SC on GPA Misuse and Property Sale Disputes

By Team @ Mahendra Bhavsar & Co.
Reviewed by: Mahendra Bhavsar & Co. Legal Team
Last Updated: 14 June 2026

Quick Answer

In Mallika v. R. Nallathambi & Ors., decided on 22 May 2026, the Supreme Court considered a dispute where a property owner claimed that registered powers of attorney (GPAs) had been executed only as security for loans and were later misused to sell her land. The Court dismissed the appeal, holding that the appellant failed to prove the alleged loan-security arrangement, repayment of loans, fraud or misuse of authority. The judgment highlights the importance of evidence, timely action and the burden of proof in property disputes involving GPAs.

Why This Judgment Matters

Property disputes involving powers of attorney are common, especially where one party later alleges that documents were executed only as security for loans rather than for genuine property transactions.

This judgment is important because it addresses several recurring issues in real estate litigation. The Supreme Court examined who bears the burden of proving that a registered GPA was intended merely as collateral security, whether allegations of fraud can succeed without supporting evidence and how courts assess long periods of inaction by property owners.

The decision is also relevant because it discusses the evidentiary significance of mutation records, possession claims and the consequences of failing to personally testify when serious allegations are made. Property owners, purchasers, lenders and lawyers dealing with GPA-based transactions may find useful guidance in the Court’s reasoning.

Brief Facts

The appellant had purchased agricultural land through registered sale deeds in 1996. She later executed two registered powers of attorney in favour of two respondents. According to her case, these GPAs were executed only as collateral security for loans and not for the purpose of selling the property. She alleged that the respondents subsequently misused those powers and executed sale deeds in favour of relatives and family members.

The respondents denied these allegations and contended that the transactions were genuine sale transactions supported by consideration. They relied on registered documents, receipts and subsequent transfers. The appellant filed a suit seeking declarations that the sale deeds were void and requesting injunctions against further alienation.

The Trial Court accepted the appellant’s case and declared the transactions invalid. However, the First Appellate Court reversed that decision. The High Court dismissed the second appeal, and the dispute eventually reached the Supreme Court.

Key Legal Issue

The Supreme Court considered three principal questions:

1. Did the appellant prove that the GPAs were merely security for loans?

2. Were allegations of fraud and misuse of authority supported by evidence?

3. Did the First Appellate Court properly exercise its role while reversing the Trial Court’s findings?

What the Court Held

Substantial Compliance with Order XLI Rule 31

The appellant argued that the First Appellate Court had failed to frame proper points for determination. The Supreme Court rejected this challenge and held that substantial compliance with Order XLI Rule 31 CPC was sufficient where the appellate court had thoroughly reappreciated the evidence and given independent reasons for its conclusions.

Burden of Proof Remained on the Appellant

The Court observed that the appellant admitted executing the registered GPAs. Since she claimed that the documents were merely collateral security for loans, the burden rested upon her to establish that allegation through reliable evidence.

The Court noted that no convincing evidence was produced regarding repayment of loans, payment of interest or discharge of the alleged debts. Even the Trial Court had recorded that repayment had not been proved.

Fraud Allegations Were Not Established

The appellant alleged misuse of blank signed papers, forgery and collusive transfers among relatives. However, the Court found that these allegations were unsupported by documentary or expert evidence. The Court observed that serious allegations require foundational evidence before the burden can shift to the opposing party.

Adverse Inference Was Justified

A significant factor was that the appellant herself did not enter the witness box despite making serious allegations. The Court accepted the findings of the appellate courts that an adverse inference could be drawn from this omission.

Delay Weighed Against the Appellant

The Court also considered the nearly ten-year delay between the transactions and the filing of the suit. During this period, the GPAs remained uncancelled, mutation entries continued in favour of purchasers and further transactions took place. The Court found the explanation for delayed discovery of the transactions unconvincing.

Revenue Records Were Relevant Circumstances

While reiterating that mutation entries alone do not create title, the Court held that long-standing revenue records supported by registered transactions may still be relevant when assessing possession and conduct of the parties.

Practical Takeaways

• Property owners alleging GPA misuse must produce supporting evidence.

• Serious allegations of fraud require foundational proof.

• Failure to personally testify may lead to adverse inferences.

• Long delays in challenging registered transactions can weaken a case.

• Mutation records do not create title but may remain relevant evidence.

• Registered documents and subsequent conduct carry significant evidentiary weight.

What the Judgment Does Not Decide

• Whether every GPA-based property transaction is valid.

• Whether all allegations of fiduciary misuse must fail.

• Ownership rights in disputes involving different facts or evidence.

• The validity of transactions not examined in this case.

• Any general rule regarding all loan-security arrangements.

Short Ratio

A party alleging that registered powers of attorney and subsequent sale transactions were merely security for loans must establish that claim through reliable evidence. Unsupported allegations of fraud, prolonged delay, failure to testify and absence of proof of repayment may justify dismissal of such challenges.