Unregistered agreement of sale

Question

My friend has made an unregistered agreement of sale on rs 100 stamp paper. He wanted to get benefit from my condition because my property was disputed at that time. After five years from the date of such agreement, I sold that property to another person. My friend is giving threats to file a civil suit for cancellation of that sale deed and performance of unregistered sale agreement. Please guide.

Question asked on 11/04/2016

Answered by: Advocate Shivendra

It was a notorised but unregistered agreement to sell. According to section 53 & 54 of the Transfer of Property Act, that agreement would not vest any legal right in his favour [Sadashiv Prasad Singh v. Harendar Singh, (2015) 5 SCC 574].

Registration of sale agreement is mandatory if the value of the immovable property is more that one hundred rupees. Section 17 of the Registration Act also explicitly mandates the registration of the sale agreement (sale deed).  

In your case, the subsequent transfer of property through a duly registered sale deed is perfectly valid. The buyer shall get an absolute right in the property. He is the bonafide purchaser, and the law will protect his right [Ramesh Vajabhai Rabari v. Pratiksha Real Estate (P) Ltd., (2014) 12 SCC 190].

He will not succeed if he files a suit for specific performance of the contract based on unregistered agreement. According to section 34 and 41 of the Specific Relief Act, he must prove that prima facie he has a legal right in the suit property. An unregistered agreement does not give any right, so his petition will fail.

In T.G. Ashok Kumar v. Govindammal, (2010) 14 SCC 370 the Supreme Court held that the buyer will not get any legal right in the property unless it is duly registered and attested by the witness. A valid sale deed is necessary for the transfer of immovable property from the seller to the buyer.

The court further opined that the unregistered sale agreement shall increase unnecessary litigations. Unscrupulous property owners enter into contracts of sale and take huge earnest money deposits/advances, and then sell the property to others, thereby plunging the original agreement-holder and the subsequent purchaser into litigation.

Registration of agreements of sale will reduce such litigation. It will also assist in putting an end to the prevalent practice of entering into agreements of sale showing the real consideration and then registering the sale deed for only a part of the actual consideration.

Therefore, an unregistered sale agreement has not legal effect and also does not vest any legal right in his favour. You should not be afraid and let him file a civil suit. It would be best if you contested the prospective civil suit at the stage of admission. The court will dismiss the suit in limine (at the threshold).

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