Preliminary decree holders cannot trade on or use it to assert title on property

Cause Title : M/s Trinity Infraventures Ltd. vs M.s. Murthy & Ors., Arising Out Of Slp (C) Nos.2373-2377 Of 2020, The Supreme Court

Date of Judgment/Order : 15/6/2023

Corum : V. Ramasubramanian & Pankaj Mithal

Citied: 

1. NSS Naryana Sarma vs. M/s Goldstone Exports Private Ltd., (2002) 1 SCC 662
2. Raja Ram Chandra Reddy vs. Rani Shankaramma, AIR 1956 SC 319
3. Sikander Jehan Begum vs. Andhra Pradesh State Government, AIR 1962 SC 996
4. State of Andhra Pradesh (Now State of Telangana) vs. A.P. State Wakf Board, 2022 SCC OnLine SC 159
5. Mohd. Habbibuddin Khan vs. Jagir Administrator, Government of Andhra Pradesh,  (1974) 1 SCC 8213 (2011)
6. Rangammal vs. Kuppuswami,  12 SCC 220
7. National Textile Corporation (Maharashtra South) Ltd. vs. Standard Chartered Bank, (2000) 10 SCC 592
8. Lachhman Dass vs. Jagat Ram and Others, (2007) 10 SCC 448

Background

The issue was a very convoluted matter concerning grant of land by the then Nizam of Hyderabad in the 18th century. As common with land matters, due to subsequent descendants and claimants, it became a tangled web. However, the bone of contention in this matter related to a suit filed in 1955 in City Civil Court, Hyderabad which was subsequently transferred to the High Court in 1958. Some of the litigants reached a compromise and prayed for recording the compromise and passing a preliminary decree for partition which was granted in 1963. Subsequently some of the decree holders transferred their property to other people including the Nizam who in turn sold his undivided property to another entity. The properties, entirely based on the preliminary decree were subsequently further sold, mortgaged and/or otherwise transferred. During the entire period, the people in possession of these properties were never made a party. Subsequently, responding to another application, the Division Bench declared the preliminary decree vitiated by fraud and therefore void ab initio which truly set the cat among the pigeons.

Judgment

The Supreme observed that on the one hand we have persons claiming title to the property on the basis of a preliminary decree and final decree in a suit for partition. On the other hand, we have persons (who were claim petitioners before the Executing Court) who claimed independent title on the basis of pattas granted to their predecessors, after the abolition of Jagir.

The court declared that the way in which the suit claim has been valued and court-fee paid, demonstrates very clearly that it was not a suit for declaration of title to any property. It was only a suit for partitioning and in a simple suit for partition, the parties cannot assert title against strangers, even by impleading them as proforma respondents. The strangers who are impleaded in a partition suit, may have nothing to say about the claim to partition. But they may have a claim to title to the property and such a claim cannot be decided in a partition suit. 

On the issue of partitioning of immovable properties, the Court observed it must be remembered that Order XX Rule 18 of the Code of Civil Procedure, 1908, lays down a procedure to be adopted by a Court while passing a decree in a suit for partition. There are two sub-rules to Rule 18 of Order XX. As per the first sub-rule, the Court passing a decree for partition may direct the partition or separation to be made by the Collector or any gazetted subordinate deputed by him, if the decree relates to an estate assessed to the payment of revenue to the Government. This shall be done, after first declaring the rights of several parties interested in the property. Under the second sub-rule, the Court may, if it thinks that the partition and separation cannot be conveniently made without further enquiry, pass a preliminary decree declaring the rights of several parties and giving such further directions as may be required, if the decree relates to any other immovable property not covered by sub-rule (1).

Therefore, the question of specific immovable properties or specifically identified portions of immovable properties getting allotted to any person merely holding a preliminary decree with respect to an undivided share does not arise. A preliminary decree in a suit for partition merely declares the shares that the parties are entitled to in any of the properties included in the plaint schedule and liable to partition. On the basis of a mere declaration of the rights that take place under the preliminary decree, the parties cannot trade in, on specific items of properties or specific portions of suit schedule properties. Since there are three stages in a partition suit, namely (i) passing of a preliminary decree in terms of Order XX Rule 18(2); (ii) appointment of a Commissioner and passing of a final decree in terms of Order XXVI Rule 14 (3); and (iii) taking possession in execution of such decree under Order XXI Rule 35, no party to a suit for partition, even by way of compromise, can acquire any title to any specific item of property or any particular portion of a specific property, if such a compromise is struck only with a few parties to the suit.

Therefore, the manner in which the judgment and preliminary decree were sought to be used, abused and misused by parties to the proceedings as well as non-parties who jumped into the fray by purchasing portions of the preliminary decree and seeking to execute them through Court, defeating the rights of third parties, is what has prompted the Division Bench of the High Court to hold that the preliminary decree is vitiated by fraud.