WHITE COLLAR CRIMES: AN IPC PERSPECTIVE

                            -Adv Shweta Sharma

Meaning

My earliest recollection of a White-Collar crime is that of the Securities Scam committed by Harshad Mehta of over Rs. 1000 Crores, which came to light in the year 1992. Harshad Mehta or the “Big Bull”, as he was popularly called spent 7-8 years of his early life doing some small-scale odd jobs when he finally landed a job as a sales person in an insurance company, where he became interested in the share trading. He then joined a brokerage firm as a clerk or jobber and learnt the tricks of the trade from his Guru Pranjivandas broker. He took full advantage of loop holes in the Indian banking system and an opaque system of trading for banks using fake bank receipts issued by two lesser known banks. He convinced banks to transfer huge amount of money in his personal account which he then pumped into the stock market to drive the prices of shares up to dizzying heights, which he then sold off after locking a huge profit. He was charged with over 70 criminal cases mostly relating to bribery, cheating, forgery, criminal conspiracy and falsification of accounts.

Then came year 2003 and the Stamp Paper scam broke out. Abdul Kareem Telghi, the mastermind of the scam, was being referred to as the next Harshad Mehta. Telghi, who started out as a vegetable and fruit vendor in the railways but went out to become a mastermind of organized crime. He was in-fact arrested in year 1991 on the charge of cheating and was imprisoned. There he became associated with a master forger and learnt new tricks of forgery and cheating. After bribing his way out of prison and acquiring a license of stamp vendor, he became associated with some officials of revenue department and stamp registry at Nashik. The machines at Nashik stamp printing press were declared junk at his instance which he then installed to forge the stamp papers and carried out a scam worth Rs 20,000 Crores. Abdul Karim Telghi and 4 others were sentenced to 5 years RI after they pleaded guilty on charges under section of 120-B of Indian Penal Code (IPC) pertaining to criminal conspiracy and under sections 258 (Sale and circulation of fake stamps), 260 (possession of fake stamps) and 420 (cheating) of IPC, with fine of Rs 500 each.

Recently, in 2018 the Mehul Choksi – Nirav Modi Scam came to light after the complaint made by Punjab National Bank, that the duo had defrauded the bank of Rs. 28000 Crores. Nirav Modi who belongs to an affluent family dealing in diamond business for generations, received his education in Belgium. After returning to India in 1989, he studied all aspects of diamond business and founded his company Firestone in year 1999 a distributor of Rio Pinto’s Argyle Pink diamond in India. By the year 2005 he had 17 stores across India and by 2015 he had expanded his business globally. Nirav Modi also mis-utilized the Letter of Understanding from the Bank to make hefty payments to oversees clients. He is a fugitive wanted by India on the charges of cheating and misrepresentation and by the Interpol also in a case of cheating outside of Indian territory. Nirav Modi wanted to achieve in 5 years which otherwise would have taken a good 15-20 years of time. The ED had registered a money laundering case against Nirav Modi and others on February 15, 2018 under the provisions of Prevention of Money Laundering Act. The CBI registered an FIR under sections 120-B r/w 420 of IPC, 1860 read with Section 13(2) read with 13(1)(d) of PC Act, 1988.

These three cases are examples of what are known as White Collar offenses. White Collar offense was defined by sociologist Edwin Sutherland in 1939 as "a crime committed by a person of respectability and high social status in the course of their occupation". White collar crime was named so as it was supposed to be committed by the businessmen and public officials, or people who are in respectable position in the society who generally wore white formal shirts as their work wear as opposed to the people lower in rank and position wearing blue shirts to work. The white-collar crimes such as a stock broker skimming off the top of an investor’s profit, or a banking scam, require a particular level of education or skill and access to resources to commit such crimes, which access was not possible for a socially or professional low-ranking person. As per Sutherland, the white-collar criminality, like other systematic criminality is learnt. The theory of “differential association” is applied to white-collar crimes, i.e., learning the ways of crimes through the people they are associating with on a regular basis. The above three examples of businessmen committing Securities Scam, Stamp Paper Scam, Banking Scam or the scams committed by public officials such as Commonwealth scam, coal-gate scam, 2G Spectrum scam etc., illustrate how the theory of differential association is aptly applicable to the accused person in each of the cases. Hirschi and Gottfredson gave a general theory that the “white-collar criminals are motivated by the same forces that drive other criminals, i.e., self-interest, pursuit of pleasure and avoidance of pain. White Collar crimes are non-violent, financially motivated crimes. The actus reus in itself is not an abhorred act (see in contradiction to the actus reus constituting the offence of Homacide), but when coupled with mens rea, it constitutes such an act which is declared as an offence by the Law. They could be Corporate crimes, professional or occupational crimes, environmental crimes, educational crimes, etc., and there are many enactments in India today to curtail these crimes, eg., Income Tax Act, Prevention of Corruption Act, Prevention of money laundering Act, Companies Act, and so on.

The IPC perspective:

Thought Sutherland gave the first definitive definition of the term White-collar crime in the year 1939, these crimes are a part of our society and system for as long the society and system exists. The Indian Penal Code, 1860 (IPC for short) also enumerates certain offences which fall in the category of white-collar crimes or socio-economic crimes, as they are commonly referred to. IPC which is the very first codified criminal substantive Act, deals with offences of corruption and bribery by Public servants in Chapter IX, offences related to corruptions in electoral process in chapter IXA, offences related to counterfeiting of coins and government stamps in chapter XII (Sections 230 to 263), offences related to weights and measures in chapter XIII (Sections 264 to 267), offences related to misappropriation of public property and criminal breach of trust in chapter XVII (Sections 403 to 409), cheating (Section 415 to 420), offenses related to documents and forgery in chapter XVIII (Section 463 to 489) and offenses related to counterfeiting currency etc., (Sections 489A to 489D). 

Cheating and Forgery as White-Collar Crimes:

Section 415 to 420 of IPC deal with the offence of cheating. Sec 415 defines the offence of cheating. To constitute the offence of cheating, there must be firstly, deception on part of the accused which is fraudulent or dishonest and secondly, as a result of this deception, there must be inducement of some person. This inducement must lead to either deliver any property, or to consent to retain some property, or cause the other person to do or omit to do something which he must not have done but for such deception and inducement. Thirdly, such fraudulent and dishonest deception and inducement caused thereby should have caused damage to the victim in mind, body, reputation or property. There are various illustrations appended to the section so as to make it clear. Sec 416 defines cheating my personation, i.e., cheating by pretending to be some other person. This other person being impersonated may be real or imaginary person. Sec 417 provides punishment for cheating which may extend to one year, or with fine or both. The offence is non-cognizable, bailable, triable by any magistrate and compoundable by the person cheated. Sec 418 defines cheating with a knowledge that wrongful loss would ensue to a person, whose interest the offender is bound to protect. Punishment for this form of cheating is given in Sec 419 to be for a term which may extend to 3 years and it may be compounded by the person cheating but with the permission of the Court. Sec 420provides for the aggravated for of cheating, which states that if any person cheats and upon such cheating dishonestly induces some other person to deliver any property to any person, or to make, alter or destroy the whole or any part of the valuable security, or any thing which is signed and sealed and is capable of being converted into valuable security, he may be punished with a term which may extend upto 7 years and fine. 

The three essentials of both Sections 415 and 420 are deception, inducement and the resulting harm to the victim of offence. But Section 420 is said to be aggravated form of cheating and provides for a greater punishment and a compulsory fine as the severity of offence is greater in case of Section 420, i.e., to say that the degree of mens rea is greater in case of Section 420. Professor H.S. Gaur has explained the difference in his book by an example the crux of which is as follows: If A deceives B and thereby induces him to lend some money to A, with the knowledge that he is exposing B to a danger of loss of this money, A is liable under Section 415. However, if A deceives B with an intention to cause him wrongful loss and thereby induces him to handover some money or property to A, he is liable to be tried under Section 420 of IPC. The Supreme Court in “Hari Sao vs State of Bengal AIR 1970 Cri LJ 849” has elaborated the nuanced difference between Sections 415 and 420 of IPC. In this case the accused had booked an entire coach of the freight train and dishonestly misrepresented to the station master to believe that 251 bags of chilies are being loaded on the coach and are to be sent to Calcutta and thereby induced him to sign the railway receipts qua the same. The bags were loaded and the coach was sealed and made ready for dispatch by the accused themselves. A day later when some seals were found broken, the railway authorities checked the carriage and found only 197 bags filled with chaff (bhusa). The prosecution filed charges against the accused persons under Section 420 read with Sec 120b of IPC, stating that the accused persons had deceived the station master to believe that 251 bags of chilies were loaded onto the carriage and had the intention to convert the railway receipts to make a claim for the same by converting the railway receipts as valuable securities and thereby causing loss to the railways. The Supreme Court negated the claim of prosecution and held that the railway receipts cannot be held to be valuable securities as they merely state that the number of bags is “stated to be” 251 and are not a proof that the 251 bags were actually loaded onto the carriage. They are merely for the purpose of calculating freight charges and do not create any interest in favour of the accused persons to recover or claim damages for 251 bags of chilies from the Railways and as such there was no chance of any harm being caused to the Railways. The offence was held not falling under Section 420 of IPC, as there was only fraudulent deception and inducement of the station master to counter sign the railway receipt with the contents which were known to be not true to the accused persons for which they received a SLIM of Rs. 5500 from some other person. Thus, as there was no chance of wrongful harm being caused to the railways, the accused persons could not be said to have formed the intention to do so. A greater degree of intention to cause wrongful loss being a sine qua non of offence under Section 420, the offence was not made out. 

Section 463 and Section 464 of IPC essentially define what actually constitutes the offence of forgery and are to be read together to fully understand the meaning of forgery under IPC. The essentials of Forgery as per Section 463 and 464 of IPC are as follows:

1.    The making of a false document or a part of it,

2.    Such making should be with an intent to:

a.    Cause damage or injury to:

(i)            The public; or 

(ii)           to any person; or

b.    support any claim or title; or

c.    cause any person to part with property; or

d.    enter into any express or implied contract; or

e.    commit fraud or that fraud may be committed. 

Forgery thus means making of false document or a part of it. Such a making must be either with an intent to cause damage or injury to any person or public at large; or to support any claim or title, or cause any person to part with any property or to cause any person to enter into a contract with an intention to commit fraud or that fraud be committed. The punishment for forgery may extend to a term of two years or fine or both. Intension to cause damage or injury is one of the scenario covered under Sec 463 (please refer to para 2a above) and it is not necessary to be proved in every case. If other 4 scenarios are met then there is no need to prove the intention to cause damage on part of the accused. Conversely, if intention of the accused to cause damage or injury is pleaded by the prosecution, it would be covered under one of the five scenarios under Sec 463, in other 4 enumerated scenarios, intention to cause damage and injury is not necessary. The offense of forgery would be complete in all the other scenarios if the document or a part of it is made dishonestly or fraudulently in the manner and purpose as envisaged under Sec 464 of IPC and it is immaterial if the damage or injury actually ensued or not.

Supreme Court in “Sushil Suri vs CBI AIR 2011 SC 1713” refused to quash the FIR against the directors of Morepen Company and two other on the charges of Cheating, forgery, etc., as they had obtained loan from bank on the basis of certain fabricated pay orders of machinery to be installed at their Solan plant and had diverted the loan money to some fictitious accounts to be utilized for purpose other than the one claimed for. The contention of the accused persons was that the entire loan amount stood paid to the bank and there was no loss to the bank so the charges of forgery are not made out. Supreme Court while rejecting the contention of the accused persons and held that the loan claim of the accused persons was based on fabricated pay orders and there by the accused not only duped the PSB bank but also availed depreciation on the machinery that was never availed or used by them causing loss to the ex-chequer, a serious economic offence against the society. 

Sec 467 deals with aggravated form of forgery. Its essentials are:

1.    To forge a document or a part of it with a dishonest intention or an intention to defraud as envisaged under Sec 463 and 464 and such a document must be or purport to be: 

a.    a valuable security,

b.    or Will, 

c.    or an authority to adopt a son; or 

2.    to give authority to any person to receive valuable security or principal, interest or dividends on a valuable security; or

3.     to receive or deliver any money, movable property 

a.    or valuable security; or

b.    purports to be an acquittance, receipt, or an acknowledge of payment.

Although the section does not use terms fraudulently and dishonestly, it is implied as the term forgery is used in the section, which requires the criminal intent to be established along with all the previously mentioned ingredients to prove the offence under section 467 of IPC. Now, it is very interesting to note that the forgery under section 467 of IPC is of the most severe kind and the punishment has been described for a term which may extend from 10 years to life imprisonment. The reason for severe punishment is that the section deals with forgery of valuable securities, payment and acknowledgement of money, interest, principal, dividend etc. The forgery of commercial documents related to banks and other financial institutions such as insurance, stocks, etc., or that of entire business process may be covered under the ambit of this section as valuable securities. “Valuable securities” are those documents which create or purport to create inextinguishable rights in favour of any person. Thus, keeping in view of the valuable nature of documents forged the section provides for very stringent punishment. 

In the case of “Dr. Vimla vs Delhi Administration AIR 1963 SC 1572” the accused was charged under Sec 467 and 468 of IPC as she had filed for motor accident claim in her name while she had bought the car in the name of her minor daughter. The Supreme Court rejected the prosecution case by holding that neither any undue advantage was received by the accused nor any wrongful loss was caused to the insurer as the daughter was minor and would have applied for compensation in the same manner. It explained that “the expression defraud involves two elements, deceit and injury to the person deceived. The injury is something other than economic loss, i.e., deprivation of property, whether movable or immovable, or of money, and it would include any harm whatever caused to a person in body, mind, reputation or such others. In short, it is a non-economic or non-pecuniary loss. A benefit or advantage to the deceiver will almost always cause loss or detriment to the deceived. Even if in those rare cases where there is benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied.” The intention to defraud encompasses the wrongful loss to one or wrongful gain to another. Thus, an unjust or undue advantage or benefit to a person always leads to an injury to the other, however, if there is no unjust or undue benefit to a person who has forged a document and also no resulting injury to the person deceived, the offense of forgery as under Sec 467 and 468 is not made out. 

In the end:

Recently, in the month of March 2020, the fake degree scam of Manav Bharti University broke out at Solan, wherein the degree certificates were allegedly being granted by the University for the courses which were not sanctioned by any authority. As a degree creates rights in favour of the students it is squarely covered under the definition of a valuable security and prima facie charges under Sec 467, 468 (Forgery for the purpose of cheating) of IPC may be made out along with independent charges under Sec 420 IPC and other Acts. It would be interesting to see which path does the investigation take and what charges are finally filed in the final report by the prosecution under Section 173 CrPC.  

Law of Precedents - Adv Shweta Sharma

                                                                                                                                                            

Justice Dr. B S Chauhan once in his lecture on the Law of Precedents quoted Mahabharat, when he said “Mahajano yen gatah Sa Panthaah”, which translates to “that path is right path which has been followed by the virtuous men”. He further added that Law of Precedents is based on this very theory. Precedents, as is obvious from its literal meaning, are previous instances upon which the legal principles are modeled.

The Courts of England in medieval times were entrusted with the responsibility of laying down the Law through interpretation of various customs and usage. They became the fountainhead of the legal principles in the absence of any codified Law, thus making the outcome of any case more predictable. In 18th century Lord Mansfield, the Chief Justice of King’s bench, was instrumental in shaping the common law, majorly the mercantile Law, based upon precedents exemplifying the settled legal principles. He reaffirmed the Law of precedents and the doctrine of Judicial consistency and predictability of legal outcome and said “Law does not consist of particular cases, but of general principles.” So, the relief was based on settled legal principles, refined through time, by the Judicial interpretation of local customs and usage. This also laid down the foundation of principle of stare decisis. The principle of stare decisis asserts that courts "must follow earlier judicial decisions when the same points arise again in litigation” as per Black's Law Dictionary (10th ed. 2014)

Stare decisis or Law of Precedents in modern times:

Section 212 of Government of India Act, 1935, which established the hierarchy of Courts in India, provided that law declared by the federal court (the top most Court) and any judgment of the Privy Council shall, so far as applicable, be recognised as binding and shall be followed by all courts in British India. On the same lines, Article 141 of Constitution of India states that “The Law declared by the Supreme Court shall be binding on all the Courts within the territory of India”. In the words of Supreme Court, itself, the “Law declared” has to be found from the legal principles discussed and decided by the Court in a Judgement. It is the Legal Principle culled out from the reasoning of the judgement given, in the light of the issues or questions of Law raised in any case and the decision reached after thorough discussion of the Law points.  It has not to be confused with observations or passing remarks made by the Court in the course of delivering the judgement. A judgement thus, may consist of two parts: the ratio decidendi and obiter dicta. Ratio decidendi is a Latin maxim which translates to “the rule of Law or the Legal principle on which the decision is based”. It is the ratio decidendi as laid down by the Supreme Court which binds all the Courts throughout the territory of India. 

Power of High Courts to bind lower Courts:

The position of High Courts’ power to lay down legal principles or precedents in order to bind the Courts within its territorial jurisdiction is somewhat different. There is no constitutional equivalent of Art 141 when it comes to the power of High Courts to lay down precedents. Such power of High Courts is however enshrined in Constitution itself. Art 215 provides that High Courts are Court of record, i.e., the Acts and judicial proceedings of these Courts are recorded for a perpetual memory and testimony. These records, called records of the Court, import absolute verity (i.e., truth or principle). Art 227 on the other hand gives the High Courts power of superintendence over all the Courts and tribunals within its territory. It also bestows the power of rule-making and regulating the working of the lower Courts, upon the High Courts. Thus, a comprehensive and cumulative reading of Art 215, Art 226 and Art 227 of the Constitution makes it clear that the High Courts are in fact vested with the power to bind the lower Courts and tribunals within its territory by the Law as laid down by them. This proposition was recognized by the Supreme Court in the case of “East India Commercial Co. Ltd. v. Collector of Customs, AIR 1962 SC 1893”.

Departure from precedents:

The rule states “stare decisis et non quieta movere”, i.e., “stand by decisions and do not move that is quiet”. The rule of stare decisis is generally followed in vertical hierarchy of Courts, as it is the constitutional mandate to obey the rule of Law and its non-compliance would create judicial uncertainty and also illegality. Horizontally, e.g., inter-se the different High Courts, there is no binding force in the precedents, however, they have strong persuasive value. It is more of a rule of courtesy, judicial comity and prudence, horizontally. When there are compelling circumstances before a bench of Supreme Court and serious doubts are cast over the propriety of the precedent or Law as laid down by the larger bench, it is not proper for the bench to hold that the Law is incorrect and overrule it. The matter must be as referred to the Chief Justice for referring it to a larger bench of the Supreme Court, which may in its wisdom overrule the Law and set a new precedent. Similar rule applies in case of High Courts (Siddharam Satlingappa Mhetre v. State of Maharashtra & Ors., AIR 2011 SC 312). Supreme Court has held in “Zenith Steel Tubes and Industries Ltd. v. SICOM Ltd. (2008) 1 SCC 533” that in case there exist conflicting judgements of the co-equal benches, it is desirable to refer the matter to a larger bench. 

When there does not exist any clear view or precedent in relation to any legal question, the bench may use its discretion to arrive at a clear view. Here arises an opportunity for the judges to arrive at dissenting view about the legal question raised. In such a situation the precedent is the majority view taken by the judges. However, there have been many instances where minority views have proved to be a much more liberal and correct interpretation of the Law, giving effect to not only the letter but also the spirit of the Law. They are refreshing break from the regressive and myopic views taken by the majority of judges. Many such dissenting views have been fortified into Law at a later stage. (Kindly refer to minority view of H.R. Khanna, J., in “ADM Jabalpur vs SK Shukla (1976) 2 SCC 521” known as the Habeas corpus case; dissenting view of Fazal Ali, J., in “A.K. Gopalan vs State of Madras AIR 1950 SC 27” for his view on Art 21 of Constitution and preventive detention as per “procedure established by Law”; dissenting view of K. Subba Rao, J., in “Khadak Singh vs State of UP 1963 AIR SC 1295” known as the “Right to privacy a fundamental right under Art 21” case)

Stare decisis- vs- per incuriam:

There are certain exceptions to the rule of stare decisis. The decisions which are given per-incuriam and sub-silentio do not have the power to bind the lower Courts. A sub-silentio decision, or the decision given without there being any deliberation or discussion over the legal questions raised in any case and the Law applicable there upon, cannot be referred to as the Law as it is exact contradiction to the definition of a precedent. A decision which is per-incuriam, also does not have any binding force. In curia means “ignorance” or “carelessness” and a decision given by the Supreme Court or High Courts due to ignorance of, or in carless disregard of the Statutory provision or any precedent applicable to the Court. Such a decision, which is given per incuriam, need not be followed by the lower Courts as it does not have binding effect as envisaged under Article 141 of the Constitution of India. Thus, it is the rule of Law, settled by way of judicial scrutiny of statutory provisions and applicability of any earlier precedent on the legal questions raised in any case, which has the binding effect and are binding as per the principle of stare decisis. In State of U.P. v. Synthetics & Chemicals Ltd., (1991) 4 SCC 139, the Court held that “any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be declaration of law or authority of a general nature binding as precedent. A conclusion without reference to relevant provision of law is weaker than even casual observation”. 

LAW OF ADVERSE POSSESSION : THE PROGRESSION                       

–Adv Shweta Sharma   

Brief History :        

The doctrine of acquisition of title by adverse possession is deeply rooted in our system of jurisprudence. The doctrine is derived from the Roman Law concept of usucapio and longi temporis praescriptio, but in Roman Law, there was an added requirement that the possession must be bona fide and for justa causa. English law has not insisted on the requirement of justa causa. The U.K. Law Reform Committee has defended the doctrine by observing that "certainty of title to land is a social need and occupation of land which has long been unchallenged should not be disturbed." Thus, the English version is just the opposite of the Roman concept.

When a person in England enters into possession in a bona fide manner and with "justa causa", he would not be able to perfect his title. When the inequity of the position resulting from the interpretation of the word "adverse" was argued in England before Harman, J., (as he then was), in ‘Bridges v. Mees, (1957) 1 Ch 475 (481): (1957) 2 All ER 577’ and he had interjected as under:

"You are worse off when you enter lawfully"

To this, the reply from the Bar was—"Yes, often; the case is by no means as startling as it sounds, because one has a comparable situation in detinue."

Under the Limitation Act 1908, the residuary Article 144 provided that the plaintiff suing on the basis of title had to establish not only his title, but also a subsisting one, i.e., the plaintiff had to establish that he was in possession of the property within 12 years of filing of the suit. Thus, in a suit for possession of the immovable property or any interest therein the onus did lay upon the plaintiff to prove his subsisting title to the property. Moreover, there was no clear distinction between the operation of Art 142 for filing of suits for possession based on previous possession and Art 144, for filing of suits based on title and previous possession. 

The Law Commission of India in its Report No. 3 on the Act of 1908, reverting, to the text of Article 65, examined the articles relating to possession in great detail. There was a preliminary observation that Articles 142 and 144 had introduced a good deal of confusion in the law relating to suit for possession by the owners of property. The law Commission also discussed the Privy Council case of ‘Agency Company v. Short, (1888) 13 AC 793 (PC)’ on the subject, which had settled the proposition that the rule of prescription (Art 65 read with Sec 27 of Limitation Act) should be applied not to cases of want of actual possession by the plaintiff, but to cases where the plaintiff had been out of possession and another person was in possession for the prescribed time. The Commission then made the following recommendation in para No. 35.17 on the subject:

"In our opinion, Article 142 must be restricted in its application only to suits based on possessory title. The plaintiff in such a suit seeks protection of his previous possession which falls short of the statutory period of prescription, to recover possession from another trespasser. The plaintiff’s prior possession no doubt entitles him to protection against a trespasser, though not against the true owner. The true owner's entry would be a rightful entry and would interrupt.”

The amended Art 65 of Limitation Act 1963, lays down that the suit for possession of immovable property or any interest therein based on title can be instituted within a period of 12 years calculated from the date when possession of the defendant becomes adverse to the plaintiff. Thus, the plaintiff under Art 65 has to prove his title, while the onus lies on the person claiming title by way of adverse possession to prove all the elements necessary to prove his prescriptive title, adverse to the true owner.

In ‘Nair Service Society Ltd vs Rev. Father K. C. Alexander & Ors, AIR 1968 SC 1165’ the Court said that, Article 64 contemplates suit by persons based wholly and solely on the strength of previous possession of plaintiff and is independent of position of plaintiff as owner, mortgagee, lessee etc. In suits based on possession the plaintiff's legal status is irrelevant. Such suit can be filed by owners-mortgagees not qua owners or mortgagees and also by trespassers. On the contrary, if plaintiff wants to assert and vindicate his right to possession qua owner, mortgagee, lessee etc. he must prove his title as such and his suit would fall under Article 65. In a suit governed by Article 64 if the defendant can prove a better title, the suit will fail but otherwise it may be decreed. In other words, a person having trespasser title over property for which he has only to prove his previous possession and dispossession, it would be governed by Article 64.

Meaning and Essentials of Law of Adverse Possession

The expression “adverse possession” means a hostile possession, that is, a possession which is expressly or impliedly in denial of the title of the true owner. A person claiming title by adverse possession has to prove three "nec" − nec vi, nec clam and nec precario, i.e., 'without force, without secrecy, without permission'. In other words, he must show that his possession is adequate: in continuity, in publicity and in extent. In S.M. Karim vs. Bibi Sakina [1964] 6 SCR 780, Hidayatullah, J. (as he then was) observed thus:

"Adverse possession must be adequate in continuity, in publicity and extent and a plea is required at the least to show when possession becomes adverse so that the starting point of limitation against the party affected can be found."

In ‘Kshitish Chandra Bose v. Commissioner of Ranchi, (1981) 2 SCC 103’ a three−Judge Bench of Supreme Court clarified the point of possession being adequate “in publicity” and very succinctly explained that: 

“All that the law requires is that the possession must be open and without any attempt at concealment. It is not necessary that the possession must be so effective so as to bring it to the specific knowledge of the owner.” 

Mere Possession or Adverse Possession

In a suit for declaration of title under Art 65 of Limitation Act, mere pleading possession for more than 12 years does not give a prescriptive title to the possessor. The plaintiff has to clearly plead and prove as to when did his possession become adverse to the owner and when did the possession ripened into the prescriptive title. The Court before declaring a squatter, prescriptive owner of the property by virtue of Sec 27 and Art 65 of Limitation Act, would clearly examine the evidence regarding the nature of possession exercised by the squatter, i.e., it should be open, peaceful and continuous, to the exclusion of the true owner and without there being any interruption in the possession of the squatter on account of any action of the true owner. The person claiming adverse possession also has to prove that his possession is hostile to the true owner, i.e, he did not enter upon the property in a lawful manner or under the authority of the true owner (Karnataka Board of Wakf vs Govt. of India and ors (2004) 10 SCC 779). Thus, it is the blatant inaction on part of the true owner which is penalized by the Court, rather than rewarding the misdoings of the squatter. The Court honours prescriptive possession of the person who occupied the property for a specified time, cared for it and produced something of importance of the society. A suit based merely on previous possession would fall under the purview of Art 64 of the Limitation Act and an action may be brought on dispossession under Sec 5 of Specific Relief Act with six months from the date of dispossession, even against the true owner. An action under Art 64 of Limitation Act may be brought within 12 years of dispossession and the defendant may set up a plea of title against the plaintiff, which is not allowed under Sec 6 of Specific relief Act.

Adverse Possession “a Sword or only a shield”

The Law of Adverse possession came under scathing remarks from the Supreme Court in the case of State of Haryana vs Mukesh Kumar (2011) 10 SCC 404, AIR 2012 SC 325. The Hon’ble Supreme Court observed that the right to property is now considered to be not only constitutional or statutory right but also a human right and that even adverse possession has to be read in that context. The Court referring to the American and English Courts developments in the Law of adverse possession used such terms as “illogical and disproportionate” and “draconian for the owner and windfall for the squatter”. The Court also directed the legislature to at least abolish the “bad faith” adverse possession, to have a serious thought to the Law of adverse possession as it stands today or to at least increase the limitation period to 30 or 50 years for acquiring prescriptive title.

The Supreme Court in Gurudwara Sahib vs Gram Panchayat Village Sirthala and another (2014)1 SCC 669 summed up the Law of adverse possession, holding that no declaration of title can be sought by a plaintiff on the basis of adverse possession inasmuch as adverse possession can be used as a shield by a defendant and not as a sword by the plaintiff. The Court referred to the Punjab and Haryana High Court Judgement of Gurudwara Sahib Sannauli v. State of Punjab (2009) 154 PLR 756 and without discussing the Law of adverse possession in detail, opined that there is no quarrel with the proposition to the extent that suit cannot be based by the plaintiff on the basis of adverse possession. The Court also made a reference to the IIIrd column of the Art 65 and observed that the terms used in IIIrd column is “when the possession of defendant becomes adverse to the plaintiff” and inferred that the law of adverse possession may be set up only as a defense and plea of title on the claim of adverse possession is not available to the plaintiff. 

This approach and line of reasoning had been followed by the Courts till the recent judement of the Supreme Court in the case of Ravinder Kaur Grewal vs Manjit Kaur 2019(8) SCC 308 decided on 7.08.2019. In this judgement the three Judge bench of Arun Mishra, SA Nazeer and M.R. Shah, JJ, held that the Article 65 of Limitation Act may be used not only as shield but also as a sword. The Supreme Court in a 60 page long judgement tracked the development of Law of adverse possession and rejected the approach of the Court in case of Gurdwara Sahib case holding “that it was based on inferential process of interpretation because of the language used in IIIrd column of Art 65 of Limitation Act, which is not allowed at all. It does not follow from the language used in the statute.

There is absolutely no bar for the perfection of title by way of adverse possession whether a person is suing as the plaintiff or being sued as a defendant.” The Court also held that “There is no bar under Article 65 or any of the provisions of Limitation Act, 1963 as against a plaintiff who has perfected his title by virtue of adverse possession to sue, to evict a person or to protect his possession and plethora of decisions are to the effect that by virtue of extinguishment of title of the owner, the person in possession acquires absolute title and if actual owner dispossesses another person after extinguishment of his title, he can be evicted by such a person by filing of suit under Article 65 of the Act.” 

In the end…

The view of Hon’ble Supreme Court in previous cases had been in consonance with the judgement in the case of Ravinder Kaur Grewal. Supreme Court in “Amrendra Pratap Singh vs Tej Bahadur Prajapati and ors (2004) 10 SCC 65” and many other cases have laid down that by virtue of Sec 27 of Limitation Act, at the determination of period limited by the Act to any person for instituting a suit for possession of any property, his right to such property stands extinguished. When title to property of previous owner is extinguished, it passes onto the possessor and the possessory right gets transformed into ownership. Sec 27 is an exception to the well accepted rule that limitation bars only remedy and does not extinguish title. Art 65 coupled with Sec 27 of Limitation Act bestows prescriptive title upon the adverse possessor and he may avail any remedy for filing of suit under the provisions of Specific relief Act or any other provisions of the Law to safe guard his title and interests in the property, but he may have to prove his title by leading strong evidence through which an irresistible inference may be drawn by the Court about his possession to have ripened into title.