SUPREME COURT HOLDS THAT AN UNREGISTERED AGREEMENT TO SELL IS ADMISSIBLE AS EVIDENCE OF CONTRACT IN A SUIT FOR SPECIFIC PERFORMANCE

A Two Judge Bench of the Supreme Court comprising of Justice M.R. Shah and Justice Krishna Murari passed a Judgment dated 10.04.2023 in ‘R. Hemalatha v Kasthuri, Civil Appeal No. 2535 of 2023’ and held that an unregistered agreement to sell can be admitted as an evidence of contract in a suit for specific performance.

Facts:

i) Kasthuri (Plaintiff- Buyer) and Ms. Hemalatha (Defendant- Seller) entered into an Agreement to Sell dated 10.09.2013 for sale of property to the Plaintiff- Buyer for Rs. 22,00,000/-. The said Agreement to Sell was an unregistered instrument.

ii) On the date of the Agreement, the Plaintiff- Buyer remitted an advance of Rs. 20,00,000/- to the Defendant-Seller and the balance payable within a period of 6 months from the date of the Agreement. However, the Defendant- Seller failed to sell her property to the Plaintiff- Buyer.

iii) Aggrieved, the Plaintiff- Buyer filed an Original Suit (OS) No.199 of 2014 before the Ld. Third Additional District Judge, Trichy (Trial Court) seeking specific performance of the Agreement to Sell on the ground that the Plaintiff was always willing to proceed with the Agreement but the Defendant had failed to perform her part of the contract.

iv) The Ld. Trial Court framed a preliminary issue on the admissibility of the Agreement to Sell dated 10.09.2013 as evidence.

v) That the Plaintiff- Buyer relied upon the Proviso to Section 49 (Effect of non-registration of documents required to be registered) and argued that an unregistered Agreement to Sell can be admitted as evidence of a contract in a suit for specific performance of the said contract. The Proviso to Section 49 of the Registration Act is reproduced below for easy reference:

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 (3 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument.

vi) On the other hand, the Defendant-Seller argued that in view of Section 17 (1) (g) of the Registration Act, 1908 (Registration Act), inserted vide Tamil Nadu Amendment Act No. 29 of 2012, an unregistered Agreement to Sell is inadmissible in evidence. The said Amendment requires compulsory registration of agreements relating to sale of immovable property valued at Rs. 100 or above. The Amendment omitted the Explanation to Section 17(2) of the Registration Act that states that a document to effect sale of immovable property would not require registrat The Explanation to Section 17(2) of the Registration Act is reproduced below for easy reference:

A document purporting or operating to effect a contract for the sale of immovable property shall not be deemed to require or ever to have required registration by reason only of the fact that such document contains a recital of the payment of any earnest money or of the whole or any part of the purchase money.

vii) The Ld. Trial Court vide Order dated 04.04.2017 held that the unregistered Agreement dated 10.09.2013 is inadmissible in evidence.

viii) Aggrieved by the Trial Court Order dated 04.04.2017, the Plaintiff-Buyer filed a Civil Revision Petition (CRP) (MD) No.1877 of 2017 before the Madurai Bench of Madras High Court.

ix) The High Court vide Order dated 01.02.2022 set aside the Trial Court’s Order dated 04.04.2017 and held that based on the Proviso to Section 49 of the Registration Act, the unregistered Agreement to Sell be received in evidence.

Supreme Court Observations:

Aggrieved by the High Court’s Order dated 01.02.2022, the Defendant-Seller filed a Civil Appeal No. 2535 of 2023 before the Supreme Court.

The issue before the Bench was whether an unregistered agreement to sell executed for sale of immovable property, which otherwise requires compulsory registration can be received in evidence or not.

The Apex Court passed a Judgment dated 10.04.2023 and made the following observations:

1. That despite insertion of Section 17(1)(g) of the Registration Act and omission of the Explanation to Section 17(2), no corresponding amendment has been made to Section 49 of the Registration Act.
2. As per the Proviso to Section 49, an unregistered document affecting immovable property that is required to be registered by the Registration Act may be received as evidence of a contract in a suit for specific performance.

Conclusion:

Thus, based on the aforesaid observations, the Supreme Court vide its Judgment dated 10.04.2023 dismissed the Appeal filed by the Defendant-Seller and upheld the Order of the High Court dated 01.02.2022, which allowed the admission of the unregistered Agreement to Sell as evidence in a suit for specific performance.

 

Shalini Donthi

Legal Associate

The Indian Lawyer