Admissibility of Unregistered Sale Deed in a Suit for Specific Performance

It is a settled position of law that an agreement to sell, of itself, does not transfer ownership rights or confer title upon someone with respect to an immovable property. Section 54 of the Transfer of Property Act, 1882 very categorically stipulates that a contract for sale, does not, of itself, create any interest in or charge on the immoveable property. In order to give effect to transfer of an immovable property, it is essential that the Agreement to Sell by which the immoveable property is being transferred, is registered in consonance with the provisions of the Registration Act 1908 [“the Registration Act”], failing which the transfer is not recognized in the eyes of law. In this regard, it is pertinent to mention Section 17 of the Registration Act which mandates the following documents which are compulsorily required to be registered-

Instruments of gift of immovable property.
other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property.
non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest; and
leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent;
non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property

Section 49 of the Registration Act stipulates the consequences of non-registration of documents which are compulsorily required to be registered as per Section 17 of Act and states that no document which is required by Section 17 to be registered, if not registered, shall-

Affect any immovable property comprised therein, or
Confer any power to adopt, or
Be received as evidence of any transaction affecting such property or conferring such power unless it has been registered.

[Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (1 of 1877)2 , 3 *** or as evidence of any collateral transaction not required to be effected by registered instrument.]

A conjoint reading of Section 17(a) and Section 49(a) postulates that an unregistered agreement to sell will not transfer any rights in the immoveable property and as per Section 49(c) such an agreement will not be received as evidence unless it has been registered.

Can an Agreement to Sell be used in evidence in a suit for Specific Performance?

The proviso to Section 49 of the Registration Act categorically provides that an unregistered document affecting an immoveable property may be received as evidence of contract in a suit for specific performance. Therefore, an agreement to sell pertaining to an immoveable property, though may not be registered, can still be used as evidence in a suit against the defendant for specific performance of the agreement to sell. The Supreme Court, in the matter of K.B. Saha & Sons Pvt. Ltd. vs Development Consultant Ltd.¹ culled out the following principles pertaining Section 49 of the Registration Act, viz.-

A document required to be registered, if unregistered is not admissible into evidence under Section 49 of the Registration Act.
Such unregistered document can however be used as an evidence of collateral purpose as provided in the proviso to Section 49 of the Registration Act.
A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.
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.
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.

In S.Kaladevi vs V.R. Somasundram & Ors.², the Supreme Court was specifically called on to answer the issue of admissibility of an unregistered sale deed in a suit for specific performance. In that case, the Defendants executed a sale deed in favour of the Plaintiff and also put the Plaintiff in possession of the immoveable property, however, failed to come forward and register sale deed. On contrary, the Defendants interfered with the peaceful possession of the Plaintiff. As a consequence, the Plaintiff filed suit for specific performance seeking a direction against the Defendant to execute a fresh sale deed and grant of permanent injunction restraining the Defendants from disturbing Plaintiff’s peaceful possession. The trial court refused to admit the unregistered sale deed in evidence and the High Court, in appeal, affirmed the order of the Trial Court. In Appeal before Supreme Court, the court held that the courts below erred in not admitting the unregistered sale deed in evidence in view of proviso to Section 49 of the Registration Act. When an unregistered sale deed is tendered in evidence, not as evidence of a completed sale, but as proof of an oral agreement of sale, the deed can be received in evidence making an endorsement that it is received only as evidence of an agreement of sale under the proviso to Section 49 of 1908 Act. The Court relied upon K.B. Saha (supra) and added one more principle in addition to the five culled out by the Supreme Court in the said case, viz- a document required to be registered, if unregistered, can be admitted in evidence as evidence of a contract in a suit for specific performance.

The ratio laid down by the Supreme Court in Kaladevi (supra) was quoted with approval by a three judge bench of the Supreme Court in Ameer Minhaj Vs. Dierdre Elizabeth (Wright) Issar and Ors.³ Recently, the Supreme Court in R. Hemalatha vs Kashthuri⁴ reiterated the position of law that an unregistered agreement to sell may be received as evidence of a contract in a suit for specific performance. Again, in Murudgandam vs Muniyandi (Died) Through LRs⁵ the Supreme Court affirmed the aforesaid position of law.

Is it mandatory to get the sale deed registered as per the process laid down in Registration Act as opposed to a suit for specific performance seeking direction for registration of sale deed?

The Registration Act provides a detailed process for registration of documents and in the event the Registrar refuses to register the document, then as per Section 77, the party can file a Civil Suit for a decree directing the document to be registered. The Registration Act prescribes the following steps to be undertaken before a suit Civil Suit can be filed under Section 77 of the Act-

document has to be presented for registration within the time prescribed by Sections 23-26 of the Act;
document has to be presented by a person authorised to do so under Section 32 of the Act;
the Sub-Registrar has refused to register the document presented to him for registration;
appeal or application against such refusal has been made under Section 72 or 73 of the Act within 30 days of the order of the Sub-Registrar;
the Sub-Registrar has refused to register under Section 76 of the Act;
Suit is filed within 30 days of the order of the Sub-Registrar under Section 77 of the Act.

When the Act provides a comprehensive mechanism for registration of a document, can a party directly approach a court under a suit for specific performance seeking a direction for registration of document?

In Kalavakurti Venkata Subbaiah v Bala Gurappagari Guruvi Reddy⁶, the Plaintiff filed a suit for specific performance seeking a direction to register the sale deed and for injunction or possession of the immoveable property. The trial court dismissed the suit on the ground that the Plaintiff had to avail remedy u/s 77 of the Registration Act. When the matter travelled to Supreme Court, the Court observed that Section 77 of the Registration Act would only be applicable when the matter solely pertains to registration of a document. However, the said section does not operate as a bar when a comprehensive suit has been filed by the Plaintiff (as in this case) wherein he is not only seeking direction for registration of sale deed but also seeking ancillary reliefs, viz injunction or in the alternative, delivery of possession of the immoveable property.

Conclusion

The proviso to Section 49 of the Registration Act unambiguously elucidates that an unregistered agreement to sell may be received as evidence in a suit for specific performance. If any doubt remained pertaining to the application of the said proviso, the same has been clarified by the Supreme Court in S. Kaladevi (supra) which was subsequently quoted with approval by a three judge bench of the Supreme Court in Ameer Minhaj (supra).

By Daksh Pandit