The High Court of Madhya Pradesh has delivered a critical clarification on the legal status of revenue mutation entries in the context of corporate liquidation, reinforcing a long-standing doctrinal principle that such entries are fiscal in nature and cannot confer or prove ownership. This ruling carries significant implications for secured creditors, official liquidators, and stakeholders navigating asset recovery during insolvency proceedings.
Background & Facts
The Dispute
The dispute arose during the liquidation of M/S J.C. Mills Ltd., when state revenue officials attempted to record certain lands formerly owned by the company as Government land. UCO Bank, a secured creditor, filed an application seeking permission to intervene, arguing that such reclassification would impair its ability to recover outstanding dues. The Official Liquidator had previously written to the Naib Tahsildar objecting to the proposed mutation, but then forwarded this letter to UCO Bank - prompting the bank to approach the Court.
Procedural History
- 19/08/2024: Official Liquidator sent a letter to Naib Tahsildar objecting to recording Survey Nos. 376, 383, 386-391, 395/1, 396, 427, 430, and 482 as Government land.
- I.A. No. 7484/2025: UCO Bank filed an application seeking permission to intervene, asserting its interest as a secured creditor.
- 17/12/2025: Court granted time to the State to respond.
- 28/01/2026: Court found UCO Bank’s application defective for failing to specify which category of land (owned, leased, or Custom Department-held) was in dispute.
- 04/02/2026: UCO Bank sought to withdraw its application; the Court rejected the withdrawal and directed the Official Liquidator to explain why it had involved the bank in a matter it should have addressed directly.
Relief Sought
UCO Bank sought to intervene to protect its secured interest. The Official Liquidator was implicitly under scrutiny for procedural impropriety. The Court also examined the claim by retired employee K.C. Verma that workers’ dues should rank ahead of secured creditors - a contention the Court declined to accept without evidence.
The Legal Issue
The central question was whether mutation entries in revenue records can establish legal ownership or title, and whether a secured creditor may invoke judicial intervention based solely on such entries when the Official Liquidator has already raised objections.
Arguments Presented
For the Appellant (UCO Bank)
UCO Bank contended that the proposed recording of land as Government property would extinguish its security interest. It relied on its status as a secured creditor under the Insolvency and Bankruptcy Code and argued that the mutation threatened its recovery rights. It asserted that the Custom Department’s name appearing in revenue records indicated ownership, thereby justifying its intervention.
For the Respondent (Official Liquidator and State)
The Official Liquidator did not directly oppose intervention but had failed to clarify the nature of the disputed land. The State Advocate acknowledged the ambiguity but emphasized that the liquidator’s letter to the Naib Tahsildar was an administrative step, not a litigious one. The Court noted that the liquidator’s act of forwarding its objection to UCO Bank was procedurally irregular.
The Court's Analysis
The Court conducted a rigorous examination of the legal status of revenue records, drawing upon settled precedent that mutation entries are not documents of title but serve only fiscal and administrative purposes. The Court observed:
"It is really unfortunate that Supreme Court as well as High Court are again and again holding that mutation entries are only for fiscal purposes, and they are not the document of title, but still, the intervenor had argued with vehemence that since the name of Custom Department recorded in revenue record, therefore, the Custom Department should be treated as owner."
The Court rejected the bank’s attempt to equate revenue entries with ownership, emphasizing that title must be established through registered conveyance, title deeds, or court decree. It further criticized the Official Liquidator for bypassing direct administrative or judicial remedies and instead using a secured creditor as a proxy to challenge state action. The Court held that the liquidator, as a statutory officer, had a duty to either contest the mutation directly or approach the Court - never to outsource its legal responsibilities to third parties.
The Court also dismissed the notion that workers’ claims automatically override secured creditors’ rights, noting that such priority must be established under specific statutory provisions, not by assertion.
The Verdict
The Court rejected UCO Bank’s application to withdraw its intervention plea and directed the Official Liquidator to file a detailed reply explaining its conduct. It held that mutation entries cannot establish title, and that secured creditors cannot claim rights based solely on revenue records. The liquidator was held accountable for procedural impropriety.
What This Means For Similar Cases
Mutation Entries Cannot Establish Ownership
- Practitioners must not rely on revenue records to prove title in insolvency or recovery proceedings.
- Any claim based on mutation entries must be supported by registered deeds, title documents, or court orders.
- Secured creditors must verify ownership through independent title searches, not revenue records.
Liquidators Must Act Directly, Not Through Third Parties
- Official Liquidators cannot delegate their statutory duties by forwarding objections to creditors.
- If a liquidator disputes state action affecting assets, it must file a formal application before the Court or raise objections directly with the revenue authority.
- Using a creditor as a proxy invites judicial censure and delays resolution.
Secured Creditors’ Priority Is Not Absolute
- Workers’ dues do not automatically rank ahead of secured creditors unless mandated by specific law (e.g., Section 53 of the IBC).
- Claims must be substantiated with evidence and statutory backing; mere assertion is insufficient.
- Courts will not entertain speculative claims about priority without statutory or factual foundation.
