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Unregistered agreement of sale

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My friend has made an unregistered agreement of sale on rs 100 stamp paper. He did not ready to purchase my land on the price mentioned in the agreement. 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

An unregistered sale agreement has no legal force because it does not confer any legal right to its parties. Therefore, your friend cannot approach the court for its enforcement. The sale is a process to transfer the ownership of land from one person to another if the value of a property is more than a hundred rupees then it must be transferred by a registered sale deed.

According to section 54 of the Transfer of Property Act, if the value of a property is more than one hundred rupees it must be transferred through a registered instrument. The sale deed is a valid instrument for transfer of property through the sale. The unregistered agreement is an invalid instrument for the transfer of land.

In Sadashiv Prasad Singh v. Harendar Singh, (2015) 5 SCC 574 the Supreme Court held that an unregistered agreement does not vest a legal right in favour of the purchaser.

Registration of sale agreement

The sale agreement does not require registration under section 17 of the Registration Act because it does not confer any right. Section 17 of the Registration Act explicitly mandates the registration of the sale deed compulsory if the value of a property is more than one hundred rupees.

When the law requires that there must be a registered sale deed in respect of the sale of land then unregistered sale agreement does not have any legal effect. This agreement has no legal binding force. Hence, your friend cannot rely upon it. You did nothing illegal in selling this land to another person by executing a sale deed.

Your friend has no right to challenge the sale of the land because he has no valid instrument. The unregistered sale agreement is not a valid instrument. Therefore, the court will not admit its contents if he brings any civil suit for the execution of that sale agreement. 

You have sold the land by executing a valid sale deed, hence, the buyer has obtained an absolute right in the property. He is the bonafide purchaser, therefore, 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

Your friend cannot enforce this agreement by invoking the provisions of the Specific Relief Act (SRA). Section 3420 and 41 of the Specific Relief Act provides some relief to the party of the agreement. If there is valid agreement then its party can seek specific performance of the contract, declaration of right and injunction under the aforesaid sections. 

If one party to the contract willfully refuses to perform his duty, then another party can seek specific performance and injunction under section 34 and 41 of the SRA. But in your case, there is no valid contract between you and your friend. Consequently, he cannot get any relief under the SRA.

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 the sale deed is duly registered and attested by the witness.

Notarised agreement

This agreement has no element of a valid sale deed because your friend did not pay the consideration and proper stamp duty. 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 financial 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. You should not be afraid and let him file a civil suit. If he produces that unregistered notarised agreement before the court, it will dismiss his case due to lack of evidence. He has no right to invoke legal process for enforcement of that unregistered sale agreement. 

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