By Adv Akshay Kshirsagar on 16th April 2023
The judges M.R. Shah and Krishna Murari have ruled that even if an agreement to sell property is not registered (which is normally required by law), it can still be used as evidence in a lawsuit for specific performance. This is allowed under Section 49 of the Registration Act, which has a special provision for this situation. However, it should be noted that this exception only applies to cases where specific performance is being sought, and not to other types of disputes related to immovable property.
Ms. R. Hemalatha (the person being sued) made a written agreement to sell property to Ms. Kashthuri, but the agreement was not registered. Ms. Kashthuri then filed a lawsuit asking for specific performance of the agreement. The trial court, on September 10, 2013, raised a question about whether the unsigned agreement could be used as evidence in the case.
According to Section 17 of the Registration Act, certain types of documents must be registered, but the explanation to Section 17(2) states that an agreement to sell immovable property does not need to be registered. Additionally, a proviso to Section 49 of the Registration Act allows an unregistered agreement to sell to be presented as evidence of a contract in a lawsuit for specific performance.
In a particular legal case, the defendant argued that the law had been amended and that an unregistered agreement to sell was no longer admissible as evidence. The defendant pointed to the new Section 17(1)(g) of the Registration Act, which lists certain documents that must be compulsorily registered, including agreements for the sale of immovable property. The defendant claimed that this provision invalidated the earlier proviso to Section 49, which allowed unregistered agreements to sell to be used as evidence in a lawsuit for specific performance.
On the other hand, the plaintiff argued that the proviso to Section 49 still applied and that the unregistered agreement to sell was admissible as evidence in their specific performance lawsuit. The plaintiff asserted that the agreement could prove the existence of a valid contract between the parties.
However, the trial court ultimately held that the unregistered agreement to sell was not admissible as evidence in the case. The court likely reasoned that, despite the proviso to Section 49, the new Section 17(1)(g) required that agreements to sell immovable property be compulsorily registered. Since the agreement in question was unregistered, it could not be used as evidence to support the plaintiff’s claim for specific performance.
The plaintiff was not satisfied with the trial court’s ruling and decided to appeal to the high court. The high court overturned the trial court’s decision and relied on Section 49 of the Registration Act. The high court determined that the lawsuit in question was a specific performance case, which falls under the first exception outlined in the proviso to Section 49. Consequently, the high court directed that the unregistered agreement to sell should be admitted as evidence.
The Defendant filed an appeal before the Supreme Court challenging the High Court’s order.
The bench was addressing the question of whether an agreement to sell property that was not registered, despite registration being mandatory, could be presented as evidence in a specific performance lawsuit.
the proviso to Section 49 of the Registration Act allows an unregistered document related to immovable property, which is usually required to be registered, to be admissible as evidence in a specific performance lawsuit.
The court noted that the Proviso to Section 49 was added to the Registration Act in 1929, while Section 17(1A) was added in 2001. Section 17(1A) mandates the registration of documents executed after 2001 that include a contract to transfer any immovable property for consideration, for the purpose of Section 53A of the Transfer of Property Act. The failure to register such documents will have no effect under Section 53A. As a result, the exception to the Proviso to Section 49 is only applicable to documents not covered under Section 17(1A).
The Bench upheld the High Court’s view that the unregistered Agreement to Sell in question shall be admissible in evidence in a suit for specific performance as the Proviso is exception to the first part of Section 49.