Validity of an unregistered Agreement to Sell for an Immovable Property

The Transfer of Property Act 1882 [“the Act”] governs the transfer of property, whether moveable or immoveable and inter alia provides rights and liabilities of the parties, privy to such transfer. 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. The interplay of provisions between the Transfer of Property Act and the Registration Act gives validation to a deed of conveyance for transfer of an immoveable property.

Relevant Provisions

1. Section 5 of the Act defines “Transfer of property” as an act by which a living person conveys property, in present or future, to one or more other living persons, or to himself. The “living persons” in this section includes-

1. A Company or;
2. Association or body of individuals.

2. The Transfer of property Act does not exhaustively define “immovable property”. Section 3 of the Act only states that “immovable property” does not include standing timber, growing crops or grass. In this regard, assistance may be taken of the General Clauses Act, 1897, Section 3(26) whereof, defines “immovable property” which includes-

1. Lands
2. Benefits to arise out of land.
3. Things attached to earth, or
4. Permanently fastened to anything attached to earth.

3. Section 3 of the Transfer of Property Act, however, defines “attached to earth” in the following terms given below, which further expands the scope of Section 3 (26)(c) of the General clauses Act –

1. Rooted to earth.
2. Imbedded in the earth.
3. Attached to what is so imbedded for permanent beneficial enjoyment of that to which it is attached.

4. Section 54 of the Act falling under Chapter III, specifically caters to the Sale of Immovable property and inter alia defines-

1. Sale- Sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part promised.
2. Sale how made– Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of reversion or other intangible thing, can be made only by a registered instrument.
3. Contract for sale– A contract for sale of immoveable property is a contract that a sale of such property shall take place on terms settled between the parties.It does not, of itself, create any interest in or charge on such property.

5. Section 17 of the Registration Act prescribes documents which are required to be compulsorily registered viz.

1. Instruments of gift of immovable property.
2. 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.
3. 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
4. leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent;

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

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

Essentials of a valid Agreement to Sell for an immovable property.

A conjunctive reading of the aforementioned provisions of the Transfer of Property Act and the Registration Act poses the following necessary ingredients for a valid agreement to sell viz.

1. It must be of value of Rs 100 or upwards.
2. It has to be registered as per Section 17 of the Registration Act

Its nonregistration would render it invalid as per Section 49 of the Registration Act and such an agreement would not affect the immovable property comprised therein or confer any power or ownership to any person or be received in evidence of any transaction affecting such property. An Agreement to sell alone, does not transfer any ownership rights. Section 54 of the Act unambiguously elucidates that an agreement to sale is merely a contract that a sale of such property shall take place on terms stated in the agreement. It does not, of itself, create any interest in or charge on such property. Therefore, in order to effectively transfer an immovable property, it is imperative to register the Agreement to sale, failure of which would render the transfer or sale nugatory.

Importance of Registration

Registration provides safety and security to transactions relating to immovable property, even if the document is lost or destroyed. It gives publicity and public exposure to documents thereby preventing forgeries and frauds in regard to transactions and execution of documents. Registration provides information to people who may deal with a property, as to the nature and extent of the rights which persons may have, affecting that property. In other words, it enables people to find out whether any particular property with which they are concerned, has been subjected to any legal obligation or liability and who is or are the person/s presently having right, title, and interest in the property. It gives solemnity of form and perpetuate documents which are of legal importance or relevance by recording them, where people may see the record and enquire and ascertain what the particulars are and as far as land is concerned what obligations exist with regard to them. It ensures that every person dealing with immovable property can rely with confidence upon the statements contained in the registers (maintained under the said Act) as a full and complete account of all transactions by which the title to the property may be affected and secure extracts/copies duly certified.¹Suraj Lamp and Industries Pvt. Ltd vs State of Haryana and Ors AIR 2012 SC 206

Registration was made compulsory especially in cases of agreements for sale of immovable property as many people had resorted to effecting transfer by way of a mere contract, General Power of Attorney and a Will which caused huge losses to the government in terms of revenue and encouraged black money transactions and land mafia activities. These kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges on deeds of conveyance to avoid payment of capital gains on transfers to invest unaccounted money (black money).  Therefore, in order to discourage such activities, amendments were brought to Registration Act and Stamp Act to address the issue.

Case Laws

i. Suraj Lamp and Industries Pvt. Ltd vs State of Haryana and Ors²AIR 2012 SC 206

In this matter, the three-judge bench of the Supreme Court deprecated the prevalent practice of effecting transfer of immoveable property by way of an unregistered Agreement to Sell, a general power of attorney or by way of will and categorically dealt with each of the aforesaid transactions and held them to be invalid, as follows-

1. Agreement to Sale- The Supreme Court noted the express bar stipulated in Section 54 of the Act viz. an agreement to sale does not, of itself, create any interest in or charge on the property.
2. Power of Attorney- The Supreme Court held that a power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property. The power of attorney is creation of an agency whereby the grantor authorizes the grantee to do the acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done by him (see Section 1A and Section 2 of the Powers of Attorney Act, 1882). It is revocable or terminable at any time unless it is made irrevocable in a manner known to law. Even an irrevocable attorney does not have the effect of transferring title to the grantee.
3. Will- A will is the testament of the testator. It is a posthumous disposition of the estate of the testator directing distribution of his estate upon his death. It is not a transfer inter vivo. The two essential characteristics of a will are that it is intended to come into effect only after the death of the testator and is revocable at any time during the lifetime of the testator. It is said that so long as the testator is alive, a will is not worth the paper on which it is written, as the testator can at any time revoke it. If the testator, who is not married, marries after making the will, by operation of law, the will stands revoked. (see Sections 69 and 70 of Indian Succession Act, 1925). Registration of a will does not make it any more effective.

Therefore, in the aforesaid terms, the Supreme Court reiterated the settled position of law that an immovable property can be legally and lawfully transferred only by way of a registered deed of conveyance and transfers in the nature of a mere agreement to sale, power of attorney or will do not amount to transfer nor can they be recognized as a valid mode of transfer of immoveable property.

ii. Shakeel Ahmed vs Syed Akhlaq Hussain³2023 INSC 1016 

The Respondent, in this case had filed a suit for possession and mesne profits on the strength of a Power of Attorney, an unregistered agreement to sell, an affidavit and a will which was executed in favour of the Respondent. The Trial Court decreed the suit in favor of the Respondent. In Appeal, the High Court confirmed the judgment.  The judgment was finally challenged before the Supreme Court which held as follows-

1. The Supreme Court referred to the decision in Suraj Lamps (supra) and held that no title can be transferred on the basis of an unregistered agreement to sell or a power of attorney or a will. The said mode of transaction is invalid.
2. Once this is the settled position, the Respondent could not have maintained the suit for possession against the Appellant.

Holding in the aforesaid terms, the Supreme Court set aside the judgment of High Court and dismissed the Suit filed before the Trial Court.

iii. Balram Singh vs Kelo Devi⁴2022 INSC 1011 

Plaintiff filed a Suit for permanent injunction for restraining the defendant from disturbing her possession of the suit property. The suit was filed on the basis of an unregistered agreement to sell. The Defendant filed a counterclaim for seeking decree of possession. The Trial Court dismissed the suit and allowed the counter claim filed by the Defendant for possession of the property on the basis that the Plaintiff failed to prove the agreement to sell. The said judgement of trial court was challenged before the first appellate court which reversed the findings of the trial court and allowed the suit in favor of the Plaintiff. In appeal, the High Court confirmed the judgment of first appellate court in favor of the Plaintiff. The judgment of High Court was challenged before the Supreme Court which held as follows:

1. The Agreement to sell was unregistered therefore, it could not be admissible in evidence.
2. The Plaintiff cannot get relief indirectly which otherwise he cannot get in a suit for substantive relief i.e. in the present case the relief of specific performance. The Plaintiff cleverly prayed for relief of permanent injunction only and did not seek for the substantive relief of specific performance of the agreement to sell as the agreement to sell was an unregistered document and therefore on such unregistered document/agreement to sell, no decree for specific performance can be passed.

Observing in the above terms, the Supreme Court dismissed the suit filed by the Plaintiff.

Difference between Sale Deed and Agreement to Sell

In Ramesh Chand (D) Thr. LRs. vs Suresh Chand & Anr⁵2025 INSC 1059 the Supreme Court reiterated that an Agreement to Sell and General Power of Attorney do not transfer title in the Immoveable property. The Court further explicated that there is a difference between a sale deed and an agreement for sale or contract for sale. A contract for sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. While a sale is a transfer of ownership; a contract for sale is merely a document creating right to obtain another document, namely a registered sale deed to complete the transaction of sale of an immovable property. Section 54 in its definition of sale does not include an agreement of sale and neither confers any proprietary rights in favour of the transfree nor by itself create any interest or charge in the property. If after entering into a contract for sale of property, the seller without any reasonable excuse avoids executing a sale deed, the buyer can proceed to file a suit for specific performance of the Contract.

Application of Section 53A

Section 53A of the Transfer of Property Act recognizes possessory rights of a person over the property in absence of a complete agreement to sell executed between the parties. Once an agreement to sell has been executed between the parties for sale of an immovable property, and the transferee (the purchaser) has taken possession of property in furtherance of the Agreement in part performance of the agreement to sell, then, the fact that the agreement of sale remained incomplete for want of consideration or for any law being in force, cannot dispossess the transferee (the purchaser) from the possession of the property. Section 53A provides a shield to the bonafide purchaser of the property who, once having come in possession of the property pursuant an agreement to sell, is being asked to vacate it by the Transferor (the vendor) despite the transferee (the purchaser) willing to perform the agreement to sell and pay the balance consideration as the case may be.

The Supreme Court in Shrimant Shamrao Suryavanshi and Anr. v. Pralhad Bhairoba Suryavanshi (D) by L.Rs. and Ors.⁶(2002) 3 SCC 676  culled out the necessary ingredients in order to set up the defence embodied in Section 53 A, by the purchaser, viz.-

“(1) there must be a contract to transfer for consideration of any immovable property;

(2) the contract must be in writing, signed by the transferor, or by someone on his behalf;

(3) the writing must be in such words from which the terms necessary to construe the transfer can be ascertained;

(4) the transferee must in part-performance of the contract take possession of the property, or of any part thereof;

(5) the transferee must have done some act in furtherance of the contract; and

(6) the transferee must have performed or be willing to perform his part of the contract.”

Prior to 2001, in order to seek the benefit of Section 53A of the Act, it was not necessary that the Agreement to Sell must be registered. Even an unregistered agreement to sell could be used to seek the benefit of Section 53 A by the purchaser of the property. However, in 2001, an amendment was brought to the Registration Act, viz. Act 48 of 2001 by way of which Section 17 (1) A was inserted in Section 17 of the Registration Act, reading as follows:

“17 (1) A. The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of the Registration and Other Related laws (Amendment) Act, 2001 (48 of 2001) and if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said section 53A.”

Section 17(1)A came into effect from 24.09.2001 making it mandatory to register the Agreement to Sell even for the purposes of Section 53A of the Act. Therefore, a purchaser cannot set up the defence of Section 53A unless the Agreement to sell has been registered. This position of law has further been recognized by the Supreme Court Commissioner of Income Tax vs Balbir Singh Maini.⁷2017 INSC 1002

However, it is imperative to mention the recent judgment of the Supreme Court in this regard viz. Ghanshaym vs Yogendra Rathi.⁸AIR 2023 SC 2754 The facts in the said case were that the Plaintiff instituted a suit for eviction of the Defendant and for mesne profits on the averment that he is owner of the property on the basis of an agreement to sell dated 10.04.2002, power of attorney, memo of possession, receipt of payment of sale consideration as well as a will of the Defendant bequeathing the suit property in Plaintiff’s favour. Pursuant to the Agreement to sell dated 10.04.2002, the Plaintiff had taken possession of the property in part performance of the Contract and allowed the Defendant to retain possession of the ground floor of the property only in the capacity of a licensee. Once the duration of the license was over, the licensee-defendant refused to leave the premises and contested the sale deed. Therefore, the Suit was filed by the Plaintiff. The Trial Court and High Court held in favor of the Plaintiff and decreed the suit for eviction of the Defendant. The matter was finally challenged before the Supreme Court which categorically noted the decision of Supreme Court in Suraj Lamps (supra) and stated that an Agreement to Sale, power of attorney or a will are not a valid mode for transfer of an immovable property. However, the Court stated that since the Plaintiff had been put in possession of the property, he has obtained possessory rights over the property in terms of Section 53A and his possession over the property ought to be protected. Holding in the aforesaid terms the Supreme Court dismissed the Appeal confirming the judgments of trial court and High Court which upheld the possession of the Plaintiff over suit premises.

It is imperative to mention that in the aforesaid judgment, the Supreme Court completely overlooked the express bar envisaged in Section 17(1)A of the Registration Act which categorically stipulates that the benefit of Section 53A cannot come to the rescue of the purchaser unless the agreement to sell is registered. However, the Supreme Court despite noting the decision in Suraj Lamps (supra) and recognising the position of law that an unregistered agreement to sell does not confer any title, granted possessory rights to Plaintiff in terms of Section 53A of the Act, completely overlooking the application of Section 17(1)A of the Registration Act. Therefore, the decision of Apex Court in Ghanshyam appears to be an aberration and per incuriam in view of the express bar envisaged Section 17(1)A of the Registration Act.  

 Conclusion

Registration of an agreement to sell is a mandatory ingredient for the purposes of effecting a valid sale of an immovable property. In absence of registration, the agreement to sell or the subsequent sale of property comprised in the said agreement are not recognized in the eyes of law. Stringent amendments have been brought by the legislature to make the registration of agreement to sell mandatory so as to authenticate the sale of the immovable property and plug illegal transactions and land mafia activities. Even for the purposes of Section 53A of the transfer of property Act, it is now mandatory to get the sale deed registered, in absence of which, the defence of Section 53A cannot be taken by the purchaser. As noted hereinabove, the decision of Supreme Court in Ghanshyam vs Yogendra Rathi (supra), in this regard, appears to be per incuriam and ought to be reconsidered.