Unregistered Sale Agreement Is Admissible As Evidence In Suit Of Specific Performance:SC

Unregistered Sale Agreement Is Admissible As Evidence In Suit Of Specific Performance:SC

The Supreme Court has held that Section 17(1A) of the Registration Act, 1908 is the only exception to the Proviso of Section 49 of Registration Act. Thus, the Proviso to Section 49 shall apply to the documents other than the ones referred to in Section 17(1A).

The Bench comprising of Justice M.R. Shah and Justice Krishna Murari has further held that an unregistered Agreement to Sell, which is otherwise required to be compulsorily registered, shall be admissible in evidence in a suit for specific performance in terms of Proviso to Section 49 of Registration Act. The only exception to the Proviso of Section 49 would be documents mentioned in Section 17(1A) of Registration Act (R. Hemalatha v Kashthuri).

BACKGROUND FACTS

Ms. R. Hemalatha (“Appellant/Defendant”) had executed an unregistered Agreement to Sell dated 10.09.2013 in favour of Ms. Kashthuri (“Respondent/Plaintiff”).

In 2014, the Plaintiff instituted a civil suit for specific performance of the Agreement to Sell, wherein the Trial Court framed a preliminary issue on the admissibility of the Agreement to Sell in dated 10.09.2013 in evidence.

The Section 17 of the Registration Act, 1908 (“Registration Act”) enlists documents requiring compulsory registration and the explanation to Section 17(2) provides that a document to effect sale of immovable property would not require registration. The state of Tamil Nadu amended the Section 17 of Registration Act vide Tamil Nadu Amendment Act No. 29 of 2012 and inserted Section 17(1)(g) and the explanation to Section 17(2) has been omitted. Section 17(1)(g) requires compulsory registration of agreements relating to sale of immovable property valued at Rs. 100 or above. Further, under a Proviso to Section 49 of Registration Act, an unregistered Agreement to Sell can be admitted as evidence of a contract in a suit for specific performance.

The Defendant argued that in view of amended law and insertion of Section 17(1)(g), an unregistered Agreement to Sell was inadmissible in evidence. To the contrary, the Plaintiff argued that as per Proviso to Section 49, an unregistered Agreement to Sell can be admitted as evidence of a contract in a suit for specific performance. The Trial Court held that the unregistered Agreement dated 10.09.2013 is not admissible in evidence.

The Plaintiff preferred a revision before the High Court against the Trial Court’s order. The High Court set aside the Trial Court’s order while relying upon Section 49 of Registration Act. It was observed that the suit in question was a suit for specific performance, which falls within the first exception carved out in the Proviso to Section 49. Thus, the High Court directed that the unregistered Agreement to Sell be received in evidence.

The Defendant filed an appeal before the Supreme Court challenging the High Court’s order.

SUPREME COURT VERDICT

The issue before the Bench was whether an unregistered Agreement to Sell for sale of immovable property, which otherwise requires compulsory registration, can be received in evidence in a suit for specific performance?

The Bench observed that despite insertion of Section 17(1)(g) and omission of “explanation” to Section 17(2), no corresponding amendment has been made to Section 49 of the Registration Act.

Further, the Proviso to Section 49 of Registration Act provides that an unregistered document affecting the immovable property, which otherwise requires registration under Registration Act, may be received as evidence of a contract in a suit for specific performance, or as evidence of any collateral transaction not required to be affected by registered document.

Section 17(1A) is the only exception to Proviso of Section 49 of Registration Act

It was observed that the Proviso to Section 49 was inserted in 1929 and Section 17(1A) was inserted in 2001 in the Registration Act. Section 17(1A) requires compulsory registration of documents executed on or after 2001, which contain contract to transfer for consideration any immovable property for the purpose of Section 53A of Transfer of Property Act. The effect of non-registration of such documents shall have no effect for the purposes of said Section 53A. Thus, the exception to Proviso to Section 49 is provided under Section 17(1A) of the Registration Act. Otherwise, the Proviso to Section 49 with respect to the documents other than referred to in Section 17(1A) shall be applicable.

“Under the circumstances, as per proviso to Section 49 of the Registration Act, an unregistered document affecting immovable property and required by Registration Act or the Transfer of Property Act 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, or as evidence of any collateral transaction not required to be effected by registered instrument, however, subject to Section 17(1A) of the Registration Act. It is not the case on behalf of either of the parties that the document/ Agreement to Sell in question would fall under the category of document as per Section 17(1A) of the Registration Act”, the Bench observed.

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.

The appeal has been dismissed.

CASE TITLE: R. HEMALATHA V KASHTHURI

Citation: 2023 LiveLaw (SC) 304

Registration Act, 1908 - Proviso to Section 49-an unregistered document affecting immovable property and required by Registration Act or the Transfer of Property Act to be registered, may be received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by registered instrument - Para 12, 13

Registration Act, 1908 - Effect of Tamil Nadu amendment by which Section 17(1)(g) of the Registration Act has been inserted which makes agreement to sell immovable property valued above Rs 100 compulsorily registrable - Held, the amendment will not affect proviso to Section 49, which allows unregistered sale agreements to be received in evidence- Para 12, 13