Owner Claiming GPA Was Loan Security Must Prove It, Adverse Inference for Avoiding Witness Box, GPA Sales Upheld: Supreme Court in Mallika v. R. Nallathambi [2026 INSC 529]

In Mallika v. R. Nallathambi & Ors. (2026 INSC 529), the Supreme Court held that the burden of establishing that registered GPAs and sale deeds were not genuine sale transactions but security arrangements for loans rested on the appellant, and that the principle in Subhra Mukerjee v. Bharat Coking Coal Ltd. applies only after foundational facts of fraud or fiduciary misuse are proved (para 45). The Court upheld the adverse inference drawn for the appellant's failure to enter the witness box, treated long-standing unchallenged mutation entries as relevant to possession and conduct, and found substantial compliance with Order XLI Rule 31 CPC (paras 42, 48–49, 53). A Bench of Justice Ujjal Bhuyan and Justice Vipul M. Pancholi dismissed the appeal (paras 55–57).

Status: Madras High Court judgment dated 03.01.2017 in Second Appeal No. 714 of 2016 affirmed; First Appellate Court's reversal of the Trial Court decree stands; Civil Appeal dismissed (paras 56–57).

Headnote: GPA as Loan Security and Burden of Proof

Code of Civil Procedure, 1908 – Order XLI Rule 31, Section 100 – Registered General Power of Attorney – Sale deeds executed by GPA holders – Plea that GPA was security for loan – Burden of proof – Fraud and fiduciary misuse – Foundational facts – Adverse inference for not entering witness box – Receipts of consideration – Mutation entries and possession – Delay of ten years – Second appeal – Substantial question of law.

Held: (i) The requirement of Order XLI Rule 31 CPC is one of substantial compliance; where the First Appellate Court reappreciated the evidence on every relevant issue and recorded independent findings, its judgment is not vitiated by the form of the points framed (paras 40–42).

(ii) The burden of proving that the GPAs and sale deeds were mere security arrangements rested on the appellant; mere allegations of fraud or fiduciary misuse are insufficient, and the burden shifts to the beneficiaries only after foundational facts are established (para 45).

(iii) The appellant produced no material proving the loans, interest payments or repayment, and did not challenge the Trial Court's finding that discharge was not proved (paras 46–47).

(iv) Where a party with special knowledge of facts fails to enter the witness box, an adverse inference may be drawn; the inference drawn here was justified (paras 48–49).

(v) Receipts of consideration cannot be examined in isolation; without the appellant's evidence, examination of the attesting witnesses (her own relatives) or expert evidence, the plea that the receipts were forged could not be accepted (paras 50–52).

(vi) Mutation entries do not create title, but long-standing, unchallenged revenue records supported by registered sales are relevant to possession and conduct; ten years of silence was rightly weighed against the appellant, and no substantial question of law arose (paras 53–55).

(paras 40–57)

Case Details: Mallika v. R. Nallathambi (2026 INSC 529)

Final Outcome: Civil Appeal dismissed; the sale deeds executed under the GPAs and the First Appellate Court's dismissal of the suit stand.

Case: Mallika v. R. Nallathambi & Ors.

Neutral Citation: 2026 INSC 529

Case No.: Civil Appeal No. 9837 of 2017

Court: Supreme Court of India (Civil Appellate Jurisdiction) – Reportable

Date of Decision: 22 May 2026

Bench: Justice Ujjal Bhuyan and Justice Vipul M. Pancholi (author)

Relevant Acts & Sections: Code of Civil Procedure, 1908 – Order XLI Rule 31 and Section 100

Impugned Order: Judgment and order dated 03.01.2017 of the High Court of Judicature at Madras in Second Appeal No. 714 of 2016 (paras 1, 14)

Counsel: Mr. Sivagnanam Karthikeyan for the appellant; Mr. V. Chitambaresh along with Mr. Jayanth Muth Raj, Senior Counsel, for the respondents (paras 16, 27)

Source: Supreme Court of India

Key Holdings of the Supreme Court

• The First Appellate Court substantially complied with Order XLI Rule 31 CPC, having dealt with the loans, receipts, possession, mutation, limitation and conduct of parties (paras 41–42).
• A party alleging that registered GPAs were only loan security must first prove foundational facts of fraud or fiduciary misuse before the burden shifts (para 45).
• Failure to prove the loans and their repayment meant the appellant could not establish that the GPAs were mere security (para 46).
• An adverse inference was rightly drawn because the appellant, despite alleging fraud and forgery, did not enter the witness box (paras 48–49).
• Long-standing, unchallenged mutation entries supported by registered sales, and nearly ten years of inaction, were relevant circumstances against the appellant (paras 53–54).

Brief Facts of the Case

The appellant purchased two items of agricultural land in Kalapatty Village, Coimbatore Taluk in 1996. In 1997 and 1998 she executed two registered GPAs in favour of Respondent Nos. 1 and 2, who are brothers. Her case was that the GPAs, along with the original title deeds, were given only as security for loans of Rs. 2 lakhs and Rs. 5 lakhs at 18% interest, which she claimed to have repaid (paras 2–3, 6).

The GPA holders executed sale deeds in 1998 in favour of relatives, supported by receipts (Ex. B7 and B9), and the properties were transferred further. The appellant claimed she discovered the transactions only in 2008, and in August 2008 she filed O.S. No. 472 of 2008 seeking a declaration that the sale deeds (Ex. A5 to A9) were void and an injunction. The respondents pleaded genuine sales, payment of consideration, delivery of possession and limitation (paras 4–5, 9–10).

The Trial Court decreed the suit on 22.03.2012. The First Appellate Court reversed it on 08.03.2016, holding that the burden was wrongly cast on the respondents and that the appellant failed to prove repayment or possession. The High Court dismissed the second appeal on 03.01.2017, noting that the appellant had not entered the witness box (paras 11–14).

Issues Before the Supreme Court

1. Whether the First Appellate Court's judgment was vitiated for non-compliance with Order XLI Rule 31 CPC (paras 38–42).
2. Whether the GPAs were collateral security for loans and on whom the burden of proof lay (paras 43–47).
3. Whether an adverse inference was rightly drawn for the appellant's failure to enter the witness box, and whether the receipts were proved (paras 48–52).
4. Whether the mutation entries and the delay of nearly ten years were rightly considered, and whether any substantial question of law arose under Section 100 CPC (paras 53–55).

Court's Findings and Reasoning

Appellant's case (paras 16–26): Counsel argued that the First Appellate Court did not frame proper points, relying on H. Siddiqui v. A. Ramalingam; that the respondents were money lenders who misused the GPAs within their family; that the receipts did not state the amount and were not proved; that GPA holders owed fiduciary duties under Subhra Mukerjee; and that possession was proved through PW-2.

Respondents' case (paras 27–36): Senior Counsel argued that the dispute was purely factual, that points were framed in paragraph 7 of the appellate judgment, that the appellant never proved the loans or their discharge, avoided the witness box, withheld attesting witnesses who were her relatives, and filed the suit nearly ten years late.

Order XLI Rule 31 (paras 38–42): While accepting, as in H. Siddiqui, that the First Appellate Court must frame points and give reasons, the Court held that the requirement is of substantial compliance. The appellate court had reappreciated the oral and documentary evidence on every relevant issue and recorded independent findings.

Burden of proof (paras 43–47): The execution of registered GPAs, handing over of title deeds, registered sales and mutation were admitted. The Subhra Mukerjee principle is well settled, but the appellant had to first establish foundational facts of fraud or fiduciary misuse. She produced no proof of the loans or their repayment, and did not challenge the Trial Court's finding to that effect.

Adverse inference (paras 48–49): Relying on Vidhyadhar v. Manikrao, the Court held that the appellant, who levelled serious allegations of fraud and forgery, abstained from examination; the adverse inference drawn by the First Appellate Court and the High Court was not unjustified.

Receipts (paras 50–52): Though the receipts may not be ideal evidence, they had to be read with the surrounding facts. The appellant did not enter the witness box, did not examine the attesting witnesses who were her own relatives, and led no expert evidence, so the plea that Ex. B7 and B9 were forged failed. Her claim of discovery only in 2008 did not inspire confidence as she and her husband were in the real estate business.

Possession, mutation and delay (paras 53–54): The First Appellate Court found PW-2 unreliable and relied on revenue records Ex. B14 to B23. Mutation does not create title, but long-standing unchallenged entries supported by registered sales are relevant to possession and conduct. Even assuming limitation ran from knowledge, the explanation for the delayed discovery was not found credible.

Section 100 CPC (para 55): The First Appellate Court, as final court on facts, gave reasoned findings, and the High Court rightly held that no substantial question of law arose; there was no perversity, patent illegality or jurisdictional error.

Final Outcome and Directions

• No case was made out for interference with the High Court's judgment dated 03.01.2017 in Second Appeal No. 714 of 2016 (para 56).
• The appeal was dismissed (para 57).
• Pending applications disposed of (para 58).

Legal Principle Laid Down

Where an owner admits executing registered GPAs and the resulting registered sale deeds, the burden of proving that the transactions were only security for loans lies on the owner. The heavier burden on a fiduciary beneficiary to prove bona fides arises only after foundational facts of fraud or misuse are established. An owner who alleges fraud but does not enter the witness box invites an adverse inference, and long-standing unchallenged mutation entries and prolonged inaction are relevant to possession and conduct (paras 45, 48, 53–54).

Precedents Relied Upon

• H. Siddiqui (dead) by LRs v. A. Ramalingam, 2011 (4) SCC 240 – Considered – compliance with Order XLI Rule 31 CPC by the first appellate court. Discussed at paras 17, 40.
• Subhra Mukerjee v. Bharat Coking Coal Ltd., (2000) 3 SCC 312 – Distinguished – burden on beneficiary of a transaction where fraud and fiduciary misuse are alleged; applies only after foundational facts are proved. Discussed at paras 20, 45.
• Vidhyadhar v. Manikrao, (1999) 3 SCC 573 – Relied upon – adverse inference where a party with special knowledge does not enter the witness box. Discussed at paras 23, 32, 48.

Important Paragraphs of the Judgment

Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.

Para 41: "However, it is pertinent to note that the requirement of Order XLI Rule 31 of the CPC is one of substantial compliance and not one of mere technical formality. The substance of the judgment and the manner in which the appellate court has dealt with the controversy are of greater significance than the form in which points are framed."

Para 45: "However, before the burden can shift upon the respondents, the appellant was required to first establish foundational facts constituting fraud or fiduciary misuse. In the absence of such foundational evidence, the initial burden continued to remain upon the appellant."

Para 48: "this Court 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 party."

Para 50: "It is true that the receipts may not represent ideal documentary evidence, however, the Court cannot examine these documents in isolation and must consider them along with the surrounding facts and circumstances of the case."

Para 53: "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."

Para 54: "Such conduct is inconsistent with the conduct normally expected from a person alleging fraudulent and unauthorized alienation of immovable property."

Practical Impact of the Ruling

• For landowners: Registered GPAs given as loan security carry real risk; the owner must keep and produce proof of the loan, its repayment and any agreement limiting the GPA (paras 45–46).
• For plaintiffs alleging fraud: The party with personal knowledge must enter the witness box; evidence through a spouse may not suffice (paras 46, 48–49).
• For purchasers from GPA holders: Registered sales followed by long-standing mutation entries and open further transfers strengthen their position on possession and conduct (paras 51, 53).
• For litigants: Delay of years in challenging openly registered transactions, with a doubtful plea of late discovery, weighs heavily against relief (paras 51, 54).
• For appellate practice: A first appellate judgment that reappreciates all the evidence will not be set aside merely because the points for determination are framed generally (paras 41–42).

FAQs on GPA as Loan Security and Burden of Proof

1. What did the Supreme Court decide in Mallika v. R. Nallathambi?

It dismissed the landowner's appeal and upheld the reversal of the Trial Court decree, leaving the sale deeds executed under her GPAs intact (paras 56–57).

2. Who must prove that a GPA was given only as security for a loan?

The owner making that claim; mere allegations of fraud or fiduciary misuse are not enough without reliable evidence of the foundational facts (para 45).

3. Does the Subhra Mukerjee principle shift the burden to the GPA holder?

Only after the owner first establishes foundational facts constituting fraud or fiduciary misuse; until then the initial burden remains on the owner (para 45).

4. What is the effect of not entering the witness box?

Where a party with special knowledge of the facts does not depose, an adverse inference may legitimately be drawn against that party (paras 48–49).

5. Are mutation entries relevant if they do not create title?

Yes. Long-standing, unchallenged entries supported by registered sales are relevant to possession and the conduct of parties (para 53).

Keywords: 2026 INSC 529, Mallika v. R. Nallathambi, general power of attorney as loan security, GPA sale deeds, burden of proof fraud, fiduciary misuse, Subhra Mukerjee, adverse inference witness box, Vidhyadhar v. Manikrao, Order XLI Rule 31 CPC, substantial compliance, mutation entries, delay, Section 100 CPC, second appeal, Justice Vipul M. Pancholi, Justice Ujjal Bhuyan, Supreme Court judgment

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Download Judgment PDF – Mallika v. R. Nallathambi

Judgment PDF: 2026 INSC 529 – Mallika v. R. Nallathambi & Ors. (Civil Appeal No. 9837 of 2017) – Download Judgment PDF

Source: Supreme Court of India (official website).