Adverse Inference Can Be Drawn Against A Party Possessing Special Knowledge Of Facts If He Fails To Enter Witness Box: Supreme Court
The Court upheld the verdict dismissing plea to declare multiple sale deeds void, ruled that mere allegations of fraud and fiduciary misuse are insufficient without cogent proof.
The Supreme Court has upheld the Madras High Court’s dismissal of a suit challenging multiple sale deeds executed through registered General Powers of Attorney (GPAs), reiterating that where a party possessing special knowledge of facts fails to enter the witness box, an adverse inference may legitimately be drawn against such party.
The Bench noted that the appellant had failed to produce documentary evidence proving the alleged loan transactions, repayment of principal, or payment of interest. The Court also found it significant that the appellant herself did not enter the witness box despite making serious allegations of fraud, forgery, and misuse of blank signed papers.
A Division Bench comprising Justice Ujjal Bhuyan and Justice Vipul M. Pancholi while dismissing the appeal, observed, “where a party possessing special knowledge of facts fails to enter the witness box, an adverse inference may legitimately be drawn against such party.”.
Advocate B Ragunath appeared for the appellant and Senior Advocates V. Chitambaresh, Jayanth Muth Raj appeared for the respondent.
The dispute pertained to agricultural lands situated in Coimbatore, purchased by the appellant through registered sale deeds in 1996. According to the appellant, she executed two registered GPAs in favour of the respondents merely as collateral security for loans amounting to ₹2 lakhs and ₹5 lakhs. She alleged that the respondents, who were allegedly money lenders, misused the GPAs and executed sale deeds in favour of their relatives and family members.
The appellant claimed that she had repaid the entire loan amount with interest, but the respondents neither cancelled the GPAs nor returned the original title deeds. She asserted that she discovered the impugned transactions only in 2008 after inspecting records at the Sub-Registrar’s office.
The respondents, however, maintained that the transactions were genuine sale transactions, that possession had been handed over, and that valid consideration had been paid and acknowledged through receipts.
The Trial Court decreed the suit and declared the sale deeds void, holding that the GPAs had been executed merely as security for loans. However, the First Appellate Court reversed the decree, holding that the appellant failed to prove repayment of loans or establish that the GPAs were intended only as security documents. The Madras High Court subsequently dismissed the second appeal under Section 100 CPC.
Before the Supreme Court, the appellant argued that the First Appellate Court violated Order XLI Rule 31 CPC by failing to frame proper points for determination and contended that the burden of proof ought to have shifted upon the respondents because the transactions involved fiduciary abuse and fraud.
Rejecting the contention regarding non-compliance with Order XLI Rule 31 CPC, the Supreme Court held that the requirement under the provision is one of substantial compliance and not mere technical formality.
The Court observed that the First Appellate Court had undertaken detailed re-appreciation of oral and documentary evidence relating to loan transactions, possession, mutation entries, limitation, and conduct of parties before reversing the trial court decree.
“…We are conscious of the fact that mutation entries alone do not create or transfer ownership rights. However, when such revenue records continue for many years, are supported by registered sale transactions and remain unchallenged for a long period (a decade in the present case), they become relevant factors while considering possession and the conduct of the parties. Therefore, the High Court cannot be said to have committed any error in considering the mutation entries as one of the important circumstances in the case”, the Bench noted.
Placing reliance on the principle laid down in Vidhyadhar v. Manikrao (1999) 3 SCC 573, the Court held that an adverse inference could legitimately be drawn against a party possessing special knowledge of facts who abstains from entering the witness box.
“One of the important circumstances against the appellant is the unexplained delay of nearly ten years in instituting the suit. The principal sale transactions were executed in the year 1998, whereas the suit came to be filed only in 2008. During this long period, the GPAs remained uncancelled, mutation entries continued in the names of purchasers and further sale transactions also took place without any objection being raised by the appellant before any authority. Such conduct is inconsistent with the conduct normally expected from a person alleging fraudulent and unauthorized alienation of immovable property. Even assuming limitation commenced from the date of knowledge, the explanation offered by the appellant regarding delayed discovery of the transactions was not found credible by the courts below. Therefore, the prolonged silence and inaction on the part of the appellant for almost ten years was rightly taken into consideration by the High Court while assessing the case”, the Bench further noted.
The Court reiterated the settled principle governing second appeals under Section 100 CPC and held that the High Court was justified in refusing interference in absence of any substantial question of law.
Cause Title: Mallika v. R. Nallathambi & Ors. (Neutral Citation: 2026 INSC 529)
Appearances:
Appellant: B Ragunath, Sivagnanam Karthikeyan, NC Kavitha, Vijay Kumar, AO, Advocates.
Respondent: V. Chitambaresh, Sr. Adv., Jayanth Muth Raj, Sr. Adv., Malavika J, Sureshan P., AOR, Nivedita, Advocates.