In Brief
A financing company (SREI) held a hypothecation over a JCB machine purchased by Amarnath Yadav. When Yadav defaulted on loan payments and faced an arbitration award, he fraudulently submitted forged documents (Form 35) to cancel SREI's hypothecation entry and obtained a clearance certificate to transfer the vehicle to Ramjan Ali, who registered it in his name. After the vehicle was seized, Ali sought its release, which the High Court granted. The Supreme Court reversed the High Court's decision, holding that the fraudulently obtained cancellation and clearance certificate were void ab initio. Since Ali's entire registration title derived from void documents, he acquired no valid ownership rights despite being otherwise a bona fide purchaser. The Court directed the vehicle's release to SREI as the rightful hypothecated lienholder.
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