HC declares illegal rule empowering Sub Registrars to refuse registration of properties under mortgage or attachment

Justice N. Sathish Kumar says the contentious rule has the effect of nullifying the rights enjoyed by property owners under the Transfer of Property Act, 1882

Published - February 14, 2023 10:11 pm IST - CHENNAI

The Madras High Court has declared as unconstitutional the first proviso to Rule 55A(i) of the Registration Rules, which empowers Sub Registrars to refuse registration of any document related to immovable properties if the latter had been mortgaged or attached or if any sale or lease agreements exist over them.

Justice N. Sathish Kumar held that the first proviso to the contentious rule, which came into effect from September 5, 2022, was “clearly illegal and vitiated by a clear abuse of power.” He said it appeared to have been drafted “without any application of mind” and its literal application might lead to “several absurd results.”

The first proviso to the rule states that in case of properties that had been mortgaged or attached or subject to sale or lease agreements, the documents could be registered only after the lapse of the time limit for filing a civil suit or after the attachment gets raised or on receipt of no objection certificate, as the case may be.

“The limitation period for redeeming a mortgage is 30 years,” the judge said, ruling that the first proviso to Rule 55A(i) had the effect of completely nullifying Sections 48 and 56 of the Transfer of Property Act, 1882 that empower owners to deal even with properties that had been mortgaged.”

“It is an elementary principle of law that a purchaser of a mortgaged property takes the property subject to the mortgage. Once a mortgage, always a mortgage unless the same is redeemed,” Justice Kumar wrote. He said, similarly, any sale deed registered after attachment of a property would become void only against claims enforceable under the attachment.

“For example, if the attachment is made for recovery of ₹1 lakh and the property value is more than ₹1 crore, it cannot be said that the entire property cannot be dealt with by its owner. In such a case, sale is void only against the claim of ₹1 lakh and the interest thereof, not in entirety,” the judge added.

Further, disapproving of the requirement to submit no objection certificates concerning properties that were a subject matter of sale or lease agreements, Justice Kumar said: “In the case of a sale agreement, it is settled law that an agreement of sale does not create any interest over the property.”

“There are many cases where properties have been sold with existing leases. On such sale, once lessee has also attorned tenancy under the subsequent purchaser, there is no impediment for the owner of the property as the jural relationship of lessor and lessee continues,” he added.

Rule 55A was in the nature of a subordinate legislation and, therefore, such a rule could not have been framed unless it had the backing of a statutory guideline under the Registration Act of 1908, which was the substantial law pertaining to registration of documents, the judge pointed out.

“It would be clearly illegal and violative of a citizen’s right to deal with his property besides infringing Article 300A (persons not to be deprived of property save by authority of law) of the Constitution. It does not bear repetition that Article 300A has now been recognised as a human right,” the judgment read.

It said, not just the first proviso but also the other proviso to the rule defied logic. Justice Kumar expressed surprise over the rule insisting upon a person wanting to register a document related to an immovable property to mandatorily produce the original deed under which he/she had acquired the right over it.

A person desiring to execute a will would not be able to produce the original document if the property was under mortgage, the judge said. Similarly, in the case of a joint family property, one of the shareholders could be prevented from dealing with his share if the co-sharer refuses to part with the original parent deed.

Wondering how could the second proviso permit Sub Registrars to accept revenue records such as Patta or tax receipts if original deeds with respect to ancestral properties could not be produced, the judge said: “Production of revenue documents to verify the source of title only demonstrates complete ignorance of the settled position of law.”

The judge also found fault with the third proviso to the rule which states that if the previous original deed had been lost, then the executants could produce non-traceable certificates issued by the police department along with the advertisement published in local newspapers regarding the lost deed.

“If the original is lost, it is not understood as to why a certified copy of that document obtained from the file of the concerned Sub Registrar’s Office cannot be produced. When the best evidence is not available, the best course is to produce a certified copy which is the next best available alternative,” he said.

However, since the case before him was restricted to the first proviso to the rule, the judge held it to be illegal and ultra vires the Constitution though the writ petitioner, The Federal Bank Ltd, itself had not challenged the rule but had only challenged the refusal of Pollachi Sub Registrar to register a sale certificate since the property was under attachment.

Allowing the writ petition, the judge quashed the Sub Registrar’s October 17, 2022 order refusing to register the sale certificate issued by the bank to an auction purchaser just because the property in question had been attached provisionally by the Principal Commissioner of Goods and Services Tax and Central Excise.

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