Case Name: MALLIKA V. R. NALLATHAMBI & ORS.
Petition Number: CIVIL APPEAL NO. 9837 OF 2017
Neutral Citation: 2026 INSC 529
Date of Judgment: 22.05.2026
Coram: HON’BLE JUSTICE MR. UJJAL BHUYAN & HON’BLE MR. JUSTICE VIPUL M PANCHOLI
Relevant Provisions: Order XLI Rule 31 of the Code of Civil Procedure, 1908, and Section 100 of the Code of Civil Procedure, 1908.
INTRODUCTION
The present dispute before the Supreme Court centered around whether the registered General Powers of Attorneys in question were executed only as security for loans and were subsequently misused to effect transfer of agricultural properties. It involved the determination of the burden of proof regarding collateral loan transactions, the evidentiary value of unproved receipts, and whether an adverse inference could be drawn against a party who failed to enter the witness box despite serious allegations of fraud. The Court ultimately upheld the First Appellate Court’s judgment, holding that there was substantial compliance with Order XLI Rule 31 CPC and no procedural irregularity. It further observed that the appellant failed to prove that the GPAs were merely collateral security for loans. The absence of documentary evidence, failure to enter the witness box, and lack of corroborative proof justified an adverse inference.
FACTS
The present appeal arose from a judgment and order passed by the High Court of Judicature at Madras in a Second Appeal, whereby the High Court dismissed the second appeal filed by the appellant and affirmed the judgment of the First Appellate Court reversing the decree of the Trial Court.
The dispute pertained to two agricultural lands situated at Kalapatty Village, Coimbatore Taluk, purchased by the appellant in 1996 through registered sale deeds. The appellant contended that in 1997 and 1998 she executed two registered General Powers of Attorney in favour of Respondent Nos. 1 and 2 merely as security for loans amounting to Rs. 2 lakhs and Rs. 5 lakhs, and had handed over the original title deeds only as collateral security. It was alleged that the respondents misused the GPAs and executed sale deeds in favour of their relatives and family members, followed by subsequent transfers.
The appellant claimed that the loans had been repaid and that she discovered the impugned transactions only in 2008 upon inspection of records. Consequently, she instituted a suit seeking declaration that the sale deeds were null and void and for permanent injunction. While the Trial Court decreed the suit, the First Appellate Court reversed the decree, which was subsequently affirmed by the High Court leading to the present appeal.
ARGUMENTS OF THE PARTIES
The appellant contended that the First Appellate Court failed to comply with Order XLI Rule 31 CPC by not properly framing points for determination and mechanically reversing the Trial Court’s findings. It was argued that the GPAs were executed merely as collateral security for loans advanced by professional money lenders and were fraudulently misused to transfer the properties among close relatives through sham transactions lacking bona fides. The appellant further submitted that the receipts acknowledging consideration were unreliable, unproved and created from signed blank papers. It was contended that the respondents, being GPA holders occupying a fiduciary position, failed to render accounts or prove bona fide payment of consideration. Reliance on mutation entries was also challenged, with the appellant asserting continued possession and alleging that the High Court erred in dismissing the second appeal without framing substantial questions of law.
The respondents, on the other hand, contended that the dispute was purely factual and that the First Appellate Court, being the final court on facts, had rightly reversed the Trial Court after proper appreciation of evidence. They argued that the appellant voluntarily executed the GPAs, received consideration, failed to prove repayment of loans and deliberately avoided entering the witness box, justifying adverse inference. It was further submitted that the suit was barred by limitation and no substantial question of law arose under Section 100 CPC.
ISSUES
- Whether the judgment of the First Appellate Court is vitiated on account of non-compliance with the mandatory requirements of Order XLI Rule 31 of the Code of Civil Procedure, 1908?
- Whether the General Power of Attorney transactions executed in favour of Respondent Nos. 1 and 2 were merely collateral securities for loans advanced by the respondents, and whether the alleged subsequent execution of sale deeds in favour of close relatives and family members amounted to misuse of such powers?
JUDGMENT AND ANALYSIS
The Supreme Court at the outset rejected the appellant’s contention that the judgment of the First Appellate Court was vitiated for non-compliance with Order XLI Rule 31 CPC. While reiterating that the First Appellate Court, being the final court on facts, must independently assess evidence and assign reasons, the Court held that the requirement under Order XLI Rule 31 CPC is one of substantial compliance rather than technical formality. It found that the appellate court had substantially complied with the provision by framing points for determination and undertaking a detailed reappreciation of oral and documentary evidence relating to loan transactions, receipts, possession, mutation entries and limitation.
With regards to the second issue, the Court held that the burden of proving that the GPAs were executed merely as collateral security for loans rested upon the appellant. Mere allegations of fraud, misuse of fiduciary position and collusive transfers were insufficient without cogent evidence. The appellant failed to produce any documentary proof regarding the alleged loan transactions, payment of interest or repayment of principal. Even the Trial Court had recorded a categorical finding that repayment was not proved, which remained unchallenged.
The Court also attached significance to the appellant’s failure to enter the witness box despite serious allegations of fraud and forgery. Relying on the principle in Vidhyadhar v. Manikrao [(1999) 3 SCC 573] where the Court had held that where a party possessing special knowledge of facts fails to enter the witness box, an adverse inference may legitimately be drawn against such a party, the Court upheld the adverse inference drawn against the appellant. Further, the court noted that the appellant neither examined attesting witnesses nor produced expert evidence to prove forgery of receipts or misuse of blank signed papers furthering its adverse inference.
The Court observed that registered sale deeds had been executed in 1998, mutation entries remained in favour of purchasers for years and subsequent transfers occurred openly without objection. The appellant’s explanation that she discovered the transactions only in 2008 was found unconvincing, particularly since both she and her husband were engaged in real estate business. The prolonged delay of nearly ten years in challenging the transactions, coupled with the absence of cancellation of the GPAs, was treated as conduct inconsistent with allegations of fraudulent alienation. Consequently, the Court found no perversity or substantial question of law warranting interference under Section 100 CPC and dismissed the appeal.
CONCLUSION
The Supreme Court ultimately upheld the First Appellate Court’s judgment, holding that there was substantial compliance with Order XLI Rule 31 CPC and no procedural irregularity. On merits, the appellant failed to prove that the GPAs were merely collateral security for loans. The absence of documentary evidence, failure to enter the witness box, and lack of corroborative proof justified an adverse inference. The long, unexplained delay in challenging registered transactions further weakened the claim. The court found no substantial question of law and therefore, the appeal was dismissed.
