Mere Pendency Of Challenge To Sale Certificate Before DRT Does Not Bar Mutation Under OSS Rules: Orissa High Court

"Unless and until the competent forum adjudicates on the challenge and invalidates the sale certificate, the same continues to remain an operative document evidencing the sale in favour of the petitioner." Orissa High Court, in a significant ruling dated 1st October 2026, held that a Tahasildar cannot reject a mutation application merely because the underlying sale certificate is under challenge before the Debts Recovery Tribunal (DRT).

A bench of Justice Sashikanta Mishra observed that a registered sale certificate issued under the SARFAESI Act remains an operative document until it is specifically set aside by a competent forum, and revenue authorities must act upon such registered instruments regardless of ongoing litigation.

The petitioner, an auction purchaser of property previously mortgaged by Opposite Party No. 3 to UCO Bank, sought mutation after receiving a registered sale certificate. Following a series of procedural disputes and a prior High Court direction to decide the mutation case afresh, the Tahasildar rejected the petitioner’s application. The rejection was based on the premise that a challenge to the auction sale was pending before the DRT in S.A. No. 123 of 2019 and a criminal investigation into alleged fraud was ongoing.

The primary question before the court was whether a mutation authority can refuse to update the Record of Rights (ROR) based solely on the pendency of litigation regarding the title or the validity of the sale certificate. The court was also called upon to determine if the principle in Bhimabai Mahadeo Kambekar necessitates an automatic stay on mutation proceedings during the pendency of civil disputes.

Court Clarifies Scope Of Mutation

The court emphasized that mutation proceedings are fiscal in nature and do not confer or extinguish title. The Tahasildar’s role is to maintain revenue records based on validly executed and registered documents. By refusing to mutate the property, the revenue authority improperly acted as an adjudicator of title, which is outside its statutory jurisdiction under the Orissa Survey and Settlement (OSS) Rules.

Distinction Between Challenge And Invalidation

The court held that there is a critical distinction between a document being under challenge and a document having been set aside by a competent forum. Mere allegations of fraud or the pendency of a Securitisation Application before the DRT do not render a registered sale certificate void. Unless an interim order of stay is passed by the DRT, the authority is legally bound to recognize the registered instrument.

"It is equally well settled that mutation proceedings are fiscal in nature and an entry in the record of rights neither creates nor extinguishes title."

Misapplication Of Precedent

The Tahasildar had relied upon the Supreme Court judgment in Bhimabai Mahadeo Kambekar (D) Th. LR vs. Arthur Import and Export Co. & Ors. to justify the rejection. The High Court clarified that this decision does not lay down an absolute, irrevocable principle that mutation must be dropped whenever a civil suit is pending. The observation in Bhimabai was specific to the factual context of that case and cannot be used as a blanket excuse to abdicate the Tahasildar’s statutory duty to update records.

The High Court set aside the impugned order dated 20.09.2025 and restored the original order dated 07.07.2020 which had allowed the mutation. The Tahasildar was directed to correct the ROR in the petitioner’s name within two weeks. The court clarified that this mutation entry is subject to the final outcome of the proceedings pending before the DRT and shall not be construed as a final declaration of title. The court declined to adjudicate on the validity of subsequent sale deeds executed by the private opposite party, leaving the parties to pursue remedies before the competent forum.

Date of Decision: 01 October 2026