Unregistered Agreement to Sell shall be admissible in evidence in a suit for specific performance

May 31, 2024
Unregistered Agreement to Sel

By Nihit Nagpal and Shubham Tripathi

Recently, Hon’ble Supreme Court of India in the matter of R. Hemlatha vs Kasthuri [1]has held that an unregistered document affecting immovable property and required by the Registration Act, 1908 or the Transfer of the Property Act, 1883 to be registered may be received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by a registered instrument.

The brief facts that lead to the filing of the present appeal were that the parties had entered into an Agreement of Sale of Defendant’s properties for Rs. 22,00,000/-, out of this Rs. 20,00,000/- was paid on the date of agreement, the remaining amount was to be paid in 6 months, and thereafter the agreement was to be registered. However, the Defendant failed to perform her part of the contract and denied the existence of the Agreement and signatures on it.

The Plaintiff instituted a Civil Suit for specific performance of the unregistered Agreement to Sell dated September 10, 2013, and after the chief examination of the Plaintiff, the Trial Court framed the preliminary issue regarding admissibility of the unregistered Agreement. The preliminary issue was held in favor of Defendant (Appellant), and the Agreement was held to be not admissible in evidence.

On a revision application filed by the Plaintiff before the High Court of Judicature at Madras, the Trial Court’s order was set aside and the Hon’ble High Court directed that the agreement in question be received in evidence since the suit in question is a suit for specific performance, and the same is an exception in the proviso to Section 49 of the Registration Act.

Therefore, the Defendant (Appellant) filed the present Appeal challenging the Judgment passed by the Hon’ble High Court. It was submitted by the Appellant that since the Agreement is unregistered, it cannot be exhibited in evidence, in view of Tamil Nadu amendment[2] to Section 17 of the Registration Act that makes it compulsory to register an Agreement to Sell of immovable property having value of Rs. 100 and more from December 01, 2012, and also since Section 49, Registration Act categorically states that an unregistered document shall not affect any immovable property or be received as evidence of any transaction affecting such property. Prior to the state amendment, an unregistered agreement to sell was received as evidence, and the specified terms and transaction could be relied on, however the situation is now reversed. Further, it was contended that as per Section 54, Transfer of Property Act an agreement to sell does not create any interest or charge on the property by itself.

The Respondent (Plaintiff) on the other hand prayed for dismissal of the appeal, and relied heavily on the proviso to Section 49, Registration Act which categorically states that an unregistered document affecting immovable property and requiring registration, may be received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be affected by registered instrument. It was submitted that although the state amendment makes Agreement to Sell compulsorily registrable, there was no corresponding amendment to the proviso.

The Hon’ble Supreme Court while deciding on the issue also considered the object and reason of the state amendment which was the loss being caused to the exchequer as the public were executing the documents relating to sale of immovable property etc. on white paper or on stamp paper of nominal value. The Appeal was dismissed relying on the submissions of the Respondent and it was held by the Hon’ble Court that in the facts and circumstances, High Court had rightly observed that the unregistered agreement shall be admissible in evidence in a suit for specific performance as per the proviso to Section 49, Registration Act.

[1] Civil Appeal No. 2535 of 2023

[2] Tamil Nadu Amendment Act No.29 of 2012

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