Unregistered agreement of sale

by | Apr 11, 2016 | Property Law, Civil Law

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 from: Delhi

The ownership of land does not transfer by the unregistered sale agreement. According to section 53 & 54 of the Transfer of Property Act, a duly registered sale deed vests a legal right in favour of the purchaser. [Sadashiv Prasad Singh v. Harendar Singh, (2015) 5 SCC 574].

However, it was a notarized, but it does not take the place of a registered sale deed. If the value of a property is more than one hundred rupees, the registration of sale deed is mandatory. Therefore, this notarised agreement has no value and your friend cannot legally enforce it.

Section 17 of the Registration Act explicitly mandates the registration of the sale deed compulsory if the property’s value is more than one hundred rupees. This agreement has no legal binding force. Hence, you did nothing illegal to sell this land to another person by a duly registered sale deed.

You friend has no right to challenge this subsequent sale based on that notarized agreement. Now the buyer accrued an absolute right in the property because he paid the consideration and registered in due process. He is the bonafide purchaser, and the law will protect his right first [Ramesh Vajabhai Rabari v. Pratiksha Real Estate (P) Ltd., (2014) 12 SCC 190].

Specific performance of the contract

If your friend wants to enforce this agreement by invoking the provisions of the Specific Relief Act, he will not succeed. Section 3420 and 41 of the Specific Relief Act provides a remedy, i.e. specific performance of the contract, declaration of right and injunction.

If one party to the contract willfully refuses to perform his duty, then another party can make him bound under section 34 and 41. When another party likely to suffer an irreparable loss due to the breach of contract, then above sections compel him to perform the contract individually.

More importantly, the contract must be valid for invoking section 34 & 41.

In your case, the agreement is not valid because it is made in violation of the law. Consequently, he could not approach the court for specific performance of the contract.

In T.G. Ashok Kumar v. Govindammal, (2010) 14 SCC 370 the Supreme Court held that the buyer would not get any legal right in the property unless it is duly registered and attested by the witness.

Notarised agreement

This agreement is not a valid sale deed because your friend did not pay the proper stamp duty as well as not attested by two witnesses. When ownership of the land transfers from seller to purchaser, government levies stamp duty.

The government collects that revenue by registering a sale deed. Hence, it is mandatory to execute a sale deed instead of making a personal agreement in respect of the transfer of immovable property.

Generally, the shady property owners or brokers enter into that kind of agreement. They take huge earnest money in advance then sell the property to others. In this type of transactions, they evade stamp duty and causing loss to the government exchequer.

Therefore, such kind of transfer is invalid in the eye of law. The law declares an unregistered sale agreement void and gives no legal effect.

You should not be afraid and let him file a civil suit. If you produce that unregistered notarised agreement before the court will dismiss his case. His case is liable to be rejected in the first instance.

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