Source: Supreme Court  

Why in News? 

Recently, the bench of Justices JB Pardiwala and R Mahadevan held that in the absence of a suit for specific performance, an agreement to sell cannot be made the basis for claiming ownership, title, or any transferable interest in the property. Such an agreement, by itself, does not create any right, title, or interest under the Transfer of Property Act, 1882,(TPA) and cannot be enforced unless it is followed by a decree for specific performance under the Specific Relief Act, 1963. 

• The Supreme Court held this in the matter of Vinod Infra Developers Ltd. v. Mahaveer Lunia & Ors. (2025). 

What was the Background of Vinod Infra Developers Ltd. v. Mahaveer Lunia & Ors., (2025) Case? 

• Vinod Infra Developers Ltd. claimed ownership of agricultural land in Village Pal, Jodhpur, and had borrowed Rs. 7.5 crores from Mahaveer Lunia in 2014. 
• As security for this loan, the company executed unregistered documents including a power of attorney and agreement to sell in favor of Lunia through a board resolution. 
• The original sale deeds of the property were impounded by the Collector of Stamps for insufficient stamp duty, and the company handed over these documents to Lunia as additional security. 
• In April 2022, when the company approached Lunia to settle the loan and retrieve the documents, he failed to respond. 
• Consequently, the company's Board of Directors revoked Lunia's authority and the power of attorney in May 2022. 
• Despite this revocation, Lunia proceeded to execute registered sale deeds in July 2022 in his favour and that of other respondents, leading to mutation of their names in revenue records. 
• The company then filed a civil suit seeking declaration of title, possession, and permanent injunction, claiming the sale deeds were void due to prior revocation of authority. 
• The respondents challenged the suit under Order VII Rule 11 CPC, which was initially dismissed by the trial court but later allowed by the High Court, resulting in rejection of the plaint entirely.

What were the Court’s Observations? 

• The Supreme Court observed that unregistered documents such as agreements to sell and powers of attorney cannot confer any valid authority to transfer title under Sections 17 and 49 of the Registration Act, 1908. 
• The Court emphasized that in the absence of a suit for specific performance, an agreement to sell cannot be relied upon to claim ownership or assert any transferable interest in immovable property. 
• It was noted that Section 54 of the Transfer of Property Act categorically provides that a contract for sale of immovable property does not, by itself, create any interest in or charge on such property. 
• The Court found that the subsequent revocation of the power of attorney prior to execution of the sale of deeds rendered Respondent No.1's actions legally ineffective and without authority. 
• The High Court was found to have erred in rejecting the plaint entirely without examining the distinct cause of action arising from sale of deeds executed after revocation of authority. 
• The Court reiterated that title to immovable property can only be adjudicated by competent civil courts and not by revenue authorities, as revenue entries are merely administrative and for fiscal purposes. 
• Finally, it was observed that serious triable issues arose from the pleadings which required adjudication by a competent civil court rather than summary rejection under Order VII Rule 11 CPC. 

What is Section 54 of TPA? 

• Section 54 of the Transfer of Property Act categorically defines "sale" as a transfer of ownership in exchange for a price, which can only be made through a registered instrument for immovable property valued at one hundred rupees and upwards. 
• It was emphasized that Section 54 clearly distinguishes between a "sale" and a "contract for sale," stating that a contract for sale of immovable property does not, of itself, create any interest in or charge on such property. 
• For tangible immovable property valued at one hundred rupees and upwards, such transfer can be made only by a registered instrument. 
• For tangible immovable property valued at less than one hundred rupees, the transfer may be made either by a registered instrument or by delivery of the property. 
• Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property. 
• A contract for the sale of immovable property is defined as a contract that a sale of such property shall take place on terms settled between the parties. 
• The section specifically clarifies that a contract for sale does not, of itself, create any interest in or charge on such property. 
• This provision establishes a clear distinction between an actual "sale" (which transfers ownership) and a "contract for sale" (which is merely an agreement to sell in future). 
• The section mandates compulsory registration for transfers of immovable property above the specified value, making unregistered documents legally ineffective for transferring title. 
• Unregistered agreements to sell, even if coupled with possession, do not convey title or create any interest in immovable property, as they fail to meet the requirements of Sections 54 and 55 of the Transfer of Property Act. 
• Title and ownership of immovable property can only be conveyed by a registered deed of sale, and any document falling short of this requirement cannot effectuate a valid transfer 
• An agreement to sell is not a conveyance and does not constitute a document of title or deed of transfer that confers ownership rights. 
• The subsequent revocation of authority further nullified any claim to title based on such unregistered documents, making the entire transaction legally ineffective. 

Cases Referred  

• S. Kaladevi v. V.R. Somasundaram (2010): Unregistered documents under Sections 17 and 49 of the Registration Act and their admissibility only for collateral purposes or in suits for specific performance. 
• Muruganandam v. Muniyandi (Died) through LRs. (2025): Unregistered documents may be received as evidence of a contract in suits for specific performance under the proviso to Section 49 of the Registration Act. 
• Suraj Lamp & Industries (P) Ltd. v. State of Haryana (2012): Unregistered agreements to sell do not convey title or create interest in immovable property, and that SA/GPA/WILL transactions are not valid modes of transfer. 
• Cosmos Co. Operative Bank Ltd v. Central Bank of India & Ors. (2025): Title and ownership of immovable property can only be conveyed by a registered deed of sale. 
• M.S. Ananthamurthy v. J. Manjula (2025): Unregistered agreements to sell cannot create or transfer any right, title, or interest in immovable property. 
• Central Bank of India v. Prabha Jain (2025): - A plaint cannot be rejected entirely if even one cause of action survives, and that partial rejection under Order VII Rule 11 CPC is not permissible.