Unregistered Agreements to Sell

Source: Supreme Court  

Why in News? 

Recently, the bench of Justices JB Pardiwala and R Mahadevan  held that an unregistered agreement to sell does not create or convey any right, title, or interest in immovable property under Section 54 of the Transfer of Property Act, 1882. 

• 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. ? 

• The appellant company, Vinod Infra Developers Ltd., claimed ownership of agricultural land comprising Khasra No. 175, 175/2, 175/4, 175/5, 175/6, 175/7 measuring 18 bighas 15 biswas situated in Village Pal, District Jodhpur, which they had purchased in 2013. 
• In 2014, the appellant company obtained a loan of Rs. 7,50,00,000/- from Respondent No. 1, Mahaveer Lunia. 
• To secure this loan, the company's Board of Directors passed a resolution on 23rd May 2014, authorising their Managing Director Mr. Vinod Singhvi and their authorised representative Mr. Mahaveer Lunia to sell the subject property. 
• Pursuant to this board resolution, on 24th May 2014, Mr. Vinod Singhvi executed an unregistered power of attorney and agreement to sell in favour of Respondent No. 1 concerning the subject property. 
• On 12th August 2015, the original sale deeds through which the appellant company had purchased the subject property were impounded by the Collector of Stamps for insufficient stamp duty. 
• The appellant company challenged this action before the Rajasthan Tax Board, which allowed their revision petition and remanded the matter back to the Collector of Stamps. 
• During this period, the appellant company handed over the original documents pertaining to the suit property to the private respondents as security for the loan. 
• In April 2022, when the appellant company approached the private respondents to settle the loan and retrieve the original documents, the respondents failed to respond. 
• On 24th May 2022, the Board of Directors passed a resolution revoking the authority granted to Respondent No. 1, thereby invalidating all related actions and declaring them as non-est. 
• The power of attorney was also formally revoked on 27th May 2022. 
• Despite this revocation, Respondent No. 1 proceeded to execute sale deeds dated 13th July 2022 and 14th July 2022, which were registered on 19th July 2022 in his favour and in favour of Respondent Nos. 2 to 4 in respect of the subject property. 
• Based on these sale deeds, their names were mutated in the revenue records. 
• Aggrieved by these developments, the appellant company instituted Original Civil Suit No. 122 of 2022 before the District Court, Jodhpur, against Respondent Nos. 1 to 4, as well as concerned government authorities and a developer. 
• The suit sought declaratory relief, possession, and permanent injunction in respect of the subject property. 
• During the pendency of the suit, Respondent Nos. 1 to 4 filed an application under Order VII Rule 11 of the Code of Civil Procedure, 1908, seeking rejection of the plaint. 
• This application was dismissed by the Additional District Judge No. 7, Jodhpur Metropolitan, by order dated 14th July 2023. 
• Challenging this dismissal, Respondent Nos. 1 to 4 filed S.B. Civil Revision Petition No. 99 of 2023 before the High Court of Judicature for Rajasthan at Jodhpur. 
• The High Court allowed this revision petition by the impugned order dated 31st January 2025, thereby rejecting the plaint. 
• This led to the present appeal before the Supreme Court. 

What were the Court’s Observations? 

• The Supreme Court clarified that an agreement to sell does not constitute a conveyance and therefore does not transfer ownership or confer title.  
• A plaint can only be rejected under Order VII Rule 11 CPC if it fails to disclose a cause of action on its face, without considering the defense or merits of the case. 
• The Court states that unregistered documents do not confer valid authority to transfer title, and such documents are inadmissible under Sections 17 and 49 of the Registration Act, 1908. 
• The Court emphasized that the power of attorney was unregistered and had been revoked prior to execution of sale deeds, leaving no valid authority to execute the impugned transactions. 
• The Court provides that the agreement to sell was effectively a mortgage transaction, with the appellant expressing willingness to repay the loan and redeem the property. 
• The Court states that issues relating to immovable property title fall exclusively within civil court jurisdiction, not revenue authorities, as revenue entries are merely administrative. 
• The Court observed that the High Court erred in treating the second cause of action as "academic" and rejecting the entire plaint without proper examination. 
• Section 23 of the Registration Act mandates registration within four months, which was not fulfilled for documents executed in 2014. 
• The Court states that the trial court correctly held the issues were triable, while the High Court improperly overturned this finding. 

What is an Unregistered Agreement to Sell? 

An unregistered agreement to sell is a contract document that: 

• Purports to create rights in immovable property valued at ₹100 or more 
• Should have been registered under Section 17 of the Registration Act, 1908 
• Remains legally ineffective for transferring title due to non-registration 

Legal Consequences Under Section 49 

According to Section 49 of the Registration Act, unregistered documents required to be registered: 

• Cannot affect immovable property comprised in the document 
• Cannot confer any power related to the property 
• Cannot be received as evidence of any transaction affecting the property 

Limited Exceptions (Proviso to Section 49) 

Unregistered agreements to sell may only be admitted as evidence for: 

• Specific performance suits - as evidence of a contract in suits seeking to enforce the agreement 
• Collateral transactions - for purposes not directly related to transferring property rights 

Key Cases Referenced: 

• S. Kaladevi v. V.R. Somasundaram (2010) 5 SCC 401 - Established that unregistered documents required to be registered cannot affect immovable property or be received as evidence of transactions affecting such property, except for collateral purposes or in suits for specific performance. 
• Suraj Lamp & Industries (P) Ltd. v. State of Haryana (2012) 1 SCC 656 - Definitively held that unregistered agreements to sell, even with possession, do not convey title or create interest in immovable property, and that only registered sale deeds can effectuate transfer of immovable property.