Vehicle Registration Cannot Be Cancelled Solely Because Previous Owner Obtained Initial Registration Through False Representation And Forged Documents: Bombay High Court
The High Court held that cancellation under Section 55(5) of the Motor Vehicles Act cannot be justified merely on the basis that the initial registration was procured through forged documents, once the vehicle has subsequently changed hands and the buyer is found to be an innocent purchaser.
Justice N.J. Jamadar, Bombay High Court
The Bombay High Court has held that the registration of a motor vehicle cannot be cancelled solely because the previous owner had obtained registration using forged documents, when the vehicle has subsequently been purchased by an innocent buyer who neither participated in nor had knowledge of the fraud.
The Court emphasised that the statutory framework governing registration, including Section 55(5) of the Motor Vehicles Act, 1988, does not permit mechanically visiting the consequences of a prior fraud upon a bona fide purchaser who has taken all normal precautions.
The Court was hearing a writ petition under Article 227 challenging the appellate affirmation of an order cancelling the registration of a Nissan car purchased by the petitioner after paying full consideration and later clearing customs duty, interest, and fine as determined by the Settlement Commission.
A Bench comprising Justice NJ Jamadar, upon deciding the matter, observed: “The registration of the vehicle in the name of the Petitioner could not have been cancelled on the sole premise that the initial registration …was obtained by making a false representation and on the basis of forged documents”.
Advocate Cherag Balsara represented the petitioner, while Abhishek Bhadang, AGP, represented the respondents.
Background
The petitioner purchased a Nissan petrol car that had originally been registered in Manipur in the name of Meenarani Devi, who later obtained transfer of registration to RTO Mumbai. Believing the documents to be genuine, the petitioner purchased the vehicle and secured registration in his own name.
It was later discovered that the vehicle had been fraudulently imported in the name of a diplomatic officer by availing an exemption from customs duty using forged documents. The vehicle was first seized by the Directorate of Revenue Intelligence and later by the Anti-Corruption Bureau in connection with offences concerning the forged bill of entry.
The petitioner approached the Settlement Commission under the Customs Act, 1962. The Commission concluded that the forged documents were created by third parties, not by the petitioner, and that he had taken normal precautions. It settled the customs liability, ordered confiscation with an option to redeem, and granted immunity from penalty and prosecution subject to payment of duty, interest, and fine, all of which the petitioner paid.
Despite these findings, the Registering Authority cancelled the vehicle’s registration under Section 55(5) of the Motor Vehicles Act, and the appellate authority confirmed the cancellation. The petitioner then invoked the High Court’s supervisory jurisdiction.
Court’s Observations
The Bombay High Court first examined the statutory scheme under the Motor Vehicles Act, including the necessity of valid registration under Section 39 and the requirements of Section 41, Section 42 relating to diplomatic registrations, and Rule 47 of the Central Motor Vehicles Rules concerning documents required for registration of imported vehicles.
The Court noted that the only procedural issue was whether the authorities were justified in cancelling the registration based on the forged documents originally submitted by the first owner.
The Court then analysed Section 55(5), which permits cancellation where registration has been obtained through documents that are false in any material particular or through misrepresentation. While acknowledging the power, the Court held that its exercise must be informed by the totality of circumstances, including the role of the current owner and the binding determinations of the Settlement Commission.
Critically, the Court referred to the Settlement Commission’s observations that the petitioner had taken all normal precautions, was not connected with the smuggling syndicate, and had been deceived through forged documents. In light of Sections 127C(5), 127H and 127J of the Customs Act, the Court held that the Settlement Commission’s findings had a conclusive effect and could not be ignored in collateral proceedings, including cancellation of registration.
The Court further examined Section 42(2), noting that when a vehicle imported under diplomatic exemption ceases to be the property of the diplomatic officer, its special registration ceases, and ordinary provisions under Sections 39 and 40 apply. Applying this reasoning, the Court held that once the fraud was discovered and the petitioner, a bona fide purchaser, paid the customs duty, interest, and fine, the authorities ought to have regularised the registration rather than cancel it.
Invoking the doctrine of proportionality, the Court observed that cancellation imposed excessive hardship on an innocent purchaser who had already borne financial liability, and that the authorities failed to consider relevant factors or follow the balancing and necessity tests elucidated in Coimbatore District Central Cooperative Bank v. Coimbatore District Central Cooperative Bank Employees Assn.
The Court concluded that the impugned orders were arbitrary, disproportionate, and contrary to the principles governing the exercise of statutory discretion.
Conclusion
Holding that the cancellation of registration could not be sustained, the Court quashed the orders of the Registering Authority and the Appellate Authority and directed restoration of the petitioner’s registration certificate. The writ petition was accordingly allowed.
Cause Title: Imran Humayun Chandiwala v. State of Maharashtra & Ors (Neutral Citation: 2025:BHC-AS:52534)
Appearances
Petitioner: Cherag Balsara, Advocate
State: Abhishek Bhadang, AGP