What is the value of an unregistered agreement to sell?

What is the value of an unregistered agreement to sell?

(1)  Introduction:-

When parties enter into the contract, they agree to make an agreement, but sometimes due to lack of knowledge or unawareness party does not register. Sometimes party avoids registration.

But, when we enter into the agreement and avoid the registration, then some question will arise that, is an unregistered agreement valid or not? 

Can an unregistered agreement to sale be enforced under the law? How to cancel the unregister agreement? These types of common questions arise in natural terms when we enter into an unregistered agreement. In this article, we know about the unregistered agreement.

(2)  What is an Agreement to sell?

In simple words, we can say that an agreement to sale means which the owner or seller of the property agrees to transfer the ownership right to the buyer in future aspects with terms and conditions mentioned in such agreement.

In short, a seller of the property who want to sell property with specific terms and conditions to the buyer and the buyer agree to that regarding the same aspect. 

They create an agreement called an agreement to sell. All these things the main essentials requirement is that the object should be legal, the consideration must be included, and the terms and conditions must be fulfilled in the future.

(3) What is a registered agreement to sell?

As we above refer an agreement to sell, when the seller of the property agree and promised to transfer the right, title, interest, and ownership to the buyer in the future with specific terms and conditions. 

And after the fulfillment of conditions, the seller of the property makes a sale deed of such property that called registered agreement to sell.

(4) Validity of an agreement without registration?

As we refer to section 17(1A) of the Registration Act 1908, which deals with the registrable documents according to that section clearly mentions that, documents of which registration is compulsory. An agreement of any immovable property for the purpose of transfer with consideration according to Section 53A of the transfer of property Act 1882, should be registered.[1].

Provision of Section 53A of the transfer of property which is related to the transfer of immovable property and deals with a part performance of the contract. 

Here, one question also comes to our mind that is an unregistered agreement valid as for law or not?

The answer to that question is given in the case of M/s. K. B. Saha and Sons Pvt. Ltd v. M/s. Development Consultant Ltd. (2008 AIR SCW 4829), the supreme court observed the following principles:-

“1. A document required to be registered, if unregistered is not admissible into evidence under Section 49 of the Registration Act.

  1. Such unregistered documents can however be used as evidence of collateral purpose as provided in the proviso to Section 49 of the Registration Act.
  2. A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.
  3. A collateral transaction must be a transaction, not itself required to be effected by a registered document, that is, a transaction creating, etc. any right, title, or interest in immovable property of the value of one hundred rupees and upwards.
  4. If a document is inadmissible in evidence for want of registration, none of its terms can be admitted in evidence and that to use a document for the purpose of proving an important clause would not be using it as a collateral purpose.”

An additional concept must be applied to the above principles, namely that the document needed to be registered if it is not registered, must be accepted as evidence of a contract in a specific performance suit.[2].

Held, we can say that an unregistered agreement of sale can be seen for collateral purposes, according to provision section 49 of the registration act, 1908.

(5)  Is registration of sale agreement is compulsory in India?

As we above discussed, registration of an agreement to sale does not require under the proviso of the registration Act, 1908. But it advisable that should be compulsorily registered.

Now in some states of India recognized for the registration of sale agreement. The main aim for registration of sale agreement is, a party can protect his legal rights through various laws like the Indian contract act, specific relief act, and registration act, etc.

In the case of T.G. Ashok Kumar V/S Govindammal and others. (2011 AIR SC 551), The supreme court observes that It is important to refer to the hardship, loss, anxiety, and needless litigation caused by the lack of a process for prospective purchasers to check whether the property is subject to any pending suit or decree, or attachment. 

It is also possible to make provision for the compulsory registration of such documents concerning decrees and attachments of immovable properties.[3].

In the case of Surendra Kumar V/S Amarjeet Singh and others, (AIR 2004 Allahabad 335). The Allahabad high court has held that unregistered document of contract for sale in respect of immovable property cannot be enforced under the Specific Relief Act.[4].

A similar view is taken by Allahabad high court in the case of Vijay Kumar Sharma V/S Devesh Behari Saxena (AIR 2008 Allahabad 66). The court held that an unregistered agreement of sale is inadmissible in evidence, it cannot be taken into consideration for passing a decree for its specific performance in favor of the plaintiff.[5].

(6) Suit for specific performance of the unregistered agreement is maintainable?

The answer to the question is yes. According to the case of S.Suresh babu, V/S G. Rajalingam, and others (Civil Revision Petition No. 4066 of 2016), the Andhra Pradesh high court held that unregistered agreement for sale can be enforced under the law. Specific performance of a contract based on an unregistered agreement is not barred from bringing a lawsuit. Section 49 of the registration Act 1908. Allow a party to make use of an unregistered agreement for the specific performance of the contract.[6].

(7)  How to cancel an unregistered sale agreement?

There is no lengthy legal procedure for cancelation of an unregistered agreement to sale. A party who went to cancel such an agreement may issue a legal notice for cancelation. Party can make a deed of cancelation and gating back an advance amount which is payable at the time of making an agreement. If the agreement mentions any penalty or token money not being fully refunded, it must be complied with by the party.

(8) Reference:

(1) Section 53A of the transfer of property Act 1882.

(2) M/s. K. B. Saha and Sons Pvt. Ltd v. M/s. Development Consultant Ltd. (2008 AIR SCW 4829).

(3) T.G. Ashok Kumar V/S Govindammal and others. (2011 AIR SC 551).

(4) Surendra Kumar V/S Amarjeet Singh and others, (AIR 2004 Allahabad 335).

(5) Vijay Kumar Sharma V/S Devesh Behari Saxena (AIR 2008 Allahabad 66).

(6) S.Suresh babu, V/S G. Rajalingam, and others (Civil Revision Petition No. 4066 of 2016)

You May Also Like

Leave a Reply

Your email address will not be published. Required fields are marked *