The High Court of J&K and Ladakh Thursday held that ownership of immovable property could not be transferred merely on the basis of an agreement to sell through a compromise before a Lok Adalat without execution of a registered sale deed and payment of the requisite stamp duty.
A division bench of Acting Chief Justice Sanjeev Kumar and Justice Muhammad Yousuf Wani said this while upholding the cancellation of an award by National Lok Adalat in 2014 that had declared a woman the owner of 147 Kanals and 4 Marlas of land in Rakhi Rabitar village of Ganderbal district. The award was obtained through a “collusive” process and was contrary to public policy, the bench noted.
The dispute at Rabitar related to agricultural land measuring 147 Kanals and 4 Marlas.
The appellant (aggrieved woman) had instituted a civil suit in 2014 seeking a declaration of ownership and mandatory injunction on the basis of an “agreement to sell” dated July 15, 2010, allegedly executed by one Sansar Singh through his attorney holder, the woman.
Instead of contesting the suit, the defendants admitted the claim, leading to a compromise before the National Lok Adalat, which on December 6, 2014, declared the woman owner in possession of the entire land
The Court underscored that the original civil suit, filed in 2014, appeared to have been designed to bypass the requirements of the Transfer of Property Act, Registration Act, and Stamp Act.
The proposed vendor, it said, was not even made a party to the suit, while the claim was admitted by the alleged attorney holder, leading to a compromise award before the National Lok Adalat. Moreover, the court noted that compromise decrees or Lok Adalat awards could not be used as substitutes for registered sale deeds to evade statutory requirements. Such practices cause significant loss to the public exchequer by avoiding stamp duty and registration charges, it said.
The court held that if the Lok Adalat award is used as a substitute for the sale deed to transfer ownership of immovable property from one person to another, the decree would be hit by Section 23 of the Contract Act and would be void. “Similarly, an award, which is collusive or fraudulent and is intended to evade the stamp duty and registration requirements, would be opposed to public policy and cannot be legally enforceable.”
The single bench had set aside the Lok Adalat award and had restored the civil suit for trial. On the woman’s appeal against the single judge’s judgment, the division bench upheld the decision declaring the Lok Adalat award null and void. While the bench set aside the direction to implead the contesting respondents in the pending civil suit, it granted them liberty to seek impleadment before the Trial Court, that would decide the matter on its merits after hearing all parties.
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