A Sale Agreement constitutes all the terms and conditions of the sale of a
property (movable or immovable) to the buyer. Under the Indian Registration Act,
1908, an agreement for the transfer of rights of immovable property of value
more than Rs. 100/-, is required to be registered. Section 54, under the
Transfer of Property Act, 1882, defines Sale as a transfer of ownership for a
price and in case of transfer of immovable property of a value exceeding One
Hundred Rupees, can be done only through a registered instrument.
important to note that Section 54 only mandates registration of the sale deed,
i.e., only the instrument that helped in the sale of the property but does not
mandate the registration of Agreement to Sale (ATS). An unregistered sale deed
without the delivery of property will not be enough since the document must be
registered. Thus under Section 54, such an unregistered sale deed, although
valid under the Registration Act, will not be able to confer the title on the
Validity of the Unregistered Sale Agreement
Unregistered Sale Agreement is enforceable in Law, and any shortage of stamp
charges can be paid through the Court's order. Such an agreement will be valid
for three years from the execution date. In case of a negative clause in the
agreement, for instance, it is mentioned in the agreement that the buyer has to
get the property registered within three months, then the limitation period is
extended by such a period.
It is in the party's interest to comply with the
following negative clauses that may favour him in the agreement:
- In an unregistered sale deed, the party has to issue a revocation notice
for cancellation of agreement despite the agreement being cancelled because
of flux in time to cancel the agreement validly.
- This depends on the clauses framed in the agreement, but it is advisable
to refund the advance taken.
In case a document is not accompanied by delivery of possession but is executed
for the sole purpose of conveying the property, it is necessary that the
document is registered since a registered document is not compulsory to be
accompanied by the delivery of possession.
Here the question arises, in the case
where there is an unregistered instrument and delivery of possession, whether
the transferee who is claiming to refer to both will not fall back on that
delivery of possession. The purchaser might have his claim on the title,
preceding the execution of the oral agreement to sale, which is unregistered,
and the delivery of possession.
Since the delivery of possession is considered
part of the sale transaction, the registered sale deed can be a surplus, and the
delivery of possession will be sufficient to confer the title.
Therefore, the conditions mentioned under Section 54 must be fulfilled if the
delivery of property takes place.
The formalities stated under Section 54 are:
- During the sale of an immovable property, whose value is Rs. One hundred or
above, the sale deed has to be registered.
- If the value is less than Rs. 100, this may be either by a registered deed or
by delivery of property because the aim is to give publicity to the respective
There should be no vitiation of the transaction, on the sole ground that there
was no proof of oral agreement, which was accompanied by the delivery of
possession preceding the execution of the unregistered sale deed where the
property is delivered. If the oral sale is there along with the delivery of
possession, then the transaction is regarded as complete.
In the case of 'Mahomed Yaouoob Ally v. Chhotey Lal'
, AIR 1939 Pat 218, it was
held that the sale of an immovable property whose value is below Rs. 100,
through an unregistered sale deed, it is not mandatory that the delivery of
possession be co-existent with the execution of the sale deed.
Thus, the sale
would be valid even if delivery of possession of the property is in pursuance of
the sale deed after its execution. Even in the case cited, 'AIR 1937 Mad 265',
it was held that if the sale is for less than Rs. 100, the non-registration will
not be consequential to the validity of the transfer if the transferee is able
to set up an oral sale, and the delivery of possession will be in fulfilment
thereof. Therefore it can be regarded as independent of the other. Consequently,
it is necessary to file a suit to get the deed registered through court.
Recently, the Supreme Court upheld a Trial Court order that allowed the
plaintiff to file the suit on evidence of the insufficiently stamped and
unregistered agreement of sale for the recovery of money that has to be paid by
him during the execution of the Agreement for Sale.
The major issue before the Supreme Court was whether an unregistered sale
agreement could be viewed for collateral purposes under Section 49 of the
Registration Act of 1908. The bench was considered the appeal against the High
Court of Madhya Pradesh, which set aside the order by the Trial Court, referring
to Avinash Kumar Chauhan v. Vijay Krishna Mishra judgment.
Justice Navin Sinha and Justice BR Gavai, in Prakash Sahu vs Saulal
, noted that
the Trial Court had referred to the judgment in S. Kaladevi vs V.R. Somasundaram to
allow the plaintiff to lead evidence on an insufficiently stamped document.
In this judgment, it was held that:
- A document necessary to be registered, if it is unregistered, will not
be admissible as evidence as per Section 49 of the 1908 Act
- Such an unregistered agreement can still be used as evidence for
collateral purposes as per the proviso mentioned under Section 49 of the
Registration Act of 1908.
- The collateral transaction must be independent of the transaction to
give effect to the law that is required to be registered.
- A collateral transaction should be a transaction that is not itself
required to be effected by a registered document but is a transaction that
creates any right, or title or interest in the immovable property of value
of one hundred rupees or above.
- If a document is inadmissible as evidence for want of registration, then
none of its terms can be admitted as evidence, and to use a document for
proving an important clause will not be used as a collateral purpose.
- An agreement required to be registered, if it is unregistered, can be
admitted as evidence of the contract for a suit of specific performance.
Earlier, the industry practice was that in case of absence of the legal
provision, an Agreement to Sale of an immovable property, which is executed
between the individuals that may be developers or allotters, was not registered.
Since there was no mandate by the law for registration, the Agreement to Sales
also did not face the consequences, according to Section 49 of the Registration
But, subsequently, the courts, especially the consumer foram, gave effect
to such an unregistered Agreement to Sales.
However, as per the current legal scenario, a non-registered document that is
mandatory to be registered has serious consequences since the party seeking its
enforcement will not be able to rely on the document to prove its contents. This
process may deprive the party of enforcing their contract.
Award Winning Article Is Written By: Mr.Kishan Dutt Kalaskar
Authentication No: SP35716495620-05-0921