Jetly, 2008-7 SCC 85.

Claim of Title and Adverse Possession are Mutually Destructive

This is because the claim of title and adverse possession involve two inherently contradictory pleas:

(i) “I own the property lawfully,” and
(ii) “I do not own it lawfully, but I have acquired title by possessing it unlawfully for a sufficient period to attract the doctrine of adverse possession.”

Because of the fundamental difference in the origin of the rights, both cannot logically coexist in the same case. One is destructive to the other.

Rattan Lal v. Ragunath, 18 Aug 2023, 2023 Supreme (Del) 3938,
Rishi Rathi v. Rishi Rathi, AIR 2022 (Del)(NOC) 585
Anu Gupta v. Vijay Gupta, 08 Aug 2022, 2022 Supreme(Del) 1198.
Vidya Shanker v. Suresh Chandra, 2020-4 ADJ 547; 2020-5 AllLJ 290; 2020 142 AllLR 353; 2020 4 AWC 3430 (Sudhir Agarwal, J.)
Kuriakose v. Varkey, 2017 Supreme(Ker) 858
Bharat Bhushan Jain & Anr. v. UOI, 2014 SCC OnLine Del 3577,
Kewal Kishan v. Delhi Development Authority, 2013-137 DRJ 267
Mrs. Adarsh Kaur Gill v. Smt. Surjit Kaur Gill, FAO(OS) No.634/2009
Rama Kanta Jain v. M.S. Jain, AIR 1999 (Del) 281,

Plea of Title and Adverse Possession – Contradictory/Inconsistent Pleas

Because, they are founded on fundamentally different legal principles, which cannot coexist without contradiction.

Government of Kerala v. Joseph, AIR 2023 SC 3988,
Karnataka Board of Wakf v. Government of India, AIR 2004 SC 2096; 2004-10 SCC 779,
P. T. Munichikkanna Reddy v. Revamma, AIR 2007 SC 1753; 2007-6 SCC 59 (S.B. Sinha, J.);
Narasamma v. A. Krishnappa, AIR 2020 SC 4178; 2020-15 SCC 218.

No Res Judicata on Finding on Title in an Injunction Suit

Taken from: Res Judicata and Constructive Res Judicata

Saji Koduvath, Advocate, Kottayam.

No Res judicata, where –

Decision by fraud
Dismissal in limine
Suit was premature
Pure question of law
Compromise decree
Want of jurisdiction
Habeas corpus cases
Dismissal on ‘limitation’
New laws bring changes
Public interest litigation
Decision not on the merits,
Dismissal for want of notice
Suit was not properly framed,
Dismissal on technical ground
Default of plaintiffs appearance,
Decision by an incompetent court
Cases where re-litigation is needed
Misjoinder or non-joinder of parties
Grounds not taken up by appeal court
Findings on the Title in an injunction suit.
Dismissed in limine without a Speaking Order
Intermediate reliefs in interlocutory applications.
Findings not Necessary (for supporting decree)
Taxation cases. Liability to pay tax each year differs.
Lower Court findings where appeal decree was passed
Former decision was too perverse (no proper reasoning)
Adverse findings against one who got a favorable decree
Different causes of action, as in an injunction suit or in an eviction suit

Other Settled Position: No Res Judicata, When

Issue not decided/adjudicated.
Dismissal of earlier suit for res judicata.
Dismissal of earlier suit for insufficient court fees.
If the ultimate decision was that the suit was not maintainable.
Adverse findings against one, in favour of whom the suit was ultimately decided.
Findings on several grounds. In the appeal, only one ground was considered. Res judicata on that one ground alone.

What is Res Judicata?

‘Res’, in Latin, means a thing or matter; and ‘Judicata’ means decided or judged.

Thus, Res Judicata applies when the ‘matter is decided’.

It is based on the public policy of finality and conclusiveness of judicial decisions, and private interest of all persons sued; that is, one should not be tried twice for the same cause or a matter that has been directly and substantially in issue in an earlier suit. Sec. 11 of the Code of Civil Procedure, 1908, elucidates this principle.

Plantation-Tenants Not Approached The Land Tribunal are Ineligible for Plantation-Exemption-Orders from the Land Board

Saji Koduvath, Advocate, Kottayam.

Introduction

Plantation Lands are exempted from the ceiling limit, under Sec. 81 of the Kerala Land Reforms Act, 1963. A planation tenant (who planted the crop) can also claim the exemption. He has the right of ‘fixity’ under Sec. 13 of the Act.

But, it is definite – in most cases, such a tenant cannot claim a Purchase Certificate, because it can be obtained below the ceiling limit alone. In such a situation, an interesting question comes –

Should such a plantation tenant (who is not legally entitled to a purchase Certificate) have filed an application or statement before the Land Tribunal under Sec. 72B?

It was Incumbent on the Tenant to Apply the Land Tribunal

It was Incumbent on the tenant to apply to the Land Tribunal even if he possessed maximum within the ceiling.

A cultivating tenant is permitted to obtain title by assignment of the right, title, and interest of the landlord (under a Purchase Certificate from the Land Tribunal) only up to the extent permissible under the ceiling limit prescribed by the KLR Act, he must have filed the application for Purchase Certificate under Sec. 72B.

For determining the ceiling area, the total extent of land held by a person or his family anywhere in the State or in India shall be taken into account.

Even if a tenant (already) holds land at or above the ceiling limit (and, for that reason, no purchase certificate could be received), still then proceedings are to be initiated by filing an application before the Land Tribunal.

Reasons: The law casts a duty on the tenant to make an application to the Land Tribunal, within the time prescribed, because every tenant seeks the right to hold property, invoking the ‘exemption’ provided in Sec. 81 (including Plantation) has –

to get the purchase price of the property fixed by the LT
to pay the purchase price to the landowner through LT
to pay rent to the land owner, pending proceedings, through LT
to get forwarded the orders to the Land Board by the LT.
and to get the purchase price, payable to the Government, fixed by the LT (after the Amendment Act No. 35 of 1969).

Relevant Provisions of the KLR Act

The Cultivating Tenants have to prove their claim of being a cultivating tenant, entitled to fixity of tenure, under the provisions of the KLR Act through the LT. The following are the relevant provisions of the KLR Act.

54(1). A cultivating tenant (to purchase the right) has to apply Land Tribunal.
55. Purchase price is to be fixed by LT (on fair rent u/s. 31) to be paid u/s. 59
57. The LT, after enquiries, has to pass orders determining the purchase price.
57(3). The Land Tribunal has to allow the purchase of the land it determines.
57(6). The Land Tribunal has to forward the orders to the Land Board.(On the basis of the Orders sent to the Land Board, the Land Board takes actions under S. 85(7) – whereon a person fails to file a statement under 85(2) or (3A), LB shall intimate that fact to TLB and thereon the TLB shall determine land to be surrendered.)
59. The purchase price _{(determined u/s. 57 by the LT)} has to be deposited with the Land Tribunal to the credit of the Land Board and issue of certificate.
61. Tenant has to pay rent (under orders of LT) pending proceedings.
72D. The cultivating tenant has to pay the purchase price to the Government (fixed by the LT) on the assignment to him of the right, title and interest of the landowner. (If the extent of land is one hectare or below, he shall not be liable to pay.)

Balanoor Plantations & Industries Ltd. v. State of Kerala

It is held in Balanoor Plantations & Industries Ltd. v. State of Kerala, 2018(3) KLT 283, as under:

“28. That apart, we notice that the specific claim of the petitioners is hinged solely on Exts. P1, P2 lease deeds in favour Sri. K. M. Cheriyan and on Exts. P3 and P4 letters of the Zamorin Raja, which as we have already said earlier is contended by the Zamorin Raja to be forged. However, nowhere do they say in their pleadings or in their submissions before us that the petitioners have even attempted, under the provisions of the Kerala Land Reforms Act, to claim right over the property as a cultivating tenant. This is pertinent because, under Section 72B(3) of the KLR Act, it is legally obligated on every cultivating tenant, entitled to assignment of right, title and interest in respect of any property, to apply to the Land Tribunal, within whose jurisdiction that the property is situated, within two years from the date of vesting of such title and interest. Of course, the period of limitation shown therein can be extended by the Government for sufficient reasons. The imperative mandate of this Section is inescapable and we, therefore, deem it necessary to extract it as under to facilitate a complete reading of it:
“72B(3): Any cultivating tenant entitled to assignment of the right, title and interest in respect of a holding or part of a holding under sub-section (1) may apply to the Land Tribunal within whose jurisdiction such holding or part is situate within two years from the date of vesting such right, title and interest in the Government under Section 72, or such further time as may be allowed by the Government in this behalf, for such assignment to him.”

It is further held as under:

“29. From the factual factors in this case, it is rather obvious that even though the petitioners claim possession and ownership over the property on the strength of Exts. P1 to P4, asserting that they are cultivating tenants, they have conspicuously chosen never to make an application before Land Tribunal for assignment of the right, title or interest over the property in their favour until now. Therefore, all that the petitioners have done is to merely make a claim, solely based on the documents aforementioned and Ext. P5, to assert that they are cultivating tenants with respect to the property in question, however, consciously choosing not to make any application under the afore extracted Section 72B (3) to establish such claim, even when they are statutorily obligated to do so.”
“44. We are, of course, cognizant that Sri. Joseph Kodianthara, the learned senior counsel appearing for the petitioners, refutes with grate force the above submissions of Sri. R. Lakshmi Narayan by predicating that the Devaswom cannot even be heard to be the owner of the property, since by the automatic operation of Section 72 of the KLR Act, the property would become vested with the Government. This submission, we must say, is certainly ingenious in its nature but we refrain ourselves from answering it one way or the other, for the simple reason that whether the property belongs to the Government or to the Devaswom Board, it would be of no consequence or relevance to the petitioners since, in either case, they will have to first prove their claim of being a cultivating tenant, entitled to fixity of tenure, under the provisions of the KLR Act through a proper process of law. Unless and until they are able to do so, the attempted distinction drawn by Sri. Joseph Kodianthara would be nothing more than academic in its nature. We are firm in our mind of this because it is only if they are able to prove that they are a cultivating tenant, entitled to fixity of tenure, can the first petitioner obtain the locus to challenge action under the KLC Act, invoked on the strength of Section 94A of the HR & CE Act, on the ground that property does not belong to the Devaswom. As long as they have not established their claim over the property, adjudication as to if the property is owned by the Government or the Devaswom would not be of any relevance to the petitioners at this point of time.”

Also Read: Balanoor Plantations & Industries Ltd. v. State of Kerala – Based on the Principle: LT to fix Tenancy’; TLB to Fix Plantation Exemption.

The Legal Principles

The legal principles that warrant the invocation of the Land Tribunal’s jurisdiction are the following:

It is for establishing and adjudicating the ‘tenancy right’.
The Land Tribunal is the only authority that can decide on the “tenancy right”.
Under Sec. 72A, the Landlord is entitled to compensation and under Sec. 72D, a tenant is bound to pay the Purchase Price. The compensation is to be decided by the Land Tribunal.
The Scheme of the KLR Act requires that there should be proceedings before the Land Tribunal under Sec. 72B or 72C.
Suo Motu proceedings may not be initiated by the Government for the benefit of a Plantation Tenant (entitled to purchase certificate within the ceiling limit, within the time allowed). It cannot be sought by a tenant, ‘as of right’.
- Note: A tenant cannot declare himself to be a cultivating-tenant and avail benefits – the competent statutory authority (for the same) under the KLR Act is the Land Tribunal.
Title to the property is not decided by the TLB (Harikumar v. State of Kerala, 2013 (2) KLT 44 (Para 9) Jagadeesachandran Nair v. Mamomohanan Pandarathil, 2013 (4) KLT 584 (para 11).
- Both decisions were referred to in Harrisons Malayalam Limited v. State of Kerala, Represented By The Chief Secretary, 2018-2 KHC 719; 2018-2 KLT 369 (para 54).
In Ganapathy Acharya v. Bhaskaran (TLV Iyer, J.), ILR 1993-3 (Ker) 736; 1993 2 KLT 962, it is pointed out:
- “If there is dispute on any of these points necessarily the Land Tribunal has to go into the question of possession and the alleged tenancy”.

Sec. 85(3) of the KLR Act

The legal basis of the decision, Balanoor Plantations & Industries Ltd. v. State of Kerala, 2018(3) KLT 283, can be derived from Sec. 85(3) of the KLR Act.

Sec. 85(3) and (3A) of the KLR Act read as under:

(3). Where, after the final settlement of claims for resumption of lands held by a person as tenant, such person holds land in excess of the ceiling area, or where after the purchase of the right, title and interest of the landowner*^* and the intermediary by the cultivating tenant in respect of lands owned by a person, such person owns land in excess of the ceiling area, such excess land shall be surrendered as hereinafter provided.
(3A). The person bound to file a statement under Sub-section (2) shall, within a period of three months from the date of final settlement or purchase, file a statement before the Land Board, and the provisions of the said Sub-section shall, as far as may he, apply in regard to the particulars to be contained in such statement, the calculation of the excess land and for the procedure for the surrender of the same.] [Substituted by Act No. 35 of 1969.

*^*Why the Words “After The Purchase of the Right, Title And Interest of the Landowner” Included?

It is not lawful to initiate Suo Motu proceedings (under Section 72C) by the Government for the benefit of a Plantation Tenant (entitled, within the time allowed, to purchase a certificate below the ceiling limit), because Explanation II to Section 87 disfavours the fragmentation of the plantation land.

Still, because of subsection (3) of Section 85, the tenant could have obtained a purchase certificate (under Section 72B) within the statutory period.

It is definite: If the claimant of Plantation Exemption (under Sec. 81) is a tenant, he must have approached the LT (with respect to each plantation, if he has more plantations under different landlords).

Because (i) this sub-section itself says as to the settlement of claims for resumption and purchase of the right, title, and interest of the landowner by the cultivating tenant, and (ii) LT is the only authority to determine tenancy (Land Board cannot determine it).

Note: A tenant cannot avail benefits declaring himself to be a cultivating-tenant; on the contrary, he has to approach the competent statutory authority (for the same) under the KLR Act; that is, the Land Tribunal. Land Board or Taluk Land Board (deals with exemption on the ground of plantation, excess land issues, etc.) cannot adjudicate on tenancy rights.

A cultivating tenant, “entitled to assignment” of the right under Sec. 72B, if failed to apply the same, will not have ‘vested right to continue’, as a cultivating tenant (in any case, beyond the ceiling limit).

Note: The tenant who opts to avail benefits of plantation-exemption, under Sec. 81, cannot seek fragmentation (Sec. 87, Explanation II) of the plantation land and obtain purchase-certificate (under Sec. 72B or 72C). Still, he stood as a cultivating tenant, “entitled to assignment” of the right under Sec. 72B, within the statutory period.

Sec. 72B provides for cultivating tenant’s rights to get assignment by purchase certificate (through LT) – within ceiling area. A tenant was “obliged to apply” for it within 2 years from 1-1-1970. Therefore, the cultivating tenants entitled to assignment of the right, title and interest were “obliged to apply” to the Land Tribunal within the time fixed for asserting the claim as cultivating tenants. This decision (Balanoor Plantations) also says that tenants having ‘no bona fide claim’ as to cultivating-tenancy will not have the benefit of fixity under Sec. 13 of the KLR Act, and they will have ‘no vested right to continue’.

Sec. 73B(3) reads as under:

“(3) Any cultivating tenant entitled to assignment of the right, title and interest in respect of a holding or part of a holding under Subsection (1) may apply to the Land Tribunal within whose jurisdiction such holding or part is situate within two years from the date of vesting of such right, title and interest in the Government under Section 72, or such further time as may be allowed by the Government in this behalf, for such assignment to him.”

Tenant has to pay Rent to the Government

In any case, the tenants who are found to be cultivating tenants entitled to hold the plantation tenancy land, under exemption, have to pay rent to the Government as provided under Sec. 72E (and the Land Tribunal has to fix the rent under subsection (5)(h) of Sec. 72F). If such land is acquired by the Government compensation for improvements alone need be paid to the tenant [and no land-value be given, under Sec. 112(5A)].

Reference to the Land Tribunal, under Section 125(3)

On the basis of the Full Bench decision in Lissy v. Kuttan, 1976 KLT 571, it was argued in Balanoor Plantations & Industries Ltd. v. State of Kerala that a person who claims to be a cultivating tenant, entitled to fixity of tenure under Section 13 of the KLR Act, the Civil Courts are prohibited from considering such issues and the matter has to be referred to the Land Tribunal, under Section 125(3) of the KLR Act. It is pointed out in this decision that the judgment in Lissy v. Kuttan had been overruled by a Larger Bench in Kesava Bhat v. Subraya Bhat, 1979 KLT 766. It was held in Balanoor Plantations as under:

“11…. Unless the question actually “arises” for consideration, there is no obligation under S. 125 (3) to make a reference to the Land Tribunal. The mere incorporation of an unnecessary or irrelevant plea of tenancy into the written statement which has no relation whatever to the material averments and the reliefs sought in plaint, cannot attract the bar of S. 125 (1), or the provisions of S. 125 (3 ). ….. It is only if the question arises for consideration that the obligation to refer under S. 125 (3) also arises. …..”

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End Notes

Relevant provisions of KLR Act, in a Nutshell

Section	Provisions in a Nutshell
Chap. II 3(1)	Exemptions – (i) Nothing in this Chapter shall apply to – (viii) Tenancies of plantations exceeding 30 acres. “Provided that the provisions of this chapter, other than sections 53 to 72S, shall apply to tenancies in respect of agricultural lands which are treated as plantations under sub clause (c) of clause (44) of Section 2”.
7 E	Persons acquired lands (before 2005 amendment in KLR Act) for consideration below 1 Ha. 61 Are 87 Sq.m. (4 acre) will be deemed to be tenants .
13	Fixity: “Every tenant, shall have fixity of tenure in respect of his holding.”
22	*Landlord* desiring to *resume* any land shall apply to the Land Tribunal.
31	Fair rent determined by Land Tribunal.
51B.	Landlord not to enter on land surrendered or abandoned by the tenant. Contravention is made punishable.
54(1) 55 57 57 (3) 57 (6) 61	54(1). A cultivating tenant (to purchase the right) has to apply Land Tribunal. 55. Purchase price is fixed by LT (on fair rent u/s. 31) to be paid u/s. 59 57. The LT after enquiries, pass orders determining purchase price. (3). The Land Tribunal allows the purchase of the land it determines. (6). The *Land Tribunal* *forwards* *orders to the Land Board. 61. Tenant to pay rent* (under orders of LT) pending proceedings.
59	When Sec. 54 application is allowed _{(by the LT)}, the purchase price _{(determined u/s. 57 by the LT)} shall be deposited with the Land Tribunal to the *credit of the Land Board* and issue of *certificate* – to cultivating tenant.
72 72(4)	Sec. 72 provides for automatic vesting of lease-properties held by cultivating tenants in Govt. ILR 2010(2) Ker. 845. 72(1) says: Holdings upon which tenant entitled fixity under sec. 13 vest in govt. Sec. 72(4) states that a holding of a ”small holder” also vests in the Government and the application for resumption has to be preferred within the specified time.
72B	Cultivating-tenant “shall be entitled to assignment” of land vested in Govt. under Sec. 72 –within ceiling area and get purchase certificate (through LT) (2 years from 1-1-1970). Effect of non-filing (See Balanoor Plantations case. 2018(3) KLT 283.)
72D	The cultivating tenant has to pay the purchase price to the Government on the assignment to him of the right, title and interest of the landowner. (If the extent of land is one hectare or below, he shall not be liable to pay.)
72E	Such a tenant is liable to pay rent to the Govt. for the unassigned land – under Purchase Certificate (E.g., exempted-plantation-land). The Land Tribunal fixes the rent under Sec. 72F(5)(h).
72C	Provides for suo moto action by LT. (No time limit,) Rule 5 of the Vesting & Assignment Rules provides – LT may suo moto – notwithstanding no application – assign to cultivating tenant. (See S.72C also).
72K	LT shall issue purchase certificate. It shall be conclusive proof of assignment.
74	Prohibition of future tenancies.
Chap. III 81	Exemption from ceiling and excess for Govt. lands, private forests, plantations, industrial or commercial undertakings, etc. _Proviso_{– There will be an exemption (as plantation, land given to educational institution, trust, etc.) on Government lands, given under grant, lease, etc.}_{See: HMT (Machine Tools) Limited v. Taluk Land Board, 2009 (3) KLJ 110; MT Joseph v. State of Kerala, AIR 1974 Ker 28.}
82	Ceiling area – 5/10 standard acres.
83	No person can hold or possess excess of ceiling area. (Holding is by tenant.) It is a total bar. (Note: plantations, industrial area etc. are exempted.) Apply to tenant also. 1980 KLT 259 (Gopalan Nair Vs. State), 1976 KLT 306 (Thomas Mariamma Vs. TLB), Raghunath Laxman Wani v. The State of Maharashtra (AIR 1971 SC 2137) The policy of the Act – no person –“be permitted to hold any land in excess of the ceiling area.” Raghunath Laxman Wani v. State of Maharashtra, 1971-3 SCC 391, Bhikoba Shankar Dhumal v. Mohan Lal Punchand Tatbed, 1982-1 SCC 680, State of U.P v. Civil Judge, Nainital, AIR 1987 SC 16, State Vs. Puliyangattu, 2008(1) KLJ 571.
84	Certain transfers – void.
85(1)	Surrender excess.
85(2)	Owners and Tenants _{(having land in excess of the ceiling area)} should furnish ceiling return to Land Board before March31, 1971, before the Land Board _{(including lands exempted under S. 81)}. Note: Effect of non-filing: See – Balanoor Plantations case – 2018(3) KLT 283.State of Kerala Vs. Varkey Mathew, AIR 1996 SC 1009. According to S. 3(1) (viii), “tenancies of plantations exceeding 30 acres” is exempted from Chapter II. Therefore, the landlord can recover such plantation lands after the period of tenancy. Such landlords also had to file a ceiling return within the time stipulated.
85(3)	Excess shall be surrendered. *Note*: Tenant must have approached the LT _{(with respect to each plantation, if he has more plantations)} (He cannot declare himself a tenant) It is clear from the following provisions: 54(1) – A cultivating tenant has to apply to LT_{(or the purchase of right, title and interest}_.) 55 – Purchase price and fair rent fixed by LT 57 – LT after giving notice and enquiries, pass orders _{(on the} _{application for the purchase of right, title and interest)}. 57(3) – LT allots the purchase land it determines. 57(6) – The *Land Tribunal* *forwards* a copy of *orders to the Land Board. 61 – Cultivating tenant to pay rent (under orders of LT) 59 – The purchase price shall be deposited with the LT _{(to the credit of the Land Board)}* and issue of certificate – to cultivating tenant. It is *not* lawful to initiate Suo Motu proceedings (under Section 72C) by the Government for the benefit of a Plantation Tenant (entitled, within the time allowed, to purchase a certificate below the ceiling limit), because Explanation II to Section 87 disfavours the fragmentation of the plantation land. Still, because of subsection (3) of Section 85, the tenant could have obtained a purchase certificate (under Section 72B) within the statutory period. It is the principle applied in the Balanoor case. *Note:* (i) The sub-section (3) itself says as to the settlement of claims for resumption and purchase of the right, title, and interest of the landowner by the cultivating tenant, (ii) LT is the only authority to determine tenancy (Land Board cannot determine it), and (iii) it is clear that even if it is a plantation-exemption-land (beyond ceiling limit), the tenant has to file petition under Section 54 – for fixing Purchase price and fair rent fixed by LT and for allotting the land under section 57(3) and for effecting the payments of ‘rent’ and ‘purchase price’_{(to the credit of the Land Board)} under sec. 61 and 59.
85(3A)	The person bound to file a statement under sub-section (2) _{(that is, Owners and Tenants – having land in excess of the ceiling area)} shall, within a period of three months from the date of final settlement or purchase, file a statement before the Land Board, and the provisions of the said Sub-section shall, as far as may he, apply in regard to the particulars to be contained in such statement, the calculation of the excess land and for the procedure for the surrender of the same.
85(5)	On receipt of the statement under Sub-section (2) or Sub-section (3A), the Land Board shall transfer the statement to such Taluk Land Board and such Taluk LandBoard shall determine the extent and identity of the land to be surrendered.
85(7)	Whereon a person fails to file statement under 85(2) or (3A), LB shall intimate that fact to TLB – TLB shall determine land to be surrendered. It is obvious – The LB can intimate TLB as to non-filing, on the basis of the records it obtained under Sec. 57(6) and 59. That is, those tenants who are not entitled to get a purchase certificate also has to file an application under Sec. 54(1) and 85(2) or (3A). Effect of non-filing: See – Balanur Plantations case (With respect to Sec. 72B application) – 2018(3) KLT 283. Statute prescribes liability on the person who owes or hold the land in excess of the ceiling limit to file statement: State of Kerala Vs. Varkey Mathew, AIR 1996 SC 1009. [TLB not to do, suo motu, without direction from LB. 1980 KLT 120, referred to in 2019(1) KLT 985.]
85A	File ceiling return within March 2, 1973 before Land Board..
86(1)	On determination of the extent to be surrendered under S. 85- Excess vests in Govt. and Taluk Land Board shall issue an order accordingly.
86(3)	Where any person fails to surrender as demanded, the TLB may order an officer to take possession
86(4)	Where any land, vests in the Govt, under s. 86(1) (including that of cultivating tenant) the ownership of such land shall vest in the Govt.
86(6)	Nothing applies to property of Govt. under KLC Act.
87 Exp. II	If a person converts any portion of exempted land for any other class, that converted extent will be added to his account in determining his ceiling limit. That is, the exemption will be lost for the portion that exceeds the ceiling limit. (Mathew K Jacob v. District Environmental Impact Assessment Authority, 2018-4 KLT 913)

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General

Licence and Irrevocable Licence: Section 60 Easements Act Applies only to ‘Bare Licences’ and Not to ‘Contractual Licences’

Saji Koduvath, Advocate, Kottayam.

Abstract

The provisions relating to ‘Licence’ are not logically legislated. It lacks doctrinal coherence and legal consistency.

‘Licence’ is defined ‘exhaustively’ in Sec. 52.
But the word ‘licence’ is used in the words ‘contractual licence’ in Sec. 64 unconnected to the meaning in Sec. 52. In the same way, the words ‘licence coupled with a transfer of property’ in Sec. 60(a) also connote a different meaning altogether different from the definition in Sec. 52.

The criticism is that it should have made clear in Sec. 52 itself that the definition is not exhaustive, with the usual words in the statutes – ‘unless the context otherwise requires’.

Introduction

Sec. 52 of the Indian Easements Act, 1882 defines ‘Licence’ as under:

52. “License” defined – Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license.

Note: In British English, “Licence” is a noun and “license” is a verb. In the United States, “license” is used as both a noun and a verb. Indian statues prefer to follow the US practice (license). “Licence” (UK noun form) is often preferred in legal writing and formal opinions.

Revocation of Licence and Grant

Section 60 of the Indian Easements Act, 1882 reads as under:

“60. License when revocable – A license may be revoked by the grantor, unless-
(a). It is coupled with a transfer of property and such transfer is in force;
(b). The licensee, acting upon the license, has executed a work of a permanent character and incurred expenses in the execution.

Part I – What is ‘Licence’ in Sec. 52, Easements Act?

Sec. 52 Licence is only a ‘bare’ and ‘personal’ right, Not an ‘Interest’ in ‘Property’

In Sec. 52 itself it is stated:

“such right does not amount to an easement or an interest in the property”.

‘Licence’ in Sec. 52 is only a ‘bare‘ and ‘personal‘ right, related to an immovable property.

It is made clear by the following words –

“one person grants to another”
‘a right to do, or continue to do’
something which would, in the absence of such right, be unlawful.

Kinds of Licenses

The Easements Act itself mentions several kinds of licences –

(i) licence (bare or gratuitous) in Sec. 52;
(ii) contractual licence in Sec. 64;
(iii) licence coupled with ‘a transfer of property’ in Sec. 60(a).

Licence in S. 52 is worded to ‘contra-distinct’ Contractual Licence

S. 52 canvases a bare (‘contra-distinct’ to contractual) licence from the words –

“something which would, in the absence of such right, be unlawful”.
It is the most operative and pivotal expression in Sec. 52.

For S. 52 Licence, the act must “Otherwise be Unlawful“; It must Not be Contractual

The ‘act’ envisaged under S. 52 Licence is one that must be – otherwise ‘Unlawful’.

Example:

Gratuitous permission for parking a car in the courtyard of a house.

Another (possible) ‘lawful’ means is –

Pay-and-park arrangement (express contractual licence). Implied contract if employee parks his vehicle in the employer’s compound.

The contractual parking is authoritative and ‘lawful’. It will not amount to a trespass.

In the former, if the claimant fails to show the licence, he would be a trespasser.

In Harshadkumar Sundarlal Dalal v. Hasmukhben, 1983 GLH 774; 1983-1 GLR 383, it was pointed out as under:

“The licensee has no right or interest in the immovable property and he has merely a personal right by which what would otherwise be an act of trespass is converted into a lawful action.”

In Black’s Law Dictionary, 8th Edition (South Asian Edition), page 938, the definition of “licence” is given as under:

“License: A permission, usu. revocable, to commit some act that would otherwise be unlawful: esp.: an agreement (not amounting to a lease or profit, a prendre) that it is lawful for the licensee to enter the licensor’s land to do some act that would otherwise be illegal, such as hunting game.” (Quoted in: Sunrise Stone Crusher Pvt. Ltd. v. State of U. P., 2020-1 AllLJ 210)

“Acting Upon The Licence” and Re-construction of a building

No possession in licence.

“Acting Upon The Licence” (without possession), it is not possible to dismantle a structure.

Licence is only a right to do something, which would, in its absence, unlawful.

For re-construction, possession (interest) must have given.
If it is so, in case of re-construction – there will be no application of S. 52 and 60(b).
But it is possible (as seen from Sec. 60-b) when a construction is made on a bare land.

A Legal Criticism

The provisions relating to ‘Licence’ are not logically legislated. It lacks doctrinal coherence and legal consistency.
‘Licence’ is defined ‘exhaustively’ in Sec. 52. But the word ‘licence’ is used in the words ‘contractual licence’ in Sec. 64 unconnected to the meaning in Sec. 52. In the same way, the words ‘licence coupled with a transfer of property’ in Sec. 60(a) also connote a different meaning altogether to the definition in Sec. 52. (The criticism is that it should have made clear in Sec. 52 itself that the definition is not exhaustive, with the usual words in the statutes – ‘unless the context otherwise requires’).

Sec. 60(b) is not attracted to Contractual Licences

R. P. Shrivastava v. Sheela Devi, 2008-2 CivLJ 288; 2007-4 MPLJ 102 (Arun Misra, J.)
Mumbai International Airport Pvt. Ltd. v. Golden Chariot Airport, 2010-10 SCC 422

Sec. 60(b) Easement Act applies to a purely personal or gratuitous licence that falls under Sec. 52. It is clear from R. P. Shrivastava v. Sheela Devi, 2008-2 CivLJ 288; 2007-4 MPLJ 102 (Arun Misra, J.) that it does not apply to contractual licences.

“13. A mere licence does not create any estate or interest in the property to which it relates. It only confers legality on an act which would otherwise become unlawful. A licence may be
- purely personal,
- gratuitous or
- contractual.
The first two classes of mere licenses are revocable, the third class is revocable or not revocable according to the express or implied terms of the contract between the parties.
A license coupled with grant of an interest in nature of property is not revocable.”

Concept of Part Transfer to the licenses is Unknown u/s. 60
In Dharamvir Khosla v. Asian Hotels (North) Ltd., 2020 Supreme (Del) 738, it is held as under:

“14. Since in terms of Section 60 clause (b) of the Easement Act the plaintiff, i.e. licensee, has, acting upon the license, executed a work of permanent character and has incurred expenses thereon, the license has to be interpreted as a irrevocable one. When the transfer of license in respect of shop U-63 was done, the only transfer charges taken by the defendant were Rs. 25,800/- whereas the plaintiff received a full consideration minus the consideration of the loft area. Since the defendant permitted part transfer of the licenses which concept is unknown under Section 60, it is evident that the intention of the parties was of creating irrevocable license.”

Bare Licence u/S. 52 is ‘Personal Privilege’

Division Bench of the Delhi High Court in Chandu Lal v. Municipal Corporation of Delhi, AIR 1978 Del 174, distinguished easement and licence as under:

“26… A mere licensee has only a right to use the property. Such a right does not amount to an easement or an interest in the property but is only a personal privilege to the licensee. ……..”

Contract must be Enforced by Injunction, Not by Invoking Sec. 60

In Dominion of India v. R.B. Sohan Lal, AIR 1950 P&H 40, it was found that a contractual provision that made an irrevocable licence had to be protected by enforcing the contract, by an injunction “restraining the breach of the implied negative covenant”, and not by invoking the pleading of Sec. 60. It was held as under:

“I would be inclined to hold, if that clause stood alone, that the parties by their special contract made the license, which was prima facie revocable under S. 60, an irrevocable license and that a threatened revocation thereof should be enforced by an injunction restraining the breach of the implied negative covenant.”

Definitions of Licence

Black’s Law Dictionary

In Black’s Law Dictionary, Seventh Edition, the word “licence” means “a revocable permission to commit some act that would otherwise be unlawful” and the word “licensee” means “one to whom a licence is granted or one who has permission to enter or use another’s premises, but only for one’s own purposes and not for the occupier’s benefit.”

Stroud’s Judicial Dictionary of Words and Phrases

Stroud’s Judicial Dictionary of Words and Phrases, Sixth Edition, Vol. 2, provides the meaning of word “licensee” to mean “a licensee is a person who has permission to do an act which without such permission would be unlawful. [See Vaughan C.J., in Thomas v. Sewell Vaugh at page 330 at page 351, quoted by Romour, J, in Frank Warr and Co. v. London County Council (1940) 1 K.B. 713.”

Barron’s Law Dictionary

Barron’s Law Dictionary has given the meaning of word “licensee” to mean “the one to whom a licence has been granted; in property, one whose presence on the premises is not invited but tolerated. Thus, a licensee is a person who is neither a customer, nor a servant, nor a trespasser, and does not stand in any contractual relation with the owner of the premises, and who is permitted expressly or impliedly to go thereon usually for his own interest, convenience, or gratification”.

Puran Singh Sahani v. Sundari Bhagwandas Kriplani, 1991-1 SCR 592

“44. ….. A “licence” is a power or authority to do some act, which, without such authority, could not lawfully be done. In the context of an immovable property a “licence” is an authority to do an act which would otherwise be a trespass. It passes no interest, and does not amount to a demise, nor does it give the licensee an exclusive right to use the property.

All these definitions are quoted by the Bombay High Court in Prabhudas Damodar Kotecha v. Manharbala Jeram Damodar, 2007-5 MHLJ 341 (Upheld by the Supreme Court in: Prabhudas Damodar Kotecha v. Manharbala Jeram Dmodar, AIR 2013 SC 2959, 2013-15 SCC 358).

Kinds of Licences

Licence may be Personal or Contractual

In Pradeep Oil Corporation v. Municipal Corporation of Delhi, AIR 2011 SC 1869; 2011-5 SCC 270, it is held as under:

“A licence may be created on deal or parole and it would be revocable. However, when it is accompanied with grant it becomes irrevocable. A mere licence does not create interest in the property to which it relates. Licence may be
- personal or
- contractual.
A licensee without the grant creates a right in the licensor to enter into a land and enjoy it.

Bare Licence Defined under Sec. 52 Easements Act:

As stated above, Sec. 52, Easements Act presents a ‘bare licence’, and it does not refer to a contract with mutual and reciprocal promises. It primarily deals with gratuitous licences.

Contractual Licences:

Modern commercial licences—such as those related to hotel stays, telecom services, software usage, and similar arrangements—are typically contractual in nature, involving mutual and reciprocal obligations between the parties. Unlike traditional unilateral licences, these Contractual Licences are governed by the terms of an agreement and may include rights, duties, and considerations enforceable under contract law. While such licences do not fall within the ambit of Section 52 of the Indian Easements Act.

Oral Licence

A Licence may be oral also. In such a case, terms, conditions and the nature of the Licence, has to be gathered from the purpose for which it is licenced, coupled with the conduct of the parties and the circumstances which may have led to the grant of the Licence (Ram Sarup Gupta v. Bishun Narain Inter College, AIR 1987 SC 1242; 1987-2 SCC 555).

‘Contractual Licence’ Differs from a Bare Licence u/S. 52

In Mumbai International Airport Pvt. Ltd. v. Golden Chariot Airport, 2010-10 SCC 422, it is observed as under:

“A licence can be –
- purely personal,
- gratuitous or
- contractual.
Whether a contractual licence is revocable or not, would obviously depend on the express terms of the contract.”

A licence created by a contract is known as ‘contractual licence’. It differs from a bare licence under Sec. 52 Easements Act on the following counts -.

One of the essential essence of a licence is that it is revocable; but, the terms of the contractual licence determines its revocation.
Sec. 52 serves to legalise “something which would, in the absence of such right be unlawful”. Contractual licence is legally recognised under the Contract Act. (For example, gratuitous-permission of using a room in a residential house and contra-distinct to a ‘homestay’ – with consideration).

Characteristics of Contractual Licence

Following are the characteristics of contractual licence –

Its enforcement is governed under the Indian Contract Act, and not under the Easements Act.
In contractual licence, the terms of the licence will be the decisive factor; and not thye sweet will of the grantor.
What matters most in contractual licence is the substance of the arrangement, not its form or label.

In Vishwanath Sawant v. Gandabhai Kikabhai, 1990-2 BomCR 406; 1990 MhLJ 1145; 1990-1 MhLJ 1145, it was observed as under:

“A licence may be of two kinds, namely, a bare licence which is purely a matter of personal privilege and a licence coupled with a grant or interest. …. A licence may be purely personal, gratuitous or contractual. The first two classes are of mere licences which are revocable, the third class, whether is recoverable or not would depend upon the express or implied terms of the contract between the parties.
- (Quoted in: Francis v. Andrew, 2008-6 MhLJ 450;
- Adi S. Mehta v. Adil G. Illava, AIR 1998 Bom 107;
Also See:
- RP Shrivastava v. Sheela Devi, 2008-2 CivLJ 288; 2007-4 MPLJ 102 (Arun Misra, J.).
- Mumbai International Airport Private Limited v. Golden Chariot Airport, 2010-10 SCC 422)

Halsbury’s Laws of England 4th Edition, Volume 9, paragraph 530 it is stated as follows:

“A contractual licence is a licence supported by consideration but not coupled with a grant. Such a licence might at common law be effectively of revoked at any time, whether or not it contained provisions regarding its duration and the licensee’s only remedy was an action for damages; but the equitable principle now prevails, and if on its proper construction the licence is irrevocable or revocable only after a certain time, revocation will as a rule be restrained by the grant of an injunction. Where the remedy of injunction cannot be applied because the licence has already been ejected, it seems that the Court will determine the parties’ rights on the basis of what they would have been if there had been an opportunity to apply for an injunction.” (quoted in: Base International Holdings N. V. Hockenrode v. Pallava Hotels Corporation Limited, 1999 2 ArbLR 433; 1999 19 PTC 252 (Mad).

Difference: ‘Bare Licence’ and ‘Contractual Licence’ – on Revocability

The difference between a Bare Licence and ‘Contractual Licence’ can be deciphered from M.N. Clubwala v. Fida Hussain, AIR 1965 SC 610, where our Apex Court has pointed out as under:

“While it is true that the essence of a licence is that it is revocable at the will of the grantor, the provision in the licence that the licensee would be entitled to a notice before being required to vacate is not inconsistent with the licence. In England it has been held that a contractual licence may be revocable or irrevocable according to the express of implied terms of the contract between the parties.” Quoted in: Delta International LTD. v. Shyam Sundar Ganeriwalla, AIR 1999 SC 2607; 1999 4 SCC 545).

Bare Licence u/S. 52 Does Not Create Contractual Obligations

The following legal propositions arise from Sec. 52 of the Easements Act –

1. A bare licence under Sec. 52 of the Easements Act is a unilateral permission. It does not arise from mutual or reciprocal promises, and does not create contractual obligations. It is typically gratuitous, revocable, and does not confer any interest in the (immovable) property.
2. If a document titled ‘licence’ is entered into by a lawful owner or authority as ‘licensor’, but its terms confer a vested proprietary right (such as exclusive possession or interest in the property), then the arrangement will not be a (bare) licence under Sec. 52 of the Easements Act; and instead, it will be construed as a lease, contractual-licence etc. as the case may be.
3. However, if the arrangement only permits the licencee to do something on the property that would otherwise be unlawful (e.g., gratuitously occupy a room in a house, erect a stall without transferring an interest in the land), then the test under Sec. 52 — “something which would, in the absence of such right, be unlawful” — is satisfied, and the arrangement is characterised as a licence.
4. Even if there is on a (prior) contract, express or implied (as in the former example – to occupy a room in a house) what matters is the terms of the licence; and not the ‘prior’ contract.
5. Though the words: “something which would, in the absence of such right be unlawful” may appear to be applicable to both contract and licence, the catching words, “something which would” make it sufficiently clear that it is intended to exclude all other lawful right or permission such as lease, mortgage, contract that creates a vested right etc. Otherwise, these words would stand redundant or mere surplusage.
6. The “permission” granted in a licence should ‘legitimise’ an act (otherwise, it should stand unlawful or trespass).

Bare Licence u/S. 52 – No Mutual Promise; It must be Unilateral

In Ramesh Dwarkadas Mehra v. Indravati Dwarkadas Mehra (B.N. Srikrishna, Smt. Ranjana Desai, JJ.), 2001 AIR (Bom) 470; 2001-4 BomCR 417; 2001-4 BomLR 102; 2001-4 MhLJ 483, it is held as under:

“Section 52 does not require any consideration, material or non-material, to be an element of the definition of licence, nor does it require that the right under the licence must arise by way of contract or as a result of mutual promises. Thus, ” licence” as defined in section 52 of the Indian Easements Act, 1882 can be a unilateral grant and unsupported by any consideration. This is also the view taken by the Supreme Court in State of Punjab v. Brig. Sukhjit Singh, 1993(3) S.C.C. 459 (vide paragraph 30) where it observes that –
“payment of licence fees is not an essential attribute for the subsistence of the licence”.
9. The concept of licence is contra distinguishable from the concepts of easement and interest in property. Licence is purely a personal right created and terminable at will, which may or may not be supported by material consideration. That is the reason why section 56 of the Indian Easements Act, 1882 provides that a licence is not transferable and section 59 provides that where the grantor of the licence transfers the property affected thereby, the transferee is not bound by the licence already granted.”

The Bombay High Court in Prabhudas Damodar Kotecha v. Manharbala Jeram Damodar, 2007-5 MHLJ 341 (Upheld by the Supreme Court in: Prabhudas Damodar Kotecha v. Manharbala Jeram Dmodar, AIR 2013 SC 2959, 2013-15 SCC 358) held as under:

“Thus, it is seen that even in popular sense the word ‘licence’ is not understood to mean it should be on payment of licence fee for subsistence of licence. It also covers a ‘gratuitous licensee’, that is, a person who is permitted, although not invited, to enter another’s property and who provides no consideration in exchange for such permission

Consideration and Mutual Promises in Bare Licence u/S. 52

In Prabhudas Damodar Kotecha v. Manharbala Jeram Dmodar, AIR 2013 SC 2959, 2013-15 SCC 358, the Supreme Court held as under:

“43. … This Court in State of Punjab v. Brig. Sukhjit Singh, (1993) 3 SCC 459, has observed that
“payment of Licence fee is not an essential attribute for subsistence of Licence.”
Section 52, therefore, does not require any consideration, material or non material to be an element, under the definition of Licence nor does it require the right under the Licence must arise by way of contract or as a result of a mutual promise.

Part II – Irrevocable Licences under S. 60(b) Easements Act

Sec. 52 is attracted, if only it is Not a ‘Contractual Licence’

As shown above, if only the right or permission given (licence) is not supported by any other ‘lawful’ means including a ‘contractual licence’, then only Sec. 52 is attracted.

That is, to attract Sec. 60(b) –

It must be a licence that falls under Sec. 52 Easements Act; which should be –
a bare, unilateral and gratuitous licence and
arisen not from any Contract (including a ‘contractual licence’).

Example:

Owner of a property ‘licences’ his son to make a residential building in that property expending money of the son. The owner cannot revoke the licence after such construction.

As pointed out earlier, the Supreme Court emphasized in M.N. Clubwala v. Fida Hussain, AIR 1965 SC 610, that “the essence of a licenceis that it is revocable” and it defers from English “contractual licence” that may be revocable or irrevocable according to the express or implied terms. (It is seen that this English principle is adopted in Indian Law in several decisions.

Hunt and carry away deer killed – Licence coupled with Transfer of Property?

Joshi in his Commentary on the Easements Act, 1948 Edition, page 274it is stated as under:

“As a licence to go beyond the seas, to hunt in a mans park, to come into his house are only actions which without licence had been unlawful. But a licence to hunt in a mans park and carry away the deer killed to his own use; to cut down a tree in mans ground and to carry it away the next day after to his own use, are licences as to the acts of hunting and cutting down the tree, but as to the carrying away of the deer and the tree cut down, they are grants……..”

No doubt – it is a licence. However, it is doubtful whether “carry away the deer killed” comes under “(coupled with) a transfer of property and such transfer is in force” mentioned in Sec. 60(a) – because it has no connection to “immovable property”.

After referring this passage it is observed in Ghissu v. Hashim Ali, AIR 1954 (All) 683 (MH Beg, J.) as under:

“9. The rights thus created would not be revocable under S. 60. Easements Act, which states that a licence may be revoked by the grantor unless it is coupled with a transfer of property and such transfer is in force.”
It was a case where ‘a licence to the defendant to take away the crop of the grove on payment by the defendant of a yearly rent of Rs. 24/-‘.

It appears that the law is not correctly applied in this judgment – for, the licence mentioned did not fall under Sec. 52 Easements Act, because it was a ‘contractual licence’ for consideration.

S. 60(b) Applies Only to Bare Licences u/S. 52; and Not to ‘Contractual Licence’

The term ‘licence’ in Sec. 60 of the Easements Act (that deals with revocability of a licence), stands for a bare licence (under Sec. 52); andthe benefits this section is not extended to a ‘contractual licence’ (that is mentioned only in Sec. 64) for the following reasons –

Sec. 52 of the Easements Act refers to a bare and unilateral licence; and not to a ‘contractual licence’.
The term ‘licence’ in Sec. 60 is contra-distinct to the term ‘licence’ in Sec. 64 which says as to ‘contractual licence’. (Sec. 64 uses the added words – ‘a licence granted for a consideration’.)
The enforcement of ‘contractual licence’ is governed under the Indian Contract Act; and not under the Easements Act.
If the legislature intended to extend the benefit of Sec. 60 to ‘contractual licences’ also, it would have definitely used the additional words ‘licence granted for consideration’ in Sec. 60.
Note: Sec. 64 is only an enabling provision similar to Sec. 64 and 65, Contract Act.

Onus of Proving Irrevocable Licence

A licence is irrevocable under S. 60(b) of the Act only if three conditions are fulfilled –

.(i) the licencee executed work of a permanent character,
(ii) he did so acting upon the licence, and
(iii) he incurred expenses in doing so.

The onus of proving these facts lies upon the licencee and in the absence of any evidence on these questions the licence could not be irrevocable under S. 60(b) of the Act. Ram Sarup Gupta v. Bishun Narain Inter College, AIR 1987 SC 1242; 1987-2 SCC 555, is a leading authority on the subject. Following decisions were referred to in this decision:

Thakur Prasad v. J. Thomkinson, AIR 1927 Oudh 206.
Mohammad Ali v. Ahmad Husain, AIR 1932 Oudh 264,
Karan Singh v. Budh Sen, AIR 1938 All 342,
Jagat Singh v. District Board, Amritsar, AIR 1940 Lahore 18
Hashmat Jahan v. Sheo Dularey, AIR 1942 Oudh 180,
Banamali Dalbehura v. Ratnamani Dei, (1954) 20 Cut LT 319,
Raghubir Saran v. Param Kirti Saran, AIR 1962 All 444,
Brundaban Jena v. Ram Chandra Misra, (1963) 29 Cut LT 37,
Babulal Choukhani v. Caltex (India) Ltd., AIR 1967 Cal 205,
Deep Chand v. Kasturi Devi, AIR 1975 Pat 17.

Grant and Revocation of Licence can Be Express Or Implied

In Ram Sarup Gupta v. Bishun Narain Inter College, AIR 1987 SC 1242; 1987-2 SCC 555, it is pointed out –

The grant of licence may be express or implied which can be inferred from the conduct of the grantor.
Revocation of licence may be express or implied.
Section 62 enumerates circumstances on the existence of which the licence is deemed to be revoked.
One of such conditions contemplates that where licence is granted for a specific purpose and the purpose is attained, or abandoned, or if it becomes impracticable, the licence shall be deemed to be revoked.
A licence is revocable at the will of the grantor and the revocation may be express or implied.

“Acting Upon The Licence“

It must be bare licence under Sec. 52; that is – “something which would be unlawful” is made lawful by granting license. It must not be contractual.

Our Apex Court referred, in Ram Sarup Gupta v. Bishun Narain Inter College, AIR 1987 SC 1242: 1987-2 SCC 555, the following two decisions in this regard –

(i) Gujarat Ginningand Manufacturing Co. Ltd., Ahmedabad V. Moti Lal Hirabhai Spinning and Manufacturing Co. Ltd., Ahmedabad, AIR 1936 PC 77. In this decision, protection of S. 60(b) of the Act was invoked by a party who had made constructions on his own land and not on the land of the licencer. The Privy Council held that the expression “acting upon the licence” must mean “acting upon a right granted to do upon the land of the grantor something which would be unlawful in the absence of such right.” A man does not “acting upon a licence” execute works and incur expense upon his own property as that he can do without any ones licence
(ii) Shankar Gopinath Apte v. Gangabai Hariharrao Patwardhan, AIR 1976 SC 2506. Here, the plaintiff had raised plea that he was protected under S. 60(b), Easements Act, as he had executed works of permanent character on the land incurring heavy expenses. This Court rejected the submissions on the ground (i) of absence of pleadings, issues and evidence (ii) he had not done so “acting upon the licence” for he did so, in the belief that being a tenant he would become statutory purchaser of the land or that the oral agreement of sale will one fine day be implemented.

“Coupled with an interest” – Corpus Juris Secundum

A licencee without the grant creates a right in the licensor to enter into a land and enjoy it. In Halsbury’s Laws of England, 4th Edition, Vol. 27 at page 21 it is stated:

“Licence coupled with grant of interest: A licence coupled with a grant of an interest in property is not revocable. Such a licence is capable of assignment, and covenants may be made to run with it. A right to enter on land and enjoy a profit a prendre or other incorporeal hereditament is a licence coupled with an interest and is irrevocable. Formerly it was necessary that the grant of the interest should be valid; thus, if the interest was an incorporeal hereditament, such as a right to make and use a watercourse, the grant was not valid unless tinder seal, and the licence, unless so made, was therefore a mere licence and was revocable but since 1873 the Court has been bound to give effect to equitable doctrines and it will restrain the revocation of a licence coupled with a grant which should be, but is not, under seal.” (Quoted in: Pradeep Oil Corporation v. Municipal Corporation of Delhi, AIR 2011 SC 1869; 2011-5 SCC 270.)

Corpus Juris Secundum, Vol. LIII, pp. 815-16 reads as under:

“As a general rule a mere License, that is, one which is merely a personal privilege not coupled with an interest in the land, may be revoked by the licensor at any time, at his pleasure. This rule generally applies regardless of how long the use has been permitted, and although the intention was to confer a continuing right, and even though the License was created by a deed or other written instrument. The general rule, however, is not without its modifications and exceptions, and does not apply
where the License is coupled with or partakes of the character of an easement and
the rights under it are affirmatively and definitely fixed and settled, or
where it constitutes part of a contract between the parties. ”
(Quoted in Sumikin Bussan (Hong Kong) International Limited v. Manharlal Trikamdas Mody, 2006-6 AllMR 347; 2006-4 BomCR 131; 2006-6 RCR(Civ) 347; M. F. De Souza v. Childrens Education Uplift Society, AIR 1959 Bomb 533)

Sec. 52, Easements Act: Specific Contention Needed

Pleading and evidence are insisted in cases which claimed ‘irrevocable Licence’ under Sec. 60(b) Easement Act. See:

R. Mohan v. Sarat Chandran Nair, 2016-4 KHC 318; 2016-4 KLT 15.
Ramesh Raghunath v. Pandurangrao Ambadasrao Ratnalikar, 2006-4 BomCR 910 (Plea and evidence necessary, though right not claimed in “specific words”)
Francis v. Andrew, 2008-6 AllMR 874; 2008-6 MhLJ 450
Elizabeth v. Saramma, AIR 1985 NOC 159 (Ker)
Zila Panchayat Etah v. Om Prakash Shah, 01 Sep 2017 2017 0 Supreme(SC) 1418

In Shankar v. Gangabai, AIR 1976 SC 2506, the Supreme Court observed as under:

“… even assuming that the appellant has executed work of a permanent character on the land it cannot be said that he has done so acting upon the Licence“, as required by S.60 (b) of the Basements Act. If be really improved the land by executing a work of a permanent character, be did so in the belief that being a tenant he will become a statutory purchaser of the land, or that the oral agreement of sale will one fine day be implemented The execution of work would therefore be in his capacity as a tenant or a prospective purchaser and not in his capacity as a licensee”. (Quoted in: Kesavan Nair Vs Narayanan Nair, 27 Oct 1988 1988 2 KLT 1006)

In R. Mohan v. Sarat Chandran Nair, 2016-4 KHC 318; 2016-4 KLT 15, it is held as under:

“It does not spell out any authorisation to the respondent to make a permanent structure. In the absence of such a stipulation in Ext.B2 and in the absence of evidence before the courts below that he had incurred expenses for construction of a shed for running a workshop, the courts below are not justified in holding that the respondent is entitled to get the benefit of Section 60(b) of the Act. Therefore, the contention of appellant that the lower courts erred is sustainable. Hence the substantial question of law is to be answered in favour of the appellant.”

In Gujarat Ginningand Manufacturing Co. Ltd., Ahmedabad v. Moti Lal Hirabhai Spinning and Manufacturing Co. Ltd., Ahmedabad, AIR 1936 PC 77, protection of S. 60(b) of the Act was invoked by a party who had made constructions on his own land and not on the land of the licencer and in that factual backdrop the Privy Council held that the expression “acting upon the licence” must mean “acting upon a right granted to do upon the land of the grantor something which would be unlawful in the absence of such right.” A man does not “acting upon a licence” execute works and incur expense upon his own property as that he can do without any ones licence. (Referred to in: Ram Sarup Gupta v. Bishun Narain Inter College, AIR 1987 SC 1242; 1987-2 SCC 555

IN RECOVERY SUIT LANDOWNER CAN WIN IF S. 60(b) CLAIMANT FAILS

If the tenant challenges the title of the Landlord, it makes the tenant liable for Eviction under the General Rule

Where the defendant seeks to rely on Sec. 60(b) of the Easements Act in a recovery suit, the landowner can succeed by establishing ‘general title’. This is for two main reasons:

Under Sec. 116 of the Indian Evidence Act, the defendant—being a tenant or licensee—is estopped from disputing the title of the landowner.
The burden of proving the applicability of Sec.60(b) of the Easements Act lies on the defendant.

In Champa Lal Sharma v. Smt. Sunita Maitra (S.B. Sinha, J.), (1990) 1 BLJR 268, it was held:

“It is also well settled that one such relationship is admitted or established, tenant would be estopped and precluded from challenging the title of the landlord and if he does so, under the general rule, make himself liable for eviction on that ground.“ (Quoted in: Radha Devi v. Ajay Kumar Sinha, 1998-2 BLJR 1061; Biswanath Agarwala v. Savitri Bera 2009-15 SCC 693, S.B. Sinha and Deepak Varma, JJ.)

Tenant challenges Title of Landlord: Landlord can win the TITLE SUIT if he Proves his GENERAL TITLE

In Champa Lal Sharma v. Smt. Sunita Maitra (supra), it was further held:

“It, therefore, logically follows that a finding of existence of relationship of landlord and tenant is a sine qua non for passing a decree for eviction against a tenant except in a case, as mentioned hereinbefore*^* the plaintiff on payment of ad valorem Court fee may obtain a decree for eviction on the basis of his general title. (Quoted in: Radha Devi v. Ajay Kumar Sinha, 1998-2 BLJR 1061; Biswanath Agarwala v. Savitri Bera 2009-15 SCC 693)
*^* Tenant challenges title of landlord; and no special law (e.g., BRC Act) bars to give such a relief.

In Abdul Waheed Khan v. Bhawani, AIR 1966 SC 1718, it was pointed out that unless jurisdiction was excluded the civil court has jurisdiction entertain a suit based title.

In Biswanath Agarwalla v. Sabitri Bera, (2009) 15 SCC 693,it is held–

“The landlord in a given case*^* although may not be able to prove the relationship of landlord and tenant, but in the event he proves his General TITLE, may obtain a decree on the basis thereof.”
*^*Tenant challenges title of landlord; and no special law (e.g., BRC Act) bars to give such a relief.
This decision is referred to in TribhuvanShankar v. Amrutlal (S.B. Sinha and Deepak Misra, JJ.), 2014-2 SCC 788.

In Biswanath Agarwalla v. Sabitri Bera, (2009) 15 SCC 693, the question was formulated by the Court as under:

“Whether a Civil Court can pass a decree on the ground that the defendant is a trespasser in a simple suit for eviction is the question involved in this appeal.”

Following were the facts:

The defendant-tenant entered the suit shop in 1970.
Plaintiffs purchased the suit premises in 1980.
The plaintiffs served a notice on the defendant under Sec. 106, TP Act.
Plaintiffs filed Suit for eviction claiming to be the owners and landlords.
Defendant denied that he had ever been a tenant.
He claimed independent title. He claimed to have an agreement for sale with the owner.

The trial judge dismissed the suit on the following findings, in a nutshell –

.i. The plaintiffs proved to be the owner.
ii. The defendant failed to prove his independent title.
iii. The plaintiffs failed to prove the relationship of landlord and tenant.
iv. The plaintiffs having failed to prove the tenancy, not entitled to a decree.

Appellate Court, relying on AIR 1984 ROC 78 (All.), page 35, and AIR 1984 All. 66 allowed the appeal and decreed the suit.

The High Court dismissed the Second Appeal.

Hence the appeal before the Apex Court(Biswanath Agarwalla v. Sabitri Bera, (2009) 15 SCC 693).

The Plaintiffs- respondents contended as under:

.i. Even in a suit for eviction, the plaintiffs would be entitled to obtain a decree for possession relying on or on the basis of his title.
ii. In a suit for eviction, it is for the defendant to show that he has a right to remain on the tenanted premises either as a permanent tenant or otherwise.

The right of the plaintiff (landlord) to recover, on the basis of “GENERAL TITLE” is asserted by the Supreme Court (Biswanath Agarwalla v. Sabitri Bera, (2009) 15 SCC 693) referring following decisions.

1. Radha Devi v. Ajay Kumar Sinha, 1998 (2) BLJR 1061. The Patna High Court accepted that a landlord is entitled to obtain a decree of eviction on the basis of his GENERAL TITLE, though he could not prove the relationship of landlord and tenant (when the tenant raised false claim of title).

2. Champa Lal Sharma v. Smt. Sunita Maitra, S.B. Sinha, J., (1990) 1 BLJR 268. It was held:

“It is also well settled that one such relationship is admitted or established, tenant would be estopped and precluded from challenging the title of the landlord and if he does so, under the general rule, make himself liable for eviction on that ground.
It, therefore, logically follows that a finding of existence of relationship of landlord and tenant is a sine qua non for passing a decree for eviction against a tenant except in a case, as mentioned hereinbefore the plaintiff on payment of ad valorem Court fee may obtain a decree for eviction on the basis of his general TITLE.”

3. Hajee Golam Hossain Ostagar v. Sheik Abu Bakkar, AIR 1936 Cal. 351. It was held – in a suit for ejectment, if the defendant claims the right to remain on a land permanently, he was ‘bound to show‘ the right ‘wherefore the onus would be on him‘.

End Notes

Not necessary to Plead ‘Specific Words’ or Expressions in the Statute

In Ram Sarup Gupta v. Bishun Narain Inter College, AIR 1987 SC 1242; 1987-2 SCC 555, it is held as under:

“It is well settled that the pleadings need not reproduce the exact words or expressions as contained in the statute, nor the question of law is required to be pleaded. The substance of the respondents pleadings clearly informed that their case was that they had made constructions on the land acting upon the Licence which substantially met the requirement of law.” (Quoted in: Paryag Mahto v. Ram Janam Mahto, 1991 BBCJ 118 (Pat).

In Nawal Kishore v. Kauleshwari Devi, 1986 PLJR. 431, referring Nandlal Sah V. Pawan Devi (1979 BBCJ 599), Ouseph Verghese v. Joseph Aleya (1969) 2 SCC 539), Paryag Mahto v. Ram Janam Mahto, 1991 BBCJ 118 (Pat) and Preme Raj v. The DL. F. Housing and Construction Pvt. Ltd. (AIR. 1968 SC 1355) it was held that the plaintiff’s willingness and readiness to perform his part of the contract need not be expressed be in the exact words used by the Legislature.

Rajiv Sahai Endlaw, J. observed in Sambhav Kapur v. British Indo German Industrial Organics Private Ltd. , 2017-236 DLT 123; 2017-69 PTC 617; 2017-4 RAJ 99, as under:

Pleading to contain “only” a statement in a concise form

“7. Burdening the plaint with passages of judgments and citing the said judgments is contrary to the tenet of pleadings and Orders VI and VII of the Code of Civil Procedure, 1908 (CPC) which requires a pleading to contain “only” a statement in a concise form of material facts on which the party relies for his claim or defence laying down negatively that it shall not contain evidence or law. It was also so held in
The Mah. State Ele. Board vs. Madhusudan Dass, AIR 1966 Bom 160 (DB),
Guruswami Achari vs. Vengiduswami Achari, AIR 1963 Mad 71,
Lakshmi Narain vs. Union of India, AIR 1962 Pat. 64 (DB) and
Sampuran Singh vs. Aryan Singh, AIR 1961 P&H 414 (DB).

Pleadings need not reproduce exact words in the statute

Supreme Court also, in Ram Sarup Gupta vs. Bishun Narain Inter College, (1987) 2 SCC 555 held “it is well settled that the pleadings need not reproduce the exact words or expressions as contained in the statute, nor the question of law is required to be pleaded.”
The Division Bench of this Court also in Abhay Sapru vs. Chitralekha Bukshi, 2008 (106) DRJ 589 held that though “pleadings must contain only the material facts and not the law, yet copious reference to the law has been made.” Such burdening of the plaint with what is not required to be contained therein has a cascading effect, with the defendant replying thereto, the plaintiff filing replication thereto, issue, though not really required to be framed being framed thereon and often, evidence also being led thereon and is one of the causes of delay in disposal of suits.

Courts to strike out pleadings under Order 6 Rule 16

Rule 16 Order 6 empowers the Courts to strike out pleadings which are unnecessary or vexatious or which may delay trial. Though power thereunder is found to have been used often in the past, with pleadings not conforming to the requirement of law being labelled as mofussil pleadings and being blamed on weakness, in language and law, of pleaders in mofussil courts but owing to docket explosion is now exercised rarely.

A time has come for maintaining the discipline of legal proceedings

The Division Bench of this Court in Teva Pharmaceutical Industries Ltd. vs. Natco Pharma Ltd. (2014) 210 DLT 591 also lamented on the malady afflicting courts in cities including on the original side of the High Court. However refrain of the courts in exercising powers to strike off such pleadings is resulting in the principles of drafting of pleadings being thrown to the wind and passages of judgments being quoted in the plaint. A time has perhaps come for the Courts, which are responsible for maintaining the discipline of the legal proceedings before them, to refuse to entertain such pleadings to send a message to the pleaders. The plaint, being not in accordance with law and as provided in CPC, is liable to be rejected on this ground alone.”

Consideration and Mutual Promises in Bare Licence u/S. 52

In Prabhudas Damodar Kotecha v. Manharbala Jeram Dmodar, AIR 2013 SC 2959, 2013-15 SCC 358, the Supreme Court held as under:

“43. … This Court in State of Punjab v. Brig. Sukhjit Singh, (1993) 3 SCC 459, has observed that
“payment of Licence fee is not an essential attribute for subsistence of Licence.”
Section 52, therefore, does not require any consideration, material or non material to be an element, under the definition of Licence nor does it require the right under the Licence must arise by way of contract or as a result of a mutual promise.
44. We have already referred to Section 52 of the Indian Easement Act and explained as to how the legislature intended that expression to be understood. The expressions “licensor” and “licensee” are not only used in various statutes but are also understood and applied in various fact situations. The meaning of that expression “Licence” has come up for consideration in several judgments. Reference may be made to the judgment of this Court in
C.M. Beena and Anr. v. P.N. Ramachandra Rao (2004) 3 SCC 595,
Sohan Lal Naraindas v. Laxmidas Raghunath Gadit (1971) 1 SCC 276,
Union of India (UOI) v. Prem Kumar Jain and Ors. (1976) 3 SCC 743,
Chandy Varghese and Ors. v. K. Abdul Khader and Ors. (2003 ) 11 SCC 328.
45. The expression “licensee” has also been explained by this Court in
Surendra Kumar Jain v. Royce Pereira (1997) 8 SCC 759.

In P.R. Aiyar’s the Law Lexicon, Second Edition 1997, Licence has been explained as
“A licence in respect to real estate is defined to be an authority to do a particular act or series of acts on another’s land without possessing any estate therein”.
The word “licensee” has been explained in Black’s Law Dictionary, Sixth Edition to mean
a person who has a privilege to enter upon land arising from the permission or consent, express, or implied, of the possessor of land but who goes on the land for his own purpose rather than for any purpose or interest of the possessor.
Stroud’s Judicial Dictionary of Words and Phrases, Sixth Edition, Vol. 2 provides the meaning of word “licensee” to mean
a licensee is a person who has permission to do an act which without such permission would be unlawful.
46. We have referred to the meaning of the expressions “Licence” and “licensee” in various situations rather than one that appears in Section 52 of the Indian Easement Act only to indicate that the word Licence is not popularly understood to mean that it should be on payment of Licence fee, it can also cover a gratuitous licensee as well. In other words, a licensor can permit a person to enter into another’s property without any consideration, it can be gratuitous as well.”

End Notes

Dharamvir Khosla v. Asian Hotels (North) Ltd. , 21 Jul 2020,

Mukta Gupta, J.
2020 0 Supreme(Del) 738;

“The plaintiffs have placed on record documents to show when two of the erstwhile licensees of the shops at Shopping Arcade settled, the defendant paid a sum of ?70 lakhs to ?1 crore in the year 2008 and 2010 respectively which leads to the clear inference as to the amount of money received by the defendant at the time when the license agreement was entered into. Further, the conduct of the defendant in repurchasing the rights in similarly placed shop owners” premises” by paying a consideration of Rs. 71,00,000/- per shop clearly indicate that a similar if not identical bargain was entered into for all the present plaintiffs and defendant clearly acknowledged that there was an interest, charge, lien, proprietary rights, ownership interest of the possessor and the occupiers thereunder. On the one hand, shops in the same arcade were rented at exorbitant price whereas the licence was granted to the plaintiffs for nominal charges towards actual maintenance. This contradiction goes to the root of the matter to depict the true nature of the understanding/ agreement between the parties.
Referring to Section 60 of the Easement Act and the decision of the Supreme Court in Ram Sarup Gupta Vs. Bishun Narain Inter College & Ors., (1987) 2 SCC 555 it is contended that the plaintiffs not only meet the criteria laid down in the said decision but stand on a much higher footing. Referring to the Clauses in the decision of the Supreme Court in B. Arvind Kumar Vs. Govt. of India & Ors., (2007) 5 SCC 745 it is stated that the plaintiffs in terms of the law laid down therein have a much stronger claim to be licensees in perpetuity.
In respect of the objections of the defendant that the present suits are not maintainable in view of the Clause 11 in the license agreement providing for arbitration for disputes including disputes relating to interpretation and clarification of the terms of the agreement, learned counsel for the plaintiffs contends that at this stage the prayers in the plaint have to be seen by way of demurer. Since the plaintiffs pray for decrees of declaration which are decisions in rem and not in personam, the same cannot be adjudicated by the arbitrators. Reliance is placed on the decision of the Supreme Court in Himangni Enterprises Vs. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 , Berger Paints India Limited Vs. Taj and Company,2018 SCCOnlineKarnataka 3356 , and BGR Energy Systems Limited Vs. P.S. Techcom Pvt. Ltd.,2018 SCCOnlineMad 4714 . In any case the arbitration clause in the agreement is unforceable as the same provides for an even number of arbitrators, the same is impermissible in view of the amendments carried out in Section 10(1) of the Arbitration and Conciliation Act 2015.
Mr. Dhruv Mehta, Senior Advocate appearing in CS(COMM) 184/2020 and 185/2020 adopts the arguments advanced by Mr. A.M. Singhvi, Senior Advocate for the plaintiff in the other four suits. He, however, states that in CS(COMM) 185/2020 the facts are slightly different inasmuch as the plaintiffs therein were permitted to carry out construction and create loft spaces for which separate notices have been issued to plaintiff No.1 i.e. in respect of plot No. U-61A and U-63A. Since the license has been transferred in the name of plaintiff No.2 in respect of shop U-61 notice has been issued to plaintiff No.2 in the said suit. Referring to Section 60 of the Easement Act learned counsel states that provisions of Section 60 are not exhaustive and a license can be irrevocable even under the provisions of the contract between the parties. The plaintiff continues to be licensee for 36 years and thus also from the conduct of the parties it is evident that the license was irrevocable. Thus, equity weaves into a covenant of irrevocability.
Since in terms of Section 60 clause (b) of the Easement Act the plaintiff i.e. licensee has, acting upon the license, executed a work of permanent character and has incurred expenses thereon, the license has to be interpreted as a irrevocable one. When the transfer of license in respect of shop U-63 was done, the only transfer charges taken by the defendant were ?25,800/- whereas the plaintiff received a full consideration minus the consideration of the loft area. Since the defendant permitted part transfer of the licenses which concept is unknown under Section 60, it is evident that the intention of the parties was of creating irrevocable license.”

R. P. SHRIVASTAVA VS SHEELA DEVI, 22 Jun 2007
2008 2 CivLJ 288; 2007 4 MPLJ 102.

Arun Misra, J.

“Considering the aforesaid evidence adduced by the parties coupled with the pleadings, it is clear that the defendant came to the Court with the plea that house was given to Bhairo Prasad by Laxmi Narayan. It is apparent that Leeladhar died in the year 1932, he left behind three sons namely Roshan Lal, Udaybhan and Bhanu Prakash. Sheelwati is daughter of late Leeladhar. Bhanu Prakash died young at the age of 16-17 years in the year 1939. Roshan Lal died in the year 1941 and Udaybhan died in the year 1980. Marriage of Sheelwati was performed with Bhairo Prasad in the year 1934 after the death of her father Leeladhar. Thus it is apparent that considering the activity of Bhairo Prasad of Hindu Mahasabha and various other difficulties faced by Sheelwati in in-laws’ house, Roshan Lal and Udaybhan gave them the house for the purpose of their residence. What were the terms on which the house was given has to be considered in the case on the basis of the evidence adduced by the parties. It is also to be considered whether it was simpliciter licence given for the purpose of residence or it was coupled with the grant. Section 52 of the Easement Act, 1882 defines the licence where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license. Section 60 of the Easement Act lays down that a license may be revoked by the grantor, unless it is coupled with a transfer of property and such transfer is in force and the licensee, acting upon the license, has executed a work of a permanent character and incurred expenses in the execution. A licence coupled with creation of an interest in land is as binding and irrevocable as any other contract, gift or grant. In Narsing Das vs. Ratanlal and others, AIR 1915 Nag 29 it was laid down that licence coupled with void grant is revocable save (1) where the licensee entered into occupation and paid rent and (2) where the licensee, acting on the license, has executed a work of a permanent character and incurred expense in so doing. Discussing the various decisions it was also observed that a mere license is, in its nature, revocable and that a license coupled with a grant is irrevocable. In spite of void agreement in case licensee has entered into occupation and paid rent licence, cannot, therefore, be revoked at will. In Secretary of State vs. Hiranand Ojha and others, AIR 1918 Pat 366 where the plaintiff allowed defendant to execute and work out on his land irrigation scheme of considerable benefit, at considerable expense, it was held that agreement created licence, which could not be revoked at the instance of the plaintiff. In AIR 1940 18 (Lahore) , it was held that sinking well and erecting compound wall are works of permanent character within the meaning of section 60 of Easement Act. In Biswanath Panda vs. Gadadhar Panda and another, AIR 1971 Ori 115, it was laid down that though section 60 is not applicable in Cuttack at the relevant time, principles contained therein were held to be applicable. It was also held that mere licence is revocable but where it is coupled with a grant, it becomes irrevocable. Where there is no formal document embodying the terms of agreement, the intention is to be inferred from surrounding circumstances and the conduct of the parties. In Biswanath Panda (supra) it was held thus :
13. A mere licence does not create any estate or interest in the property to which it relates. It only confers legality on an act which would otherwise become unlawful. A licence may be purely personal, gratuitous or contractual. The first two classes of mere licenses are revocable, the third class is revocable or not revocable according to the express or implied terms of the contract between the parties. A license coupled with grant of an interest in nature of property is not revocable. Such a license has been stated in Halsbury’s Laws of England, Vol. 23 (3rd Edn.) page 432 to be A right to enter on land and enjoy a profit a prendre or other incorporeal hereditament.
The Bhopal State Easement Act (Act 7 of 1337 Mohammadi) was promulgated which contained similar provision to that of Easement Act, 1882, thus there is no difficulty with respect to applicability of the provision of Easement Act as provisions were pari-materia. Similarly the provisions of Bhopal State Transfer of Property Act was similar to the T.P. Act 1882 with respect to disposition of the property.
In Ram Sarup Gupta (Dead) by Lrs. Vs. Bishun Narain Inter College and Others, , their Lordships laid down that facts and circumstances have to be considered in each case. It was held in the facts and circumstances, that school was permitted to occupy and enjoy the land permanently for the purpose of education and it would be reasonable to infer implied condition that the license was irrevocable. The Apex Court has laid down thus:
“13……. These facts and circumstances point out the terms and conditions of the license, that the school was permitted to occupy and enjoy the land permanently for the purpose of education. In this background, it would be reasonable to infer an implied condition that the license was irrevocable and the school was permitted to occupy and use the premises so long as it continued the purpose of imparting education to the students.”

Dominion of India VS R. B. Sohan Lal, 13 Sep 1949,

AIR 1950 (P&H) 40 (S.R. Das, CJ, Soni, J.)

15. I approach this question first on the basis that the Easements Act applied to this case by virtue, as contended by the appellant, of S.3 and S.4 read with schedule III of the Delhi Laws Act 1915 (Act VII (7) of 1915). I have already referred to S. 52, Easements Act, which defines a “license”. It is quite clear that cl.(1) of the agreement confers on the licensee a right to do in or upon the immovable property of the licensor something, namely, selling books etc. which would, in the absence of such right, be unlawful. It is also clear that such right does not amount to an easement as defined in S.4 of that Act or an interest in the property. It consequently follows that this clause (1) creates only a license. The terms of this agreement show that it is not “coupled with a transfer of property” within the meaning of cl. (a) of S.60 of the Act. The license may be coupled with a grant of the right to carry on business in the station premises but there is no transfer of property in the sense that any interest in the station premises has been transferred. Nor is there by any suggestion that the book-stalls set up by the licensee constitute the execution of a work of a permanent character within the meaning of cl. (b) of S.60. As this license does not fall either within cl.(a) or clause (b) of that section it must he regarded, prima facie and in the absence of anything else, to be a revocable license. Is there anything special in the agreement which will override this prima facie conclusion? That the license is for a period of 5 years, that it has been granted for very valuable consideration and that it is assignable with the requisite consent of the licensor are elements which may, to a certain extent, incline the Court towards the view that the license was intended to be irrevocable but are not to my mind, decisive on the question. Clause (22), however, clearly implies that the licensee performing all its obligations under the agreement it will be entitled to peaceably enjoy the license for the full term. Adopting the language of Buckley, L.J. in Hurst v. Picture Theatres Ltd., (1915 1 K.B. 1: 83 L.J.K.B. 1837) (supra at P.10), I would be prepared to say that there is “included in that contract a contract not to revoke the license” if the licensee performs all its obligations under the agreement and I would be inclined to hold, if that clause stood alone, that the parties by their special contract made the license, which was prima facie revocable under S.60, an irrevocable license and that a threatened revocation thereof should be enforced by an injunction restraining the breach of the implied negative covenant. But this clause (22) has to be read along with and in the light of the preceding clauses (11) and (19) which I have quoted above. These clauses clearly envisage the revocation of the license on the happening of certain things.
Reading cl.(11) and cl.(22) together the position appears to be that the license is irrevocable if the licensee performs its obligations but if it fails to do so it will be lawful for the licensor to revoke it. It is not necessary to enquire whether the words “of which the General Manager shall be the sole judge” in cl.(11) govern only the clause immediately preceding those words or they govern all the clauses preceding them, for the revocation has been founded inter alia on breach of the immediately preceding clause. If these words were not in cl. (11), it would have been an issue of fact at the trial whether there had been a default on the part of the licensee within the meaning of that clause and there might have been some plausibility and force in the argument that until that issue had been decided by the Court there should be a temporary injunction. Here, however, the parties have, by their special contract made the General Manager, whose place is now taken by the Chief Administrative Officer by virtue of the notification I have referred to, the sole judge of that issue and that officer has adjudged it by his order dated 29th September 1948 which has also been mentioned above. I do not read the words “of which the General Manager shall be the sole judge” as at all constituting an arbitration agreement in the nature of like provisions in building contracts whereby the architect employed by the owner is made the sole judge of the act or conduct or claim of the contractor. In building contracts, the architect is actually appointed as arbitrator by the submission clause and the architect has to observe and perform the obligations of an arbitrator. The words in cl.11 with which we are concerned are by no means a submission to arbitration of the General Manager so as to impose upon the General Manager the duties of an arbitrator in the matter of giving notice of meeting, hearing parties and the like. All that the words mean is that it shall be lawful for the licensor to revoke the license if in the opinion of its General Manager the licensee has been guilty of any breach of any of the conditions of the license. It does not mean that the General Manager has to give notice to the parties, hold meetings and make an award declaring that there has been any breach on the part of the licensee. Further, there is ample evidence on the record to show that time and again and on several occasions warnings were given to the licensee as to various breaches and calling upon it to rectify its conduct so as to put the business in a satisfactory order and eventually on 29th September 1948, the Chief Administrative Officer ordered that as the licensees “work was unsatisfactory and he was unable to conduct business as bookstall contractor” notice should be issued terminating the license. The licensee agreed to abide by the opinion of the General Manager and cannot now be heard to complain against it. Learned counsel for the respondent-licensee has drawn our attention to a letter dated 29th October 1948, written by the Honble Sri K. Santhanam, Minister of State for Transport and Railways, that the termination of the contract was the result of a decision taken by the Central Advisory Council for Railways. If the Chief Administrative Officer took the precaution out of abundant caution of having his own decision endorsed by the Central Advisory Council for Railways, that circumstance does not alter the fact that the Chief Administrative Officer had decided the question of which he had been made the sole judge. There is on the affidavits no charge, and far less any proof, of actual misconduct, on the part of the Chief Administrative Officer personally which may in any way be taken as vitiating his judgment and decision. In the absence of any charge of fraud or actual misconduct against the officer personally and of any proof on record I do not think his decision can be challenged in any Court. Such being the position, I am quite satisfied that this is not a case where a perpetual injunction could possibly be issued at the hearing and, therefore, on principle, no temporary injunction should have been granted in this case. If the Calcutta decisions referred to above were correct the only remedy, if any, of the respondent licensee would lie in damages unless of course cl.(11) bars even that remedy as to which I express no opinion. Again, if the argument that the Indian Easements Act having, by S.64, prescribed the special remedy by way of damages, no other remedy is available were sound, then also no injunction can be granted.
Finally, if the license has, by special agreement, been made revocable on certain grounds as to the existence of which a particular persons opinion has been made the sole test and criterion and he has expressed his opinion as I hold he has, then also there can be no injunction, for to grant an injunction in such circumstances will be to make that irrevocable which the parties themselves had by their special contract thought fit to make revocable.”

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Presumptions Regarding Consideration in Cheque Cases under the NI Act

Saji Koduvath, Advocate, Kottayam.

Relevant Provisions

Sec. 118, 138 & 139 of the NI Act
Sec. 118, Negotiable Instruments Act, 1881, reads as follows:

“118. Presumptions as to negotiable instruments.—Until the contrary is proved, the following presumptions shall be made:—

(a) of consideration:—that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;…”

Sec. 138 of the NI Act reads as under:
138. Dishonour of cheque for insufficiency, etc., of funds in the account.—Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years’, or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless—
.(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such a cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation.—For the purposes of this section, “debt of other liability” means a legally enforceable debt or other liability.

Sec. 139 of the NI Act reads as under:
“139. Presumption in favour of holder – It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.”

Presumptions on Consideration

Under Section 118(a) of the Negotiable Instruments Act, 1881, it is presumed that a negotiable instrument has been executed for valid consideration.

The Presumption can be Rebutted by Evidence as to Lack of Consideration

The presumption under Sec. 118 arises only if the signature in the cheque is proved or admitted. It can be rebutted by evidence as to

(i) lack of consideration or
(ii) improper execution.

Conflict on Nature of Evidence Required to Rebut the Presumption

The Conflict is between “Cogent Evidence” and “Preponderance of Probabilities”.

The First stricter view (on Cogent Evidence) is taken in Bir Singh v. Mukesh Kumar, 2019-4 SCC 197.
But the weight of authorities is in favour of the second view (on Preponderance of Probabilities). The following are the leading decisions-
- Rajaram v. Maruthachalam, AIR 2023 SC 471;
- Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022-7 SCR 72;
- Triyambak S. Hegde v. Sripad, 2022-1 SCC 742;
- Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348).
- Basalingappa v. Mudibasappa – 2019(5) SCC 418
- K. Subramani v. K. Damodara Naidu, 2015 -1 SCC 99.
- Vijay v. Laxman, (2013) 3 SCC 86;
- Rangappa v. Sree Mohan, 2010(11) SCC 441 (Three Judge Bench);
- M.S. Narayana Menon v. State of Kerala 2006-6 SCC 39;
- Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16;
- Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, (1999) 3 SCC 35)
- Kali Ram v. State of Himachal Pradesh, (1973) 2 SCC 808.

First View: The Respondent has to Rebut the Presumption with “Cogent Evidence“

In Bir Singh v. Mukesh Kumar, 2019-4 SCC 197, it is held – In view of Sec. 118, if signature in a Cheque is admitted by the accused –

the complainant has no burden to prove the loan or other liability.

It is observed (in Bir Singh v. Mukesh Kumar, 2019-4 SCC 197), as to the ‘rebuttal evidence’ on presumption under Section 139, as under:

“36. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.” (This view is reiterated (obiter) by a three-Judge Bench in Kalamani Tex v. P. Balasubramanian, 2021-5 SCC 283.)

Second View: For rebuttal, reasonably probable evidence is sufficient.

According to the second view, the rebutal need not be positively proved to be true.

That is, a rebuttal need not be conclusively established to be true.
Onus on the accused can be discharged by a preponderance of probabilities.
The rebuttal can be by invoking another presumption
The accused can rebut the presumption even through circumstantial evidence,
- suggestions in cross-examination, or
- inconsistencies in the complainant’s case—
- as long as a probable defence is made out.
It need be reasonably probable.
- See: Rajaram v. Maruthachalam, AIR 2023 SC 471;
- Basalingappa v. Mudibasappa – 2019(5) SCC 418
- Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16;
- Vijay v. Laxman, (2013) 3 SCC 86;
- Kali Ram v. State of Himachal Pradesh, (1973) 2 SCC 808.

Rebuttal: Standard of Proof – Preponderance of Probabilities

The required evidence or Standard of Proof for the ‘rebuttal of presumption’ is –

Preponderance of Probabilities
- See: Triyambak S. Hegde v. Sripad, 2022-1 SCC 742;
- Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348).

Rebuttal: Standard of Proof – Probable Defence’ which ‘Creates Doubts‘

The required evidence or Standard of Proof (for rebuttal of a factual presumption) can be –

‘Probable Defence’ which ‘Creates Doubts‘ about the existence of a legally enforceable debt.
- Rangappa v. Sree Mohan, 2010(11) SCC 441;
- M.S. Narayana Menon v. State of Kerala 2006-6 SCC 39;
- Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, (1999) 3 SCC 35)

Rebuttal can be by invoking Another Presumption

Not necessary for the accused to rebut (consideration) by direct evidence
- M.S. Narayana Menon v. State of Kerala 2006(6) SCC 39, SB Sinha, J.).
- See: Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, 1999-3 SCC 35;
Rebuttal (of presumption) can be by invoking another presumption
- Kundanlal v. Custodian Evacuee property, AIR 1961 SC 1316) Referred to in: Priyamvada K. v. M. Rahufina, 2024-1 KerHC 245.
It can be the circumstances relied upon by the complainant (M.S. Narayana Menon v. State of Kerala 2006-6 SCC 39).
On such a ‘shifting’, the source of money and financial capacity of complainant to make the loan can be a point for consideration, and the complainant may have to produce bank-statement to show the alleged loan-payment, or his financial capacity.
- See: Rajaram v. Maruthachalam, AIR 2023 SC 471;
- Basalingappa v. Mudibasappa, 2019-5 SCC 418).
- K. Subramani v. K. Damodara Naidu, 2015 -1 SCC 99.

‘APPARENT CONFLICT’ STANDS RESOLVED BY DY CHANDRACHUD, J.

In Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022-7 SCR 72 (Dhananjaya Y Chandrachud, A S Bopanna, JJ.) after quoting the aforesaid portion in para 36 of Bir Singh v. Mukesh Kumar, the court observed as under:

“16. In Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348 a two Judge Bench of this Court, of which one of us (D.Y. Chandrachud J.) was a part, reiterated the decision of the three-Judge Bench of this Court in Rangappa v. Sri Mohan, (2010) 11 SCC 441 on the presumption under Section 139 of the NI Act. The court held:
- “12. Section 139 of the Act mandates that it shall be presumed, unless the contrary is proved, that the holder of a cheque received it, in discharge, in whole or in part, of a debt, or liability. The expression “unless the contrary is proved” indicates that the presumption under Section 139 of the Act is rebuttable. Terming this as an example of a “reverse onus clause” the three-Judge Bench of this Court in Rangappa held that in determining whether the presumption has been rebutted, the test of proportionality must guide the determination. The standard of proof for rebuttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities. This Court held thus:
- “28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.”

‘Apparent Conflict’ Stands Resolved

The ‘apparent conflict’ stands resolved by Oriental Bank of Commerce v. Prabodh Kumar Tewari. It is pointed out –

1. Three-Judge Bench decision in Rangappa v. Sri Mohan holds the field.
2. It is held in Rangappa v. Sri Mohan – ‘It is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. ‘

It is pity to see that several High Courts in India misapply the law in this matter without giving due notice to the well-reasoned analysis in Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022-7 SCR 72.

PRESUMPTION IS NOT IN ITSELF EVIDENCE

A presumption only makes a prima facie case for a party for whose benefit it exists, and it is not in itself evidence (Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513; Basalingappa v. Mudibasappa – 2019(5) SCC 418).

Presumption u/S. 118(a) – Initial onus only to show Consideration Doubtful

Our Apex Court in Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, (1999) 3 SCC 35 (V.N. Khare, R.P. Sethi, JJ.), laid down the law as to presumption under Section 118(a) as under:

“12. Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non- existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt.”
(Quoted in: Maitreya Doshi v. Anand Rathi Global Finance Ltd., AIR 2022 SC 4595;
K. S. Ranganatha v. Vittal Shetty, 2022-1 Crimes(SC) 454; 2021-12 JT 165;
K. Prakashan v. P.K. Surendran (2008) 1 SCC 258;
Rev. Mother Marykutty v. Reni C. Kottaram, 2013-1 SCC 327;
Mallavarapu Kasivisweswara Rao v. Thadikonda Ramulu Firm, AIR 2008 SC 2898; 2008-7 SCC 655;
Krishna Janardhan Bhat v. Dattatraya G. Hegde, AIR 2008 SC 1325; 2008-4 SCC 54)

Rebuttal of Presumption Explained by SB Sinha, J.

In M.S. Narayana Menon v. State of Kerala, 2006(6) SCC 39, SB Sinha, J., in His Lordship’s stupendous characteristic style explained the legal position as to the ‘proof’ of ‘presumption’, and ‘probable defence‘, as under:

“29. In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the Court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words ‘proved’ and ‘disproved’ have been defined in Section 3 of the Evidence Act (the interpretation clause) to mean: –
- “Proved”: A fact is said to be proved when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.
- “Disproved”: A fact is said to be disproved when, after considering the matters before it the Court either believes that it does not exist, or considers its non-existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it does not exist.”
30. Applying the said definitions of ‘proved’ or ‘disproved’ to principle behind Section 118(a) of the Act, the Court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.”

After quoting aforesaid passage from Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, (1999) 3 SCC 35, it was continued in M.S. Narayana Menon v. State of Kerala, as under:

“32. This Court, therefore, clearly opined that it is not necessary for the defendant to disprove the existence of consideration by way of direct evidence.
33. The standard of proof evidently is Pre-ponderance of probabilities. Inference of Pre-ponderance of probabilities can be drawn not only from the materials on records but also by reference to the circumstances upon which he relies.
34. Presumption drawn under a statute has only an evidentiary value. Presumptions are raised in terms of the Evidence Act. Presumption drawn in respect of one fact may be an evidence even for the purpose of drawing presumption under another.”

Rebuttal of Presumption- Burden Shifts; Not “Haunt the accused any longer“

On rebuttal of presumption, the burden shifts to the complainant, and thereafter and the burden does not “haunt the accused any longer” (Rajesh Jain v. Ajay Singh, AIR 2023 SC 5018; 2023-10 SCC 148).

Rebuttal: Standard of Proof – Probable defence which Creates Doubts

In Rangappa v. Sree Mohan, 2010(11) SCC 441 (CJI, K.G. Balakrishnan, P. Sathasivam and J.M. Panchal, JJ.), a case related to dishonour of cheque under Sec. 138, it is observed that preponderance of probable defence, if sufficient to Creates Doubts, may shift the burden. It is held in this decision as under:

“28 In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of ‘preponderance of probabilities’. Therefore, if the accused is able to raise a probable defence whichcreates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.“

Para 28 of Rangappa v. Sri Mohan, 2010-11 SCC 441, is quoted in following decisions of our Apex Court –

Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022-7 SCR 72 (Dhananjaya Y Chandrachud, A S Bopanna, JJ.)
Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348 (Dhananjaya Y. Chandrachud, M.R. Shah, JJ.)
Basalingappa v. Mudibasappa – 2019(5) SCC 418, AIR 2019 SC 1983 (Ashok Bhushan, K.M. Joseph, JJ.)
Rohitbhai Jivanlal Patel v. State of Gujarat, AIR 2019 SC 1876; 2019-18 SCC 106 (Abhay Manohar Sapre, Dinesh Maheshwari, JJ.)

In Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348, following Rangappa v. Sri Mohanit (supra), it is held as under:

“The standard of proof for rebuttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities.”

Rebuttal Need Not be Conclusively Established – Basalingappa v. Mudibasappa

Basalingappa v. Mudibasappa, 2019(5) SCC 418 (Ashok Bhushan and K.M. Joseph, JJ.), , is a classic decision on ‘rebuttal of presumption’. In this decision our Apex Court relied on the following earlier decisions to formulate the final propositions.

(i). Kali Ram v. State of Himachal Pradesh, (1973) 2 SCC 808. A Three-Judge Bench of the Supreme Court laid down as under:

“23 ……. One of the cardinal principles which has always to be kept in view in our system of administration of justice for criminal cases is that a person arraigned as an accused is presumed to be innocent unless that presumption is rebutted by the prosecutionby production of evidence as may show him to be guilty of the offence with which he is charged. The burden of proving the guilt of the accused is upon the prosecution and unless it relieves itself of that burden, the courts cannot record a finding of the guilt of the accused. There are certain cases in which statutory presumptions arise regarding the guilt of the accused, but the burden even in those cases is upon the prosecution to prove the existence of facts which have to be present before the presumption can be drawn. Once those facts are shown by the prosecution to exist, the Court can raise the statutory presumption and it would, in such an event, be for the accused to rebut the presumption. The onus even in such cases upon the accused is not as heavyas is normally upon the prosecution to prove the guilt of the accused. If some material is brought on the record consistent with the innocence of the accused which may reasonably be true, even though it is not positively proved to be true, the accused would be entitled to acquittal.”

(ii). Bharat Barrel & Drum Manufacturing Co. v. Amin Chand Pyarelal, (1999) 3 SCC 35, considered Sec. 118(a) of the NI Act. Our Apex Court held as under –

Once execution of the promissory note is admitted, the presumption under Sec. 118(a) as to consideration would arise; and that such a presumption can be rebutted by raising a probable defence.
In such an event, the plaintiff is entitled to rely upon the evidence led by the plaintiff.
The court may not insist upon the defendant to disprove the consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt.
The bare denial does not appear to be any defence. Something which is probable has to be brought on record for shifting the onus to the plaintiff.
To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist.

(iii). M.S. Narayana Menon v. State of Kerala, (2006) 6 SCC 39 (Justice S.B. Sinha)

Sections 118(a), 138 and 139 of the NI Act was considered in this decision. Referring Union of India v. Pramod Gupta, (2005) 12 SCC 1, it was pointed out that the expression ‘shall presume’ cannot be synonymous with ‘conclusive proof’; and that for rebutting the presumption under Sec. 118(a), a probable defence alone is needed.
Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.
It is analysed on the principle (as to the definition, “proved”, in Sec. 3 Evidence Act) whether the court believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist.
The standard of proof evidently is preponderance of probabilities.
Inference of preponderance of probabilities can be drawn not only by direct evidence or from the materials on record; but it can also be by reference to the circumstancesupon which he relies.

(iv). Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54.

An accused for discharging the burden need not examine himself.
He can rely on the materials already brought on record. And, also by reference to the circumstances upon which he relies.
An accused has a constitutional right to maintain silence.
Standard of proof on the part of an accused and that of the prosecution in a criminal case is different.
Prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an accused is “preponderance of probabilities”.

(v). Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513

Under Sec. 138 of the NI Act, as soon as the complainant discharges the burden to prove that the instrument was executed by the accused, the rules of presumptions under Sections 118 and 139 help him shift the burden on the accused.
A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists.
The phrase “until the contrary is proved” in Section 118 and use of the words “unless the contrary is proved” in Section 139 of the Act read with definitions of “may presume” and “shall presume” as given in Section 4 of the Evidence Act, makes it clear that presumptions to be raised under both the provisions are rebuttable.
When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed.
And when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over.
The court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated.
But, the bare denial of consideration and debt, apparently would not serve the purpose. Something which is probable has to be brought on record to shift the burden to the complainant.
The accused should bring facts and circumstances, which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist.

(vi) Rangappa v. Sri Mohan, (2010) 11 SCC 441 (Three-Judge Bench)

It was a case under Sec. 138 and 139 where the accused had admitted signatures on the cheque.
It gives only an initial presumption which favours the complainant.
This Court held that the presumption as to a legally enforceable debt or liability could be rebutted and the onus is then on the accused to raise a probable defence. It is an example of ‘reverse onus’.
The defendant-accused cannot be expected to discharge an unduly high standard of proof.
The accused need not adduce evidence of his/her own.

Principles Formulated in Basalingappa

Finally, in Basalingappa v. Mudibasappa, 2019(5) SCC 418, the Court summarised the principles as under:

“23. We having noticed the ratio laid down by this Court in above cases on Sections 118(a) and 139, we now summarise the principles enumerated by this Court in following manner:-
.(i) Once the execution of cheque is admitted Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.
(ii) The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that ofpreponderance of probabilities.
(iii) To rebut the presumption, it is open for the accused to rely on evidence led by him or accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.
(iv) That it is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden,
(v) It is not necessary for the accused to come in the witness box to support his defence.”

It is for the Accused to rebut the Presumptions under S. 139

In Ajitsinh Chehuji Rathod v. State of Gujarat, 2024 SCC OnLine SC 77, it is held that the Certified copy of a document issued by a Bank is itself admissible under the Bankers’ Books Evidence Act, 1891 without any formal proof thereof. Hence, in an appropriate case, the certified copy of the specimen signature maintained by the Bank can be procured with a request to the Court to compare the same with the signature appearing on the cheque by exercising powers under Section 73 of the Evidence Act, 1872. Further, it is held, it is for the accused to rebut such presumptions by leading appropriate defence evidence and the Court cannot be expected to assist the accused to collect evidence on his behalf.

Standard of Proof for Rebutting Presumption in Criminal Law

In Rajaram v. Maruthachalam, AIR 2023 SC 471 (B.R. Gavai, M.M. Sundresh, JJ.), it is held as under:

“24. It can thus be seen that in the facts of the said case, this Court found that the defence raised by the appellants/accused did not inspire confidence or meet the standard of ‘preponderance of probability’.
25. In the present case, we are of the considered opinion that the defence raised by the appellant satisfies the standard of ‘preponderance of probability’.”

Rajaram v. Maruthachalam, AIR 2023 SC 471, stands as an authority that emphasises the law that the standard of proof for rebutting the presumption in criminal law (as regards cheque-bounce cases also) is that of ‘benefit of doubt‘ and ‘preponderance of probabilities‘. It is held as under:

“After taking into consideration the defence witnesses and the attending circumstances, the learned Trial Court found that the defence was a possible defence and as such, the accused was entitled to benefit of doubt. The standard of proof for rebutting the presumption is that of preponderance of probabilities.“

Proposition on cogent evidence to rebut the presumption is found not applicable in this case. It was observed as under:

“26. Insofar as the reliance on the judgment of this Court in the case of Rohitbhai Jivanlal Patel v. State of Gujarat and Anr. (AIR 2019 SC 1876; 2019-18 SCC 106) is concerned, in the said case, the learned Trial Court had acquitted the accused, the High Court, in appeal, reversed the acquittal and convicted the accused for the offence punishable under Section 138 of the N.I. Act.
Affirming the order of the High Court, this Court held that merely by denial or merely by creation of doubt, the accused cannot be said to have rebutted the presumption as envisaged under Section 139 of the N.I. Act. This Court held that unless cogent evidence was led on behalf of the accused in defence of his case, the presumption under Section 139 of the N.I. Act could not be rebutted. As such, the said judgment also would not be applicable to the facts of the present case.”

Financial capacity of the Complainant

Financial capacity of the complainant can be a point in ‘probable defence’ (Rajaram v. Maruthachalam, AIR 2023 SC 471).
- That is, the respondent can also show – complainant had no financial capacity.
And, the respondent is so poor that the complainant did not have issued large amount by way of loan.
Or, the complainant inserted the amount to befit or match his income in Bank Account from some source, or withdrawal for some other purpose.

Complainant – May Have to Produce Bank-Statement

In K. Subramani v. K. Damodara Naidu, 2015 (1) SCC 99, it is held that on rebuttal, source of income of complainant may have to be proved by production of bank-statement.

Source of Money and Capacity – Can Be A Point

In Basalingappa v. Mudibasappa, 2019(5) SCC 418, it was held that the financial capacity can be a point if questioned; and that it was incumbent on complainant, and he has the burden, to explain his financial capacity. In K.K. Divakaran v. State of Kerala 2016(4) KLJ 273,it is found that the believability of source of money of the complainant and his capacity can be a point, on rebuttal of presumption on consideration.

Note: K.K. Divakaran v. State of Kerala, 2016(4) KLJ 273, is overruled in K. Basheer v. C.K. Usman Koya, 2021 (2) KHC 432, on another point – nondisclosure of the transaction’s nature in the notice could lead to acquittal, deeming such omission fatal to the prosecution).

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End Notes:

Legally recoverable debt (presupposed in S. 138) v. “Discharge of debt or liability” (S. 139)

Sec. 138 requires evidence on “legally enforceable debt“.
Sec. 139 provides for presumption – holder of the cheque received it for the discharge of debt or other liability.

A question arises on analysis of both these provisions – does Sec. 139 refer to “legally enforceable debt”.

The answer is ‘No’.

In Krishna Janardhan Bhat v. Dattatraya G. Hegde1 reported in [2008 (1) SCALE 421] it is held as under:

“19. Indisputably, a mandatory presumption is required to be raised in terms of Section 118(b) and Section 139 of the Act. Section 13(1) of the Act defines ‘negotiable instrument’ to mean “a promissory note, bill of exchange or cheque payable either to order or to bearer”.
Sec. 138 of the Act has three ingredients, viz.:
- (i) that there is a legally enforceable debt;
- (ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt; and
- (iii) that the cheque so issued had been returned due to insufficiency of funds.
20. The proviso appended to the said section provides for compliance of legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability.
21. The courts below, as noticed hereinbefore, proceeded on the basis that Section 139 raises a presumption in regard to existence of a debt also. The courts below, in our opinion, committed a serious error in proceeding on the basis that for proving the defence the accused is required to step into the witness box and unless he does so he would not be discharging his burden. Such an approach on the part of the courts, we feel, is not correct.
22. An accused for discharging the burden of proof placed upon him under a statute need not examine himself. He may discharge his burden on the basis of the materials already brought on records. An accused has a constitutional right to maintain silence. Standard of proof on the part of an accused and that of the prosecution in a criminal case is different.” (Quoted in Vishnu Dutt Sharma v. Daya Sapra, 2009-13 SCC 729 : S.B. Sinha and Dr. Mukundakam Sharma, JJ.)

Cheque Cannot be an Inchoate Stamped Instruments – Sec. 20, NI Act

Sec. 20, NI Act reads as under:

“20. Inchoate Stamped Instruments—Where one person signs and delivers to another a paper STAMPED in accordance with the law relating to negotiable instruments then in force in India, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the STAMP. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount:
Provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.”

Kerala High Court, in C.T. Joseph v. I.V. Philip, AIR 2001 Ker 300, held as under:

14. … So far as Section 20 of the Negotiable Instruments Act is concerned, according to us, it does not apply because Section 20 applies only with regard to inchoate negotiable instruments. So far as the cheques are concerned, they don’t require any stamp under the Stamp Act in force.”
15. The Lahore High Court in Dower v. Sohan Lal, AIR 1937 Lahore 816 have held that insofar as the cheque do not require to be stamped, Section 20 of the Negotiable Instruments Act is not applicable. Learned counsel for the plaintiff then submitted that even if the principles under Section 20 of the Negotiable Instruments Act do not apply, the general principles of law of estoppel will apply. Learned counsel also cited some decisions to show that the general principles of law of estoppel will apply. But according to us, for the application of such principles, it is highly necessary that the cheque was issued and filled up as authorised.”

In Raj Kumar v. Ram Krishan, 2016 ACD 689; ILR 2016-3 HP 416, Tarlok Singh Chauhan, J., (as he then was) expressed his view on Sec. 20 in strong words, as under:

“5. I am at a complete loss to understand as to on what basis the learned Magistrate applied Section 20 of the Act. Section 20 speaks about a stamped, incomplete, inchoate instrument delivered to any person with prima facie authority to complete the instrument and encash the same. The learned Lahore High Court in A.R. Dower versus Sohan Lal AIR 1937 (Lah) 816 held that Section 20 relating to the encashability of the inchoate stamped instrument will not apply to the cheque as it does not require stamp.
6. Following the aforesaid ratio, a Division Bench of the learned Kerala High Court in C.T. Joseph versus I.V.Philip AIR 2001 (Ker) 300 has observed that Section 20 of the Negotiable Instruments Act will not apply to the cheque as the same does not require any stamp under the Stamp Act and the aforesaid provision would apply to other incomplete, inchoate instruments which require stamp under the Stamp Act.
7. The learned Madras High Court in S. Gopal versus D. Balachandran 2008 1 CTC 491 held that bare reading of Section 20 of the Negotiable Instruments Act would go to show that it would apply only to stamped instrument viz. pronote and bill of exchange and not to cheques.”

But in S. Gopal v. D. Balachandran, 2008-1 CTC 491, the Madras High Court pointed out that sec. 20 is not attracted merely because a physically incapacitated defendant allowed the plaintiff to fill out the cheque. The Court said as under:

“9. The aforesaid authority does not run counter to the provision under section 20 of the Negotiable Instruments Act. As rightly observed therein, there is no law which prescribes that a cheque shall be filled up by the drawer himself. If such proposition is accepted, no unlettered person, who knows only to sign his name, can ever be a drawer of a cheque. Further, a person who is physically incapacitated to fill up the cheque cannot also draw a cheque and negotiate it. Of course, as far as the other negotiable instruments viz., pronotes and bills of exchange, there is a clear mandate under section 20 of the Negotiable Instruments Act to the effect that such an instrument can be negotiated by the maker thereof by simply signing and delivering the same to the holder in due course giving thereby ample authority to the latter to fill up the content of the instrument as intended by the maker thereof.
10. Even in case of a cheque, as there is no clear provision in the Negotiable Instruments Act, in the light of the above discussion, the court finds that if a drawer of a cheque gives authority to the payee or holder in due course or a stranger for that matter to fill up the cheque signed by him, such an instrument also is valid in the eye of law. There is no bar for the drawer of a cheque to give authority to a third person to fill up the cheque signed by him for the purpose of negotiating the same.”

“Payee May Fill Up the Amount and Other Particulars” in Bir Singh v. Mukesh

In Bir Singh v. Mukesh Kumar, 2019-4 SCC 197. It is held referring Sec. 20, NI Act that it is immaterial who filled the cheque. The Apex Court said as under:

“38. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars.”
“40. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.”
“42. In the absence of any finding that the cheque in question was not signed by the respondent-accused or not voluntarily made over to the payee and in the absence of any evidence with regard to the circumstances in which a blank signed cheque had been given to the appellant-complainant, it may reasonably be presumed that the cheque was filled in by the appellant-complainant being the payee in the presence of the respondent–accused being the drawer, at his request and/or with his acquiescence. The subsequent filling in of an unfilled signed cheque is not an alteration. There was no change in the amount of the cheque, its date or the name of the payee. The High Court ought not to have acquitted the respondent-accused of the charge under Section 138 of the Negotiable Instruments Act.”
Note: 1. Bir Singh v. Mukesh Kumar (R. Banumathi, Indira Banerjee, JJ.) , 2019-4 SCC 197, is an odd decision, as regards ‘consideration’.
2. On a close reading of this decision, the following emerges:
- i. The words “towards some payment” cast “some” ‘strong‘ onus on the claimant.
- ii. The presumption invoked in this matter is not one from NI Act; but from Section 114 of the Evidence Act.
- iii. The presumption must be one that can be invoked in the circumstances of the case – that is, there must have ‘something’ to take:
  - “it may reasonably be presumed that the cheque was filled in by the appellant-complainant being the payee in the presence of the respondent–accused being the drawer, at his request and/or with his acquiescence“.
3. In K. Ramesh v. K. Kothandaraman (B.V. Nagarathna, Augustine George Masih, JJ.), 2024-1 KCCR 693; 2024-1 LawHerald(SC) 475, followed Bir Singh v. Mukesh Kumar, 2019-4 SCC 197, (it appears) without noticing the above two points.
4. The view in Bir Singh (on cogent evidence) is reiterated (obiter) by a three-Judge Bench in Kalamani Tex v. P. Balasubramanian, 2021-5 SCC 283.
Read: An Inchoate Cheque (Signed Blank Cheque or Incomplete Cheque) Cannot be Enforced Through a Court of Law Invoking Presumptions under the NI Act
Sec. 138 NI Act (Cheque) Cases: Presumption of Consideration u/s. 118 – Even if ‘Signed Blank Cheque’, No Burden on Complainant to Prove Consideration; But, Rebuttal can be by a Probable Defence

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An Inchoate Cheque (Signed Blank Cheque or Incomplete Cheque) Cannot be Enforced Through a Court of Law Invoking Presumptions under the NI Act

Saji Koduvath, Advocate, Kottayam.

Abstract

Can the Plaintiff fill in the blank portion of a signed cheque, by virtue of Sec. 20 of the NI Act?

Answer: No.

Because Sec. 20 does not give ‘prima facie authority to the holder’ to complete a ‘blank’ (or incomplete) CHEQUE.

Inchoate Stamped Instruments – Sec. 20, NI Act

Sec. 20, NI Act reads as under:

“20. Inchoate Stamped Instruments—Where one person signs and delivers to another a paper STAMPED in accordance with the law relating to negotiable instruments then in force in India, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the STAMP. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount:
Provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.”

Kerala High Court, in C.T. Joseph v. I.V. Philip, AIR 2001 Ker 300, held as under:

14. … So far as Section 20 of the Negotiable Instruments Act is concerned, according to us, it does not apply because Section 20 applies only with regard to inchoate negotiable instruments. So far as the cheques are concerned, they don’t require any stamp under the Stamp Act in force.”
15. The Lahore High Court in Dower v. Sohan Lal, AIR 1937 Lahore 816 have held that insofar as the cheque do not require to be stamped, Section 20 of the Negotiable Instruments Act is not applicable. Learned counsel for the plaintiff then submitted that even if the principles under Section 20 of the Negotiable Instruments Act do not apply, the general principles of law of estoppel will apply. Learned counsel also cited some decisions to show that the general principles of law of estoppel will apply. But according to us, for the application of such principles, it is highly necessary that the cheque was issued and filled up as authorised.”

In Raj Kumar v. Ram Krishan, 2016 ACD 689; ILR 2016-3 HP 416, Tarlok Singh Chauhan, J., (as he then was) expressed his view on Sec. 20 in strong words, as under:

“5. I am at a complete loss to understand as to on what basis the learned Magistrate applied Section 20 of the Act. Section 20 speaks about a stamped, incomplete, inchoate instrument delivered to any person with prima facie authority to complete the instrument and encash the same. The learned Lahore High Court in A.R. Dower versus Sohan Lal AIR 1937 (Lah) 816 held that Section 20 relating to the encashability of the inchoate stamped instrument will not apply to the cheque as it does not require stamp.
6. Following the aforesaid ratio, a Division Bench of the learned Kerala High Court in C.T. Joseph versus I.V.Philip AIR 2001 (Ker) 300 has observed that Section 20 of the Negotiable Instruments Act will not apply to the cheque as the same does not require any stamp under the Stamp Act and the aforesaid provision would apply to other incomplete, inchoate instruments which require stamp under the Stamp Act.
7. The learned Madras High Court in S. Gopal versus D. Balachandran 2008 1 CTC 491 held that bare reading of Section 20 of the Negotiable Instruments Act would go to show that it would apply only to stamped instrument viz. pronote and bill of exchange and not to cheques.”

But in S. Gopal v. D. Balachandran, 2008-1 CTC 491, the Madras High Court pointed out that sec. 20 is not attracted merely because a physically incapacitated defendant allowed the plaintiff to fill out the cheque. The Court said as under:

“9. The aforesaid authority does not run counter to the provision under section 20 of the Negotiable Instruments Act. As rightly observed therein, there is no law which prescribes that a cheque shall be filled up by the drawer himself. If such proposition is accepted, no unlettered person, who knows only to sign his name, can ever be a drawer of a cheque. Further, a person who is physically incapacitated to fill up the cheque cannot also draw a cheque and negotiate it. Of course, as far as the other negotiable instruments viz., pronotes and bills of exchange, there is a clear mandate under section 20 of the Negotiable Instruments Act to the effect that such an instrument can be negotiated by the maker thereof by simply signing and delivering the same to the holder in due course giving thereby ample authority to the latter to fill up the content of the instrument as intended by the maker thereof.
10. Even in case of a cheque, as there is no clear provision in the Negotiable Instruments Act, in the light of the above discussion, the court finds that if a drawer of a cheque gives authority to the payee or holder in due course or a stranger for that matter to fill up the cheque signed by him, such an instrument also is valid in the eye of law. There is no bar for the drawer of a cheque to give authority to a third person to fill up the cheque signed by him for the purpose of negotiating the same.”

“Payee May Fill Up the Amount and Other Particulars” in Bir Singh v. Mukesh

In Bir Singh v. Mukesh Kumar, 2019-4 SCC 197. It is held referring Sec. 20, NI Act that it is immaterial who filled the cheque. The Apex Court said as under:

“38. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars.”
“40. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.”
“42. In the absence of any finding that the cheque in question was not signed by the respondent-accused or not voluntarily made over to the payee and in the absence of any evidence with regard to the circumstances in which a blank signed cheque had been given to the appellant-complainant, it may reasonably be presumed that the cheque was filled in by the appellant-complainant being the payee in the presence of the respondent–accused being the drawer, at his request and/or with his acquiescence. The subsequent filling in of an unfilled signed cheque is not an alteration. There was no change in the amount of the cheque, its date or the name of the payee. The High Court ought not to have acquitted the respondent-accused of the charge under Section 138 of the Negotiable Instruments Act.”
Note: 1. Bir Singh v. Mukesh Kumar (R. Banumathi, Indira Banerjee, JJ.) , 2019-4 SCC 197, is an odd decision, as regards ‘consideration’.
2. On a close reading of this decision, the following emerges:
- i. The words “towards some payment” cast “some” ‘strong‘ onus on the claimant.
- ii. The presumption invoked in this matter is not one from NI Act; but from Section 114 of the Evidence Act.
- iii. The presumption must be one that can be invoked in the circumstances of the case – that is, there must have ‘something’ to take:
  - “it may reasonably be presumed that the cheque was filled in by the appellant-complainant being the payee in the presence of the respondent–accused being the drawer, at his request and/or with his acquiescence“.
3. In K. Ramesh v. K. Kothandaraman (B.V. Nagarathna, Augustine George Masih, JJ.), 2024-1 KCCR 693; 2024-1 LawHerald(SC) 475, followed Bir Singh v. Mukesh Kumar, 2019-4 SCC 197, (it appears) without noticing the above two points.
4. The view in Bir Singh (on cogent evidence) is reiterated (obiter) by a three-Judge Bench in Kalamani Tex v. P. Balasubramanian, 2021-5 SCC 283.
Read: Presumptions Regarding Consideration in Cheque Cases under the NI Act
Sec. 138 NI Act (Cheque) Cases: Presumption of Consideration u/s. 118 – Even if ‘Signed Blank Cheque’, No Burden on Complainant to Prove Consideration; But, Rebuttal can be by a Probable Defence.

PRESUMPTIONS ON CONSIDERATION

Sec. 118(a) says about the presumption of consideration in a Negotiable Instrument (including a cheque).

Presumption under Sec. 118(a) lays down – the cheque was drawn for consideration.

The Presumption can be Rebutted by Evidence as to Lack of Consideration

The presumption under Sec. 118 arises only if signature in the cheque is proved or admitted. It can be rebutted by evidence as to

(i) lack of consideration or
(ii) improper execution.

CONFLICT ON NATURE OF EVIDENCE REQUIRED TO REBUT THE PRESUMPTION

The Conflict is between “Cogent Evidence” and “Preponderance of Probabilities.”

First View: The Respondent has to Rebut the Presumption with “Cogent Evidence“

In Bir Singh v. Mukesh Kumar, 2019-4 SCC 197. It is held –

In view of Sec. 118, if signature in a Cheque is admitted by the accused –
Complainant has no burden to prove the loan or other liability.

Presumption – View in Bir Singh v. Mukesh Kumar, 2019-4 SCC 197

It is observed in Bir Singh v. Mukesh Kumar, 2019-4 SCC 197, Two-Judge Bench decision, as to the ‘rebuttal evidence’ on presumption under Section 139, as under:

“36. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.” (This view is reiterated (obiter) by a three-Judge Bench in Kalamani Tex v. P. Balasubramanian, 2021-5 SCC 283.)

Second View: Rebuttal need not be positively proved to be true

Rebuttal need not be conclusively established or positively proved to be true (Kali Ram v. State of Himachal Pradesh, (1973) 2 SCC 808; Basalingappa v. Mudibasappa – 2019(5) SCC 418).

It need be reasonably probable
- See: Rajaram v. Maruthachalam, AIR 2023 SC 471;
- Basalingappa v. Mudibasappa – 2019(5) SCC 418
- Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16;
- Vijay v. Laxman, (2013) 3 SCC 86

Rebuttal: Standard of Proof – Preponderance of Probabilities

The required evidence or Standard of Proof for the ‘rebuttal of presumption’ is –

Preponderance of Probabilities
- See: Triyambak S. Hegde v. Sripad, 2022-1 SCC 742;
- Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348).

Rebuttal: Standard of Proof – Probable Defence which ‘Creates Doubts‘

The required evidence or Standard of Proof (for rebuttal of a factual presumption) can be –

‘Probable Defence’ which ‘Creates Doubts‘ about the existence of a legally enforceable debt.
- Rangappa v. Sree Mohan, 2010(11) SCC 441;
- M.S. Narayana Menon v. State of Kerala 2006-6 SCC 39;
- Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, (1999) 3 SCC 35)

Rebuttal can be by invoking another Presumption

Not necessary for the accused to rebut (consideration) by direct evidence
- M.S. Narayana Menon v. State of Kerala 2006(6) SCC 39, SB Sinha, J.).
- See: Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, 1999-3 SCC 35;
Rebuttal (of presumption) can be by invoking another presumption
- Kundanlal v. Custodian Evacuee property, AIR 1961 SC 1316) Referred to in: Priyamvada K. v. M. Rahufina, 2024-1 KerHC 245.
It can be the circumstances relied upon by the complainant (M.S. Narayana Menon v. State of Kerala 2006-6 SCC 39).
On such a ‘shifting’, the source of money and financial capacity of complainant to make the loan can be a point for consideration, and the complainant may have to produce bank-statement to show the alleged loan-payment, or his financial capacity.
- See: Rajaram v. Maruthachalam, AIR 2023 SC 471;
- Basalingappa v. Mudibasappa, 2019-5 SCC 418).
- K. Subramani v. K. Damodara Naidu, 2015 -1 SCC 99.

‘APPARENT CONFLICT’ STANDS RESOLVED BY DY CHANDRACHUD, J.

In Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022-7 SCR 72 (Dhananjaya Y Chandrachud, A S Bopanna, JJ.)after quoting the aforesaid portion in para 36 of Bir Singh v. Mukesh Kumar, the court observed as under:

“16. In Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348 a two Judge Bench of this Court, of which one of us (D.Y. Chandrachud J.) was a part, reiterated the decision of the three-Judge Bench of this Court in Rangappa v. Sri Mohan, (2010) 11 SCC 441 on the presumption under Section 139 of the NI Act. The court held:
- “12. Section 139 of the Act mandates that it shall be presumed, unless the contrary is proved, that the holder of a cheque received it, in discharge, in whole or in part, of a debt, or liability. The expression “unless the contrary is proved” indicates that the presumption under Section 139 of the Act is rebuttable. Terming this as an example of a “reverse onus clause” the three-Judge Bench of this Court in Rangappa held that in determining whether the presumption has been rebutted, the test of proportionality must guide the determination. The standard of proof for rebuttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities. This Court held thus:
- “28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.”

‘Apparent Conflict’ Stands Resolved

The ‘apparent conflict’ stands resolved by Oriental Bank of Commerce v. Prabodh Kumar Tewari. It is pointed out –

1. Three-Judge Bench decision in Rangappa v. Sri Mohan holds the field.
2. It is held in Rangappa v. Sri Mohan – ‘It is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. ‘

PRESUMPTION IS NOT IN ITSELF EVIDENCE

Presumption u/S. 118(a) and Onus to show Consideration

“12. Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt.”
(Quoted in: Maitreya Doshi v. Anand Rathi Global Finance Ltd., AIR 2022 SC 4595;
K. S. Ranganatha v. Vittal Shetty, 2022-1 Crimes(SC) 454; 2021-12 JT 165;
K. Prakashan v. P.K. Surendran (2008) 1 SCC 258;
Rev. Mother Marykutty v. Reni C. Kottaram, 2013-1 SCC 327;
Mallavarapu Kasivisweswara Rao v. Thadikonda Ramulu Firm, AIR 2008 SC 2898; 2008-7 SCC 655;
Krishna Janardhan Bhat v. Dattatraya G. Hegde, AIR 2008 SC 1325; 2008-4 SCC 54)

Rebuttal of Presumption Explained by SB Sinha, J.

“29. In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the Court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words ‘proved’ and ‘disproved’ have been defined in Section 3 of the Evidence Act (the interpretation clause) to mean: –
- “Proved”: A fact is said to be proved when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.
- “Disproved”: A fact is said to be disproved when, after considering the matters before it the Court either believes that it does not exist, or considers its non-existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it does not exist.”
30. Applying the said definitions of ‘proved’ or ‘disproved’ to principle behind Section 118(a) of the Act, the Court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.”

After quoting aforesaid passage from Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, (1999) 3 SCC 35, it was continued in M.S. Narayana Menon v. State of Kerala, as under:

“32. This Court, therefore, clearly opined that it is not necessary for the defendant to disprove the existence of consideration by way of direct evidence.
33. The standard of proof evidently is Pre-ponderance of probabilities. Inference of Pre-ponderance of probabilities can be drawn not only from the materials on records but also by reference to the circumstances upon which he relies.
34. Presumption drawn under a statute has only an evidentiary value. Presumptions are raised in terms of the Evidence Act. Presumption drawn in respect of one fact may be an evidence even for the purpose of drawing presumption under another.”

Rebuttal of Presumption- Burden Shifts; Not “Haunt the accused any longer“

Rebuttal: Standard of Proof – Probable defence which Creates Doubts

“28 In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of ‘preponderance of probabilities’. Therefore, if the accused is able to raise a probable defence whichcreates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.“

Para 28 of Rangappa v. Sri Mohan, 2010-11 SCC 441, is quoted in following decisions of our Apex Court –

Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022-7 SCR 72 (Dhananjaya Y Chandrachud, A S Bopanna, JJ.)
Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348 (Dhananjaya Y. Chandrachud, M.R. Shah, JJ.)
Basalingappa v. Mudibasappa – 2019(5) SCC 418, AIR 2019 SC 1983 (Ashok Bhushan, K.M. Joseph, JJ.)
Rohitbhai Jivanlal Patel v. State of Gujarat, AIR 2019 SC 1876; 2019-18 SCC 106 (Abhay Manohar Sapre, Dinesh Maheshwari, JJ.)

In Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348, following Rangappa v. Sri Mohanit (supra), it is held as under:

“The standard of proof for rebuttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities.”

Rebuttal Need Not be Conclusively Established – Basalingappa v. Mudibasappa

(i). Kali Ram v. State of Himachal Pradesh, (1973) 2 SCC 808. A Three-Judge Bench of the Supreme Court laid down as under:

“23 ……. One of the cardinal principles which has always to be kept in view in our system of administration of justice for criminal cases is that a person arraigned as an accused is presumed to be innocent unless that presumption is rebutted by the prosecutionby production of evidence as may show him to be guilty of the offence with which he is charged. The burden of proving the guilt of the accused is upon the prosecution and unless it relieves itself of that burden, the courts cannot record a finding of the guilt of the accused. There are certain cases in which statutory presumptions arise regarding the guilt of the accused, but the burden even in those cases is upon the prosecution to prove the existence of facts which have to be present before the presumption can be drawn. Once those facts are shown by the prosecution to exist, the Court can raise the statutory presumption and it would, in such an event, be for the accused to rebut the presumption. The onus even in such cases upon the accused is not as heavyas is normally upon the prosecution to prove the guilt of the accused. If some material is brought on the record consistent with the innocence of the accused which may reasonably be true, even though it is not positively proved to be true, the accused would be entitled to acquittal.”

(ii). Bharat Barrel & Drum Manufacturing Co. v. Amin Chand Pyarelal, (1999) 3 SCC 35, considered Sec. 118(a) of the NI Act. Our Apex Court held as under –

Once execution of the promissory note is admitted, the presumption under Sec. 118(a) as to consideration would arise; and that such a presumption can be rebutted by raising a probable defence.
In such an event, the plaintiff is entitled to rely upon the evidence led by the plaintiff.
The court may not insist upon the defendant to disprove the consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt.
The bare denial does not appear to be any defence. Something which is probable has to be brought on record for shifting the onus to the plaintiff.
To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist.

(iii). M.S. Narayana Menon v. State of Kerala, (2006) 6 SCC 39 (Justice S.B. Sinha)

Sections 118(a), 138 and 139 of the NI Act was considered in this decision. Referring Union of India v. Pramod Gupta, (2005) 12 SCC 1, it was pointed out that the expression ‘shall presume’ cannot be synonymous with ‘conclusive proof’; and that for rebutting the presumption under Sec. 118(a), a probable defence alone is needed.
Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.
It is analysed on the principle (as to the definition, “proved”, in Sec. 3 Evidence Act) whether the court believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist.
The standard of proof evidently is preponderance of probabilities.
Inference of preponderance of probabilities can be drawn not only by direct evidence or from the materials on record; but it can also be by reference to the circumstancesupon which he relies.

(iv). Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54.

An accused for discharging the burden need not examine himself.
He can rely on the materials already brought on record. And, also by reference to the circumstances upon which he relies.
An accused has a constitutional right to maintain silence.
Standard of proof on the part of an accused and that of the prosecution in a criminal case is different.
Prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an accused is “preponderance of probabilities”.

(v). Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513

Under Sec. 138 of the NI Act, as soon as the complainant discharges the burden to prove that the instrument was executed by the accused, the rules of presumptions under Sections 118 and 139 help him shift the burden on the accused.
A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists.
The phrase “until the contrary is proved” in Section 118 and use of the words “unless the contrary is proved” in Section 139 of the Act read with definitions of “may presume” and “shall presume” as given in Section 4 of the Evidence Act, makes it clear that presumptions to be raised under both the provisions are rebuttable.
When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed.
And when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over.
The court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated.
But, the bare denial of consideration and debt, apparently would not serve the purpose. Something which is probable has to be brought on record to shift the burden to the complainant.
The accused should bring facts and circumstances, which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist.

(vi) Rangappa v. Sri Mohan, (2010) 11 SCC 441 (Three-Judge Bench)

It was a case under Sec. 138 and 139 where the accused had admitted signatures on the cheque.
It gives only an initial presumption which favours the complainant.
This Court held that the presumption as to a legally enforceable debt or liability could be rebutted and the onus is then on the accused to raise a probable defence. It is an example of ‘reverse onus’.
The defendant-accused cannot be expected to discharge an unduly high standard of proof.
The accused need not adduce evidence of his/her own.

Principles Formulated in Basalingappa

Finally, in Basalingappa v. Mudibasappa, 2019(5) SCC 418, the Court summarised the principles as under:

“23. We having noticed the ratio laid down by this Court in above cases on Sections 118(a) and 139, we now summarise the principles enumerated by this Court in following manner:-
.(i) Once the execution of cheque is admitted Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.
(ii) The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that ofpreponderance of probabilities.
(iii) To rebut the presumption, it is open for the accused to rely on evidence led by him or accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.
(iv) That it is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden,
(v) It is not necessary for the accused to come in the witness box to support his defence.”

It is for the Accused to rebut the Presumptions under S. 139

Standard of Proof for Rebutting Presumption in Criminal Law

In Rajaram v. Maruthachalam, AIR 2023 SC 471 (B.R. Gavai, M.M. Sundresh, JJ.), it is held as under:

“24. It can thus be seen that in the facts of the said case, this Court found that the defence raised by the appellants/accused did not inspire confidence or meet the standard of ‘preponderance of probability’.
25. In the present case, we are of the considered opinion that the defence raised by the appellant satisfies the standard of ‘preponderance of probability’.”

“After taking into consideration the defence witnesses and the attending circumstances, the learned Trial Court found that the defence was a possible defence and as such, the accused was entitled to benefit of doubt. The standard of proof for rebutting the presumption is that of preponderance of probabilities.“

Proposition on cogent evidence to rebut the presumption is found not applicable in this case. It was observed as under:

“26. Insofar as the reliance on the judgment of this Court in the case of Rohitbhai Jivanlal Patel v. State of Gujarat and Anr. (AIR 2019 SC 1876; 2019-18 SCC 106) is concerned, in the said case, the learned Trial Court had acquitted the accused, the High Court, in appeal, reversed the acquittal and convicted the accused for the offence punishable under Section 138 of the N.I. Act.
Affirming the order of the High Court, this Court held that merely by denial or merely by creation of doubt, the accused cannot be said to have rebutted the presumption as envisaged under Section 139 of the N.I. Act. This Court held that unless cogent evidence was led on behalf of the accused in defence of his case, the presumption under Section 139 of the N.I. Act could not be rebutted. As such, the said judgment also would not be applicable to the facts of the present case.”

Financial capacity of the Complainant

Financial capacity of the complainant can be a point in ‘probable defence’ (Rajaram v. Maruthachalam, AIR 2023 SC 471).
- That is, the respondent can also show – complainant had no financial capacity.
And, the respondent is so poor that the complainant did not have issued large amount by way of loan.
Or, the complainant inserted the amount to befit or match his income in Bank Account from some source, or withdrawal for some other purpose.

Complainant – May Have to Produce Bank-Statement

In K. Subramani v. K. Damodara Naidu, 2015 (1) SCC 99, it is held that on rebuttal, source of income of complainant may have to be proved by production of bank-statement.

Source of Money and Capacity – Can Be A Point

Note: K.K. Divakaran v. State of Kerala, 2016(4) KLJ 273, is overruled in K. Basheer v. C.K. Usman Koya, 2021 (2) KHC 432, on another point – nondisclosure of the transaction’s nature in the notice could lead to acquittal, deeming such omission fatal to the prosecution).

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End Notes:

Sec. 118(a) & 139 of the NI Act

Sec. 118(a) Negotiable Instrument Act, 1881, reads as follows:

“118. Presumptions as to negotiable instruments.—Until the contrary is proved, the following presumptions shall be made:—
(a) of consideration:—that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;…”

Sec. 138 of the NI Act reads as under:

138. Dishonour of cheque for insufficiency, etc., of funds in the account.—Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years’, or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless—
· .(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
· (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for
· the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
· (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation.—For the purposes of this section, “debt of other liability” means a legally enforceable debt or other liability.

Sec. 139 of the NI Act reads as under:

“139. Presumption in favour of holder – It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.”

Legally recoverable debt (presupposed in S. 138) v. “Discharge of debt or liability” (S. 139)

Sec. 138 requires evidence on “legally enforceable debt“.
Sec. 139 provides for presumption – holder of the cheque received it for the discharge of debt or other liability.

A question arises on analysis of both these provisions – does Sec. 139 refer to “legally enforceable debt”.

The answer is ‘No’.

In Krishna Janardhan Bhat v. Dattatraya G. Hegde1 reported in [2008 (1) SCALE 421] it is held as under:

“19. Indisputably, a mandatory presumption is required to be raised in terms of Section 118(b) and Section 139 of the Act. Section 13(1) of the Act defines ‘negotiable instrument’ to mean “a promissory note, bill of exchange or cheque payable either to order or to bearer”.
Sec. 138 of the Act has three ingredients, viz.:
- (i) that there is a legally enforceable debt;
- (ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt; and
- (iii) that the cheque so issued had been returned due to insufficiency of funds.
20. The proviso appended to the said section provides for compliance of legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability.
21. The courts below, as noticed hereinbefore, proceeded on the basis that Section 139 raises a presumption in regard to existence of a debt also. The courts below, in our opinion, committed a serious error in proceeding on the basis that for proving the defence the accused is required to step into the witness box and unless he does so he would not be discharging his burden. Such an approach on the part of the courts, we feel, is not correct.
22. An accused for discharging the burden of proof placed upon him under a statute need not examine himself. He may discharge his burden on the basis of the materials already brought on records. An accused has a constitutional right to maintain silence. Standard of proof on the part of an accused and that of the prosecution in a criminal case is different.” (Quoted in Vishnu Dutt Sharma v. Daya Sapra, 2009-13 SCC 729 : S.B. Sinha and Dr. Mukundakam Sharma, JJ.)

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Bona Fide Purchaser for Value Deserves Stronger Equity than a Prior Contract Holder

Saji Koduvath, Advocate, Kottayam.

Introduction

The general rule in property transactions is ‘caveat emptor’—buyer beware.

That is, the law does not extend its protection to those who fail to exercise due diligence when entering into contracts or dealing with property.

However, there exists a well-recognised exception—protection to a bona fide purchaser for value. The law safeguards, shielding from adverse consequences, such a purchaser who has acquired property –

in good faith,
for valuable consideration, and
without notice of any prior claims or defects in title.

Application of this Principle in Enacted Law

The doctrine, bona fide purchaser for value, is explicitly recognised in the following statutory provisions:

1. Section 19(b), Specific Relief Act, 1963

This provision exempts a subsequent bona fide purchaser for value without notice from the enforcement of a decree for specific performance of a prior contract. Section 19 of the Specific Relief Act, 1963, reads as under:
- “19. Relief against parties and persons claiming under them by subsequent title—Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against—
- (a) either party thereto;
- (b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract ;
- (c)-(d)-(e)….”

2. Section 27(b), Specific Relief Act, 1963

Under this section, a contract cannot be rescinded if the property has already been acquired by a third party who acted in good faith, paid valuable consideration, and had no notice of the original rights.

3. Section 41, Transfer of Property Act, 1882 – Transfer by Ostensible Owner

This section guards against defeating a transfer obtained by a transferee, in good faith, for value, and after taking reasonable care to verify the transferor’s competency.

4. Section 53, Transfer of Property Act, 1882 – Fraudulent Transfers

A transfer made with the intent to defeat or delay creditors is voidable at the option of such creditors. However, this does not affect the rights of a transferee who has received the property in good faith, for consideration, and without notice of the fraudulent intent.

“Mere Equities” and “Equitable Interests“

When the doctrine, bona fide purchaser for value without notice, is discussed, in Ram Niwas v. Bano, 2000-6 SCC 685, our Apex Court qualified the right of the purchaser as a ‘legal right‘ and the right of the prior claimant (tenant) as an ‘equitable right‘.

A critical distinction also emerges – between ‘mere equities’ and ‘equitable interests’. The person contracted had “mere equities” alone, and “equitable interests” remain with with bona fide purchaser (See: Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265, High Court of Australia, the Apex Court of the Australian legal system).

Who Has the Stronger Equity?

Equity favous whom — the person who (merely) contracted earlier, or the bona fide purchaser for value without notice of that earlier contract?

The law naturally favours the latter.

However, three important points must be noted:

1. Burden of Proof:

It is the responsibility of the bona fide purchaser to prove that the purchase was made in good faith, for value, and without notice of the earlier claim. (See: Manjit Singh v. Darshana Devi, 2024 SCC OnLine SC 895; (2024) 4 CurCC (SC) 360)

2. Seller’s Fraud: He may be liable; he cannot rely on the protection of the purchaser.

If the seller has acted fraudulently — for instance, by concealing the earlier contract — he may be held liable both civilly and criminally. In such cases, the seller cannot seek refuge behind the bona fide status of the purchaser.

3. Doctrine of Lis Pendens:

The doctrine of lis pendens is laid down in Section 52 of the Transfer of Property Act, 1882. It renders transfer of property, during the pendency of a legal dispute, subject to the outcome of that litigation. Therefore, the doctrine of bona fide purchaser for value without notice does not, usually, override this statutory mandate.

‘Good faith’

Section 3(22) of the General Clauses Act defines ‘good faith’ as under:

“3(22). A thing shall be deemed to be done in good faith where it is in fact done honestly, whether it is done negligently or not.”

Section 2(11) of the Bhartiya Nyaya Sanhita, 2023 defines “good faith”, as under:

“2(11). “Good faith– Nothing is said to be done or believed in “good faith” which is done or believed without due care and attention;”

In Manjit Singh v. Darshana Devi, 2024-4 CurCC(SC) 360; 2024 INSC 895, it is pointed out that the definition of the Penal Code, 1860, emphasises due care and attention, whereas the General Clauses Act emphasises honesty.

Bona Fide Purchaser for Value – Onus on Claimant

It is often difficult to establish that one is truly a bona fide purchaser for value without notice of any prior claim. It comes with a heavy evidentiary burden. The law places the entire onus on the claimant to establish that the purchase was made:

For value, in good faith, and without notice of any prior claim.

See:

Manjit Singh v. Darshana Devi, 2024-4 CurCC (SC) 360; 2024 INSC 895.

The Supreme Court emphasised that the plea of bona fide purchaser is a matter of evidence and cannot be presumed.

R.K. Mohammed Ubaidullah v. Hajee C. Abdul Wahab, (2000) 6 SCC 402

The Court held that a purchaser who fails to conduct reasonable due diligence cannot later claim protection under the doctrine.

D. Kamalavathi v. P. Balasundaram, (2011) 3 CTC 205 (Madras HC)

In this case, it was observed that when a person is already in possession of the property, it casts a duty on the purchaser to inquire into that person’s rights or authority. Failure to do so precludes the purchaser from being treated as a bona fide purchaser without notice of the fraudulent intent.

Inadmissible Documents and Equitable Principles

The equitable principles will not be applied to defeat certain mandatory requirements as to the admissibility of documents (e.g., unregistered or unstamped deeds).

Equity in favour of Bona Fide Purchaser – Common Instances

Courts have consistently applied the principle of equity in favour of the ‘bona fide purchaser for value without notice’ in several circumstances. The following are the important instances:

1. Seller had obtained the title through fraud (Frazer v Walker, (1967) 1 AC 569: Privy Council – New Zealand).
2. Party with whom a contract for sale of property was made earlier, blacked out. The owner sold it to another, a bona fide purchaser. The equities stand in favour of the purchaser (Bunny Industries Ltd v FSW Enterprises Pty Ltd., (1982) 7 ACLR 481: The Supreme Court of Queensland, the highest court in the Australian State of Queensland)
3. Where an ostensible (apparent) owner transfers property for consideration to a bona fide purchaser, the (apparent) owner cannot contend subsequently that he was not authorised to make the transfer at the time it was made (Section 41 of the Transfer of Property Act).

Supreme Court Decisions

In Municipality of Bhiwandi and Nizampur v. Kailash Sizing Works, 1974 (2) SCC 596, the Supreme Court held as under:

“15. …This legal presumption is drawn through the well- known hypothetical reasonable man. Reckless disregard of consequences and mala fides stand equal, where the actual state of mind of the actor is relevant. This is so in the eye of law, even if there might be variations in the degree of moral reproach deserved by recklessness and mala fides.
16. The Bombay, as also, the Central, General Clauses Acts, help only in so far as they lay down that negligence does not necessarily mean mala fides. Something more than negligence is necessary. But these Acts say “honestly” and so, for the interpretation of that word, we have explained the legal meanings above.” (Quoted in: Manjit Singh v. Darshana Devi, 2024-4 CurCC(SC) 360; 2024 INSC 895)

In R.K. Mohammed Ubaidullah v. Hajee C. Abdul Wahab, 2000-6 SCC 402, after quoting Section 19 of the Specific Relief Act, it was held as under:

“14. …. As can be seen from Sections 19(a) and (b) extracted above specific performance of a contract can be enforced against (a) either party thereto; and (b) any person claiming under him by a title arising subsequent to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract. Section 19(b) protects the bona fide purchaser in good faith for value without notice of the original contract. This protection is in the nature of exception to the general rule. Hence, the onus of proof of good faith is on the purchaser who takes the plea that he is an innocent purchaser. Good faith is a question of fact to be considered and decided on the facts of each case. Section 52 of the Penal Code emphasises due care and attention in relation to good faith. In the General Clauses Act emphasis is laid on honesty.
15. Notice is defined in Section 3 of the Transfer of Property Act. It may be actual where the party has actual knowledge of the fact or constructive. “A person is said not have notice” of a fact when he actually knows that fact, or when, but for wilful abstention from an inquiry or search which he ought to have made, or gross negligence, he would have known it.
Explanation II of said Section 3 reads:
“Explanation II-Any person acquiring any immovable property or any share or interest in any such property shall be deemed to have notice of the title if any, of any person who is for the time being in actual possession thereof.”
xxx
Hence, with reference to subsequent purchaser it is essential that he should make an inquiry as to the title or interest of the person in actual possession as on the date when the sale transaction was made in his favour. The actual possession of a person itself is deemed or constructive notice of the title if any, of a person who is for the time being in actual possession thereof. A subsequent purchaser has to make inquiry as to further interest, nature of possession and title under which the person was continuing in possession on the date of purchase of the property.” (Quoted in: Manjit Singh v. Darshana Devi, 2024-4 CurCC(SC) 360; 2024 INSC 895; Referred to in: Har Narain v. Mam Chand, 2010-13 SCC 128)

Recent Apex Court Decision

The Supreme Court (Ahsanuddin Amanullah, Sudhanshu Dhulia, JJ.), in Machhindranath v. Ramchandra Gangadhar Dhamne,2025 INSC 795, applied the doctrine – ‘bona fide purchaser for value without notice of any subsisting charge’.

Brief Facts

The plaintiff took a loan from a co-operative society. He had created a charge on the suit property. Thereafter, he executed a registered sale deed in favour of his son-in-law and simultaneously wrote an unregistered “Ram-Ram Patra” promising reconveyance upon payment of ₹5,000. Later, the son-in-law sold a part of the land to another for ₹30,000. The loan was closed. The society released the charge. The plaintiff sued his son-in-law for re-conveyance, alleging that the two sale deeds were void. The Trial Court decreed the suit. The appeal was allowed by the Bombay High Court. The plaintiff approached the Supreme Court.

The Supreme Court dismissed the appeal, holding, inter alia, that (i) the unregistered “Ram-Ram Patra” could not invalidate the duly registered sale deed (C.S. Venkatesh v. A.S.C. Murthy, (2020) 3 SCC 280, referred to) and (ii) the subsequent purchaser was protected as a ‘bona fide purchaser for value without notice of any subsisting charge’.

Bona fide Purchaser is a Necessary Party

In Seethakathi Trust Madras v. Krishnaveni (17 January, 2022) M.M. Sundresh, Sanjay Kishan Kaul, JJ. held that a decree of specific performance was vitiated for the purchaser of the property, who had paid money in good faith and without notice of the original contract, being deliberately not impleaded in the suit.

Wilful Abstention to Enquire Presence of a Tenant

The leading case on the subject, relied on in a number of Indian decisions is — ‘Daniels v. Davison’ [(1809) 16 Ves Jun 249: 33 ER 978]. The Lord Chancellor held as under:

“Where there is a tenant in possession under a lease, or an agreement, a person purchasing part of the estate must be bound to inquire on what terms that person is in possession … that a tenant being in possession under a lease, with an agreement in his pocket to become the purchaser, those circumstances altogether give him an equity repelling the claim of a subsequent purchaser who made no inquiry as to the nature of his possession.” (Quoted in: Manjit Singh v. Darshana Devi, 2024-4 CurCC(SC) 360; 2024 INSC 895)

In Ram Niwas v. Bano, 2000-6 SCC 685, our Apex Court considered the effect of abstention on the part of a subsequent purchaser, to make enquiries about the real nature of the possession of the tenant (holding under a registered deed), and held that the purchaser cannot escape from the consequences of the deemed notice under Explanation II to Section 3 of the Transfer of Property Act. The Court said as under:

“… the Defendants 4 and 5 had a duty cast upon them to make a search or enquiry about the nature of such a claim. Their failure to do so, amounted to wilful abstention leading to constructive notice.” (Quoted in: Manjit Singh v. Darshana Devi, 2024-4 CurCC(SC) 360; 2024 INSC 895)

Contract Holder Entitled Damages (If Right of Bona Fide Purchaser is Protected)

If the right of a bona fide purchaser is protected under the doctrine, ‘bona fide purchaser for value‘, the prior contract holder is entitled to damages or compensation.

The relevant enacted provisions are the following:

1. Sections 64 and 65 of the Indian Contract Act. If the contract is voidable, or discovered to be or becomes void, the affected party can claim damages.
2. Section 21(5) of the Specific Relief Act. It allows compensation where specific performance is refused, on equitable grounds.

What is the Effect – If the Purchaser had Knowledge of Prior Contract

Section 91 of the Indian Trusts Act, 1882, lays down that where a person acquires property with notice that another person has entered into an existing contract affecting that property, the former must hold the property for the benefit of the latter to the extent necessary to give effect to the contract. (See: Vasantha Viswanathan v.V.K. Elayalwar, 2001-8 SCC 133: Quoted in: Jayeshkumar Mathurbai Patel v. Mukeshbhai Vershibhai Desai, AIR 2022 Guj-NOC 514)

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What is Torrens System and Torrens Plan in Registration of Deeds and Documents

Saji Koduvath, Advocate, Kottayam.

Introduction

The Torrens System is a modern, government-backed method designed to safeguard property ownership and ensure transparency in property transactions. While a title deed serves as evidence of ownership, it does not guarantee absolute or indisputable ownership on its own.

Recognizing the risks of forged, outdated, or unclear documentation, the Torrens system was introduced to bring clarity, security, and confidence to property dealings. By maintaining an authoritative central register, this system ensures that ownership is legally recognized, verifiable, and protected—minimizing disputes and streamlining transfers.

What is Title?

The word ‘Title’ conveys the idea as to a distinctive name given to a book, artistic work, case-name etc., or status conferred upon a person.
‘Title’ is the legal expression of right to ownership in a property. Hence, in law, “Title is the legal way of saying you own a right to something.”
- Therefore, owner of a land holds title to the property (Pilla Akkayyamma v. Channappa, ILR 2015 Kar 3841; 2016-1 Kar LR 432) and also title to the easements.
When title on a property is transferred, the ownership also stands transferred.
‘Title’ encompasses capacity of individual to exercise absolute right over property and to exclude others.
A person who has title over a property, even if, has no physical possession thereof, can continue title in various ways.

What is Title in Property Law?

In property law, “title” is the legal recognition of the right to own, use, and dispose of property. However, it is not foolproof evidence of ownership.

A title deed is evidence or a legal expression of ownership. Or, it represents ownership. But it does not represent unfailing ownership by itself.

The ownership is a bundle of rights (possession, control, exclusion, enjoyment, and disposition)

In short, each of the upshot of the triplet, ‘Right, Title and Interest’, enunciates same thing when used in property dealings, though they are not be synonyms in language and in jurisprudence.

It may be full (absolute) or limited (e.g., leasehold or subject to conditions).

Black’s Law Dictionary defines “title” in relation to property as under:

“Title is the means whereby the owner of lands has the just possession of the property.
The union of all the elements which constitute ownership.
Full independent and free ownership.
The right to or ownership in land: also, the evidence of such ownership. Such ownership may be held individually, jointly, in common, or in cooperate or partnership form.
One who holds vested rights in property is said to have title whether he holds them for his own benefits or for the benefit of another.” (Quoted in: Usha Tandon alias Usha Gopalan v. Lilavati H. Hiranandani, 1991 4 BomCR 422)

Why a Title Deed Is NOT Fool-proof

Because there may be-

Forgery or fraud.
Claims of adverse possession.
Lack of perfect title on the transferor.
Prior claims of encumbrances, liens, easements, etc.
Invalidity in law for not fulfilling formalities, such as want of registration, insufficiency of stamp, etc., or mistakes in land description, cloud on title, etc.

Torrens System

The Torrens system was introduced to safeguard property transactions. It was implemented through the Real Property Act, 1858, in South Australia, brought forward by Sir Robert Richard Torrens. This Act established the first formal land registry, marking the birth of the Torrens title as a legal framework.

Subsequently, it was used in –

New Zealand
Canada – In provinces like British Columbia and Ontario
United Kingdom – Land Registration Act 2002 reflects Torrens-like principles
United States – In some states (e.g., Minnesota, Massachusetts)
India – In some states like Maharashtra (Introduced digital property cards) and Kerala (Directed to attach Surveyed Plans prepared by a licensed surveyor or by an officer authorized by the Government to register deeds in Sub Registries of Kottayam and Angamaly, since 1995, on Torrens principles).

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Civil Suits: Procedure & Principles

Book No, 1 – Civil Procedure Code

Principles and Procedure

PROPERTY LAW

Title, ownership and Possession

Adverse Possession

Land Laws/ Transfer of Property Act

Land Reform Laws

Power of attorney

Evidence Act – General

Sec. 65B

Admission, Relevancy and Proof

Law on Documents

Documents – Proof and Presumption

Interpretation

Contract Act

Law on Damages

Easement

Stamp Act & Registration

Divorce/Marriage

Negotiable Instruments Act

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Pradeep Nirankarnath Sharma v. The State of Gujarat: The police have no discretion to conduct a preliminary inquiry before registering an FIR in cognizable offences

Arbitration

Will

Book No. 2: A Handbook on Constitutional Issues

Religious issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India

General Principles
Dedication and Vesting
Trustees and Management
Breach of Trust
- Breach of Trust and Removal of Trustees
Suits by or against Trusts
Law on Hindu Religious Endowments
Temples, Gurudwaras, Churches and Mosques – General
- Legal Personality of Temples, Gurudwaras, Churches and Mosques
Constitutional Principles
Ayodhya and Sabarimala Disputes
General