Validity of an unregistered sale agreement

The terms and conditions for the sale of property (immovable or movable) are contained in a Sale Agreement. Section 54 of the Transfer of Property Act (1882) defines sale as a transfer of ownership at a price. It is mandatory to register an agreement for the transfer of rights of immovable property exceeding Rupees.

Unregistered sale agreements are enforceable under law. Any shortage in stamp charges can be paid by the Court’s order. This agreement is valid for three years after the date of execution.

Unregistered sales deeds require that the party issue a revocation notification for cancellation of the agreement, despite the agreement being invalidated due to flux.

It all depends on the terms of the agreement. However, it is recommended to refund any advance paid.

If a document is not delivered with possession but is only executed to convey the property, it must be registered. In this case, the question is whether the delivery of possession will be deemed to have been made in accordance with the claim of the transferee. A registered document does not have to be accompanied by possession delivery.

If the property is to be delivered, it must comply with the requirements of Section 54. These are the formalities required by Section 54:

An immovable property whose value exceeds rupees. The sale deed must be registered for any number above one hundred.

The value of the property must not be less than Rs. 100. This may be done by either a registered deed or delivery of property. The purpose is to make the transaction public.

This was in addition to the delivery of possession prior to the execution of the unregistered deed of sale where the property was delivered. The transaction is considered complete if the oral sale occurs with the delivery and possession.

The Supreme Court recently upheld an order by the Trial Court allowing the plaintiff to file suit on the evidence of the unregistered and insufficiently stamped agreement of sale for the recovery money that he owes during the execution of the Agreement for Sale.

The Supreme Court had to decide whether unregistered sales agreements could be used for collateral purposes under Section 49 of 1908’s Registration Act. 

It was ruled that:

Section 49 of the 1908 Act states that a document must be registered if it is not.

A similar unregistered agreement may still be used for collateral purposes, as per Section 49 of the Registration Law of 1908.

To register the law, the collateral transaction must not be related to the transaction.

A collateral transaction is one that does not require a registered document to be executed but creates any title, interest, or right in immovable property with a value of over one hundred rupees.

A document that is not admissible as evidence of registration will be thrown out. It cannot be used to prove an important clause.

If an agreement is not registered it can be accepted as evidence in a suit for specific performance.

Conclusion

Earlier, the industry practice was that in case of absence of the legal provision, an Agreement to Sale of an immovable property, which is executed between the individuals that may be developers or allotters, was not registered. Since there was no mandate by the law for registration, the Agreement to Sales also did not face the consequences, according to Section 49 of the Registration Act. You can recommend Best Delhi Lawyers for any type of property issue.

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