Knowledge of encroachment after commencement of suit negates animus to hold land adversely.

Karam Chand (Plaintiff) filed a suit for declaration and injunction, claiming joint ownership of Khasra No. 38/1 and a 1/3rd share in a flour mill/machinery

He asserted title over the land via adverse possession, arguing that while initially unaware of the encroachment, his possession was continuous and hostile

Defendant No. 1 (Kartar Singh) contested this, asserting ownership of the land and a counterclaim for possession of the machinery based on an unregistered writing dated 15.5.1990 (Ex.DW1/A), alleging he purchased the equipment for ₹28,000/-

Both the Trial Court and First Appellate Court dismissed the Plaintiff’s suit and the Defendant’s counterclaim

1. Whether the Plaintiff established title over the suit land through adverse possession

2. Whether the agreement dated 15.5.1990 (Ex.DW1/A) for the sale of machinery required compulsory registration under Section 17 of the Indian Registration Act

3. Whether Defendant No. 1 was entitled to mesne profits for the Plaintiff’s use of the land

The court applied the doctrine of adverse possession as interpreted in Deva v. Sajjan Kumar (2003), which mandates that animus possidendi (intention to possess adversely) cannot exist if the occupant is unaware they are encroaching on another’s land

Regarding the classification of property, the court relied on Duncans Industries Ltd. v. State of U.P. (2000), which establishes that machinery permanently embedded in the earth for long-term use constitutes "immovable property"

Section 54 of the Transfer of Property Act and Section 17 of the Registration Act were applied, requiring any transfer of immovable property valued over ₹100/- to be made via a registered instrument

The Court found the Plaintiff's claim of adverse possession unsustainable because he admitted he was initially unaware that the machinery encroached upon Khasra No. 38/1; thus, the requisite hostile intent was absent at the commencement of possession

Regarding the Defendant's counterclaim, the Court determined that the flour and saw mill machinery were intended to be permanently fixed to the ground for operational purposes, qualifying them as immovable property under the Duncans Industries test

Since the purported sale was for ₹28,000/- via an unregistered document (Ex.DW1/A), the transfer was legally void

The Court identified a flaw in the lower courts' denial of mesne profits; as Defendant No. 1 was the admitted owner of the land and the Plaintiff’s claim of adverse possession failed, the Plaintiff’s continued occupation was unauthorized, and the Defendant was entitled to compensation based on the valuation previously agreed upon by the parties

RSA No. 60 of 2006 was partly allowed; while the Defendant was denied possession of the machinery due to the lack of a registered sale deed, he was granted mesne profits at the rate of ₹1000/- per month from the date of the suit's institution until the delivery of possession

The Court held that the unregistered document (Ex.DW1/A) was inadmissible to prove the transfer of title but could reflect the parties' assessment of the land's value