Supreme Court rules that an unregistered agreement to sell is admissible as evidence in a suit for specific performance.

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2535/2023

(@SLP (C) No. 14884/2022)

R. HEMALATHA                                                                                                                                                                                                                                           ...APPELLANT(S)     

VERSUS

KASHTHURI                                                                                                                                                                                                                                           …RESPONDENT(S)

J U D G M E N T M. 

R. Shah, J.

1. Leave granted. 

2. Feeling   aggrieved   and   dissatisfied   with   the impugned judgment and order passed by the High   Court   of   Judicature   at   Madras   at Madurai   passed   in   Revision   Application  Not Verified No.1877 of 2017 dated 01.02.2022 by which the High Court has allowed the said revision application preferred by the respondent herein by quashing and setting aside the order passed by   the   learned   Trial   Court   passed   in   I.A. No.159   of   2017   in   O.S.   No.199   of   2014   by further   directing   that   the   document   in question shall be received in evidence in the suit   for   specific   performance,   the   original defendant has preferred the present appeal. 

3. The facts leading to the present appeal in nutshell are as under:

2.1 That   the   respondent   herein   is   an   original plaintiff   (hereinafter   referred   to   as   “original plaintiff”) instituted civil suit being O.S. No.199 of   2014   for   specific   performance   of   the Agreement to Sell dated 10.09.2013. After the  chief­examination of the plaintiff as PW­1, on the application filed by the appellant – original defendant, a preliminary issue was framed by the learned Trial Court on the admissibility of the Agreement dated 10.09.2013 in evidence. It was the case on behalf of the defendant that in view of the Tamil Nadu Amendment Act No.29 of 2012 to the Indian Registration Act, under which the instruments of agreement relating to sale   of   immovable   property   of   the   value   of Rs.100/­   and   upwards   is   compulsorily required to be registered, the said unregistered document   shall   be   inadmissible   in   evidence. On the other hand, relying upon Section 49(a) and (c) of the Act, it was submitted that an unregistered Agreement to Sell can be admitted as evidence of a contract in a suit for specific performance. The learned Trial Court held the preliminary issue in favour of the defendant and against the plaintiff by observing that the unregistered   Agreement   dated   10.09.2013 shall not be admissible in evidence.

2.2 Feeling   aggrieved   and   dissatisfied   with   the order of the learned Trial Court, the plaintiff preferred   the   present   revision   application before   the   High   Court.   By   the   impugned judgment   and   order,   the   High   Court   has allowed   the   revision   petition   relying   upon Section 49 of the Registration Act by setting aside the order passed by the learned Trial Court   and   directed   that   the   agreement   in question be received in evidence considering the fact that the suit in question is a suit for specific   performance,   which   falls   within   the first   exception   carved   out   in   the   proviso   to Section 49.

2.3 The impugned judgment and order passed by the   High   Court   directing   to   receive   the unregistered Agreement to Sell in evidence in a   suit   for   specific   performance,  the   original defendant has preferred the present appeal.

3. Learned counsel appearing on behalf of the appellant   herein   –   original   defendant   has vehemently submitted that in the facts and circumstances of the case, the High Court has materially   erred   in   directing   to   receive   the unregistered agreement in evidence.

3.1 It is submitted that it is an admitted position that the Agreement to Sell dated 10.09.2013 which is the foundation or basis of the suit is an   unregistered   Agreement   to   Sell   and  therefore cannot be exhibited in evidence for the main purpose in the suit, in view of the Tamil Nadu Amendment to Section 17 of the Registration Act making an Agreement to Sell to be compulsorily registered with effect from 01.12.2012.

3.2 It is submitted that the “explanation” attached to   sub­clause   (2)   of   Section   17   which   also relates to Agreement to Sell has been omitted. It   is   submitted   that   said   explanation   was inserted   by   Amendment   Act,   1927,   to overcome the judgment of the Privy Council in the   case   of  Dayal   Singh   vs.   Indar   Singh, (1926) 24 LW 396. It is submitted that in that case, an advance paid under an Agreement to Sell  being  a  charge  on   the  property  as  per Section 55(6)(v) of the Transfer of Property Act  was   held   to   create   an   interest   and   hence, unregistered   Agreement   to   Sell   cannot   be admitted   in   evidence.   The   explanation remedied   the   situation   and   save   the Agreement   to   Sell   from   the   requirement   of compulsory registration.

3.3 It is submitted that Section 54 of the Transfer of Property Act states that an Agreement to Sell by itself does not create any interest in or charge on the property. As per Section 17(2)(v) of   the   Registration   Act   with   reference   to Section   1(b)   and   (c),   that   an agreement/document   simplicitor   merely creating a right to obtain another document, was saved from compulsory registration. It is submitted that thus prior to the amendment of   2012   and   after   the   amendment,   an  Agreement   to   Sell   simplicitor   or   reciting payment of earnest money was not required to be registered. For these savings, an Agreement to Sell would also have required registration, as   it   is   a   document   affecting   immovable property. It is submitted that now after the 2012  amendment,   an   Agreement   to   Sell   for Rs.100/­   or   upwards   is   to   be   compulsorily registered. An agreement recital for payment of advance is also to be compulsorily registered as   the   “explanation”   in   Section   17(2) introduced by 1927 amendment after  Dayal Singh’s case, has been omitted by the present amendment.   The   advance   amount   and   sale consideration   are   part   and   parcel   of   the transactions between the parties. 

3.4 It is submitted that as per Section 49(a) and (c)   of   the   Registration   Act,   a   document requires to be registered, if not registered shall not affect the immovable property comprised therein and shall not be received as evidence of any transaction affecting such property. It is submitted that prior to 2012 amendment, when an Agreement to Sell was not required to be   registered,   Section   49(a)   and   (c)   had   no operation in relation to an Agreement to Sell. So an unregistered Agreement to Sell had no restriction in being received as evidence of any transaction affecting such immovable property or   affecting   immovable   property   as   such. Thus,   the   terms   of   the   document   and   the transaction embodied in it could be relied on in its entirety in any proceeding in the preamendment era. It is submitted that however  now after the amendment, Section 49(a) and (c)   of   the   Registration   Act   which   are   both substantive law and rule of evidence, apply to an unregistered Agreement to Sell and it shall not affect immovable property and shall not be received as evidence of transaction affecting immovable property.

3.5 It is further submitted by the learned counsel for the defendant that if the interpretation of the Hon’ble High Court given in the impugned order is followed, then the same would render the   Amendment   Act,   2012   otiose   and meaningless,   simply   because   the   situation before the said amendment was exactly as has been laid down in the impugned order. The legislative intent behind making an Agreement to Sell, a compulsorily registrable document  has been completely ignored by the Hon’ble High Court.

3.6 It   is   submitted   that   after   introduction   of   a specific provision relating to Agreement to Sell in   Section   17(1)(g)   of   the   Act,   and   in   the absence of any amendment in Section 17(2) to include clause (g) also within its fold, Section 17(2)(v)   will   only   operate   in   relation   to documents   covered   under   the   general provision of Clauses (b) and (c) of sub­section (1). it is submitted that in that sense Section 17(2)(v) will apply to all other agreements to mortgage, to lease, to release, to exchange etc. but will not apply to an Agreement to Sell.

3.7 Making   above   submissions,   it   is   prayed   to allow the present appeal and quash and set aside   the   impugned   order   passed   by   the  Hon’ble High Court and to restore the order passed by the learned Trial Court.

4. While   opposing   the   present   appeal,   learned counsel   appearing   on   behalf   of   original plaintiff has heavily relied upon the proviso to Section   49   of   the   Registration   Act   which specifically   provides   that   an   unregistered document   affecting   the   immovable   property and   required   by   the   Registration   Act   to   be registered may be received as evidence of a contract   in   a   suit   for   specific   performance under Chapter­II of the Specific Relief Act or as evidence of any collateral transaction not required   to   be   affected   by   registered instrument.

4.1 It is submitted that as rightly observed and held by the Hon’ble High Court though Section  17(1)   of   the   Registration   Act   has   been amended   by   the   Tamil   Nadu   Act,   2012   by inserting   Section   17(1)(g),   making   the Agreement   to   Sell/   Agreement   affecting   any immovable property compulsorily required to be   registered,   there   is   no   corresponding amendment  to  Section   49   more   particularly proviso to Section 49 of the Registration Act.

4.2 It is further submitted that even the object and purpose of Tamil Nadu Amendment Act, 2012 more particularly inserting Section 17(1) (g)   is   required   to   be   considered   which   has been elaborately dealt with and considered by the   Hon’ble   High   Court   in   the   impugned judgment   and  order.  It is  submitted that  a perusal of statement of objects and reasons to the   Act   No.29   of   2012   would   suggest   that  primarily the amendment has been introduced by the State of Tamil Nadu by reason of the fact that instruments of agreement relating to sale   of   immovable   property,   instruments   of power   of   attorney   relating   to   immovable property   and   instruments   evidencing agreement of deposit of title deeds, which were not registrable were resulting in loss to the exchequer as the public were executing these documents on white paper or on stamp paper of nominal value.

4.3 With   the   above   submissions   and   heavily relying upon the proviso to Section 49 of the Registration Act, it is prayed to dismiss the present appeal.

5. We have heard the learned counsel appearing on behalf of respective parties at length. The  short question posed for the consideration of this Court is effect of Section 17(1)(g) of the Registration   Act   applicable   to   the   State   of Tamil Nadu by which Section 17(1)(g) of the Registration   Act   has   been   inserted   and instruments of agreement relating to sale of immovable property of the value of Rs.100/­ and upwards is made compulsorily registrable and   whether   such   unregistered   agreement relating to sale of immovable property can be received   in   evidence   in   a   suit   for   specific performance?

6. While   answering   the   aforesaid   issues   and appreciating the submissions made by learned counsel appearing on behalf of the respective parties,   Section   17   of   the   Registration   Act, 1908, as applicable prior to the Registration Page 15 of 26 (Tamil   Nadu   Amendment)   Act,   2012   and Section   17   post   Amendment   Act,   2012,   are required to be referred to which are as under.

7. Section 17 of the Registration Act, 1908, post Tamil Nadu Amendment Act, 2012 reads as under : “17.   Documents   of   which   registration   is compulsory.—(1) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the Indian   Registration   Act,   1871,   or   the   Indian Registration Act, 1877, or this Act came or comes into force, namely:— (a) instruments of gift of immovable property;  (b)   other   non­testamentary   instruments   which purport or operate to create, declare, assign, limit or extinguish,   whether   in   present   or   in   future,   any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property;  (c)   non­testamentary   instruments   which acknowledge   the   receipt   or   payment   of   any consideration   on   account   of   the   creation,  declaration, assignment, limitation or extinction of any such right, title or interest; and (d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent; [(e)   non­testamentary   instruments   transferring   or assigning any decree or order of a Court or any award   when   such   decree   or   order   or   award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property:]  Provided that the [State Government] may, by order published in the [Official Gazette], exempt from the operation of this sub­section any lease executed in any district, or part of a district, the terms granted by which do not exceed five years and the annual rents reserved by which do not exceed fifty rupees.  [(1A) The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of   the   Registration   and   Other   Related   laws (Amendment) Act, 2001 (48 of 2001) and if such documents   are   not   registered   on   or   after   such commencement, then, they shall have no effect for the purposes of the said section 53A.]  (2) Nothing in clauses (b) and (c) of sub­section (1) applies to— (i) any composition deed; or  (ii) any instrument relating to shares in a joint stock Company, notwithstanding that the assets of such Company consist in whole or in part of immovable property; or (iii) any debenture issued by any such Company and not creating, declaring, assigning, limiting or extinguishing   any  right,   title   or  interest,   to   or  in immovable property except in so far as it entitles the holder to the security afforded by a registered instrument whereby the Company has mortgaged, conveyed or otherwise transferred the whole or part of its immovable property or any interest therein to trustees upon trust for the benefit of the holders of such debentures; or (iv)   any   endorsement   upon   or   transfer   of   any debenture issued by any such Company; or (v)   [any   document   other   than   the   documents specified   in   sub­section   (1A)]   not   itself   creating, declaring, assigning, limiting or extinguishing any right, title or interest of the value of one hundred rupees and upwards to or in immovable property, but   merely   creating   a   right   to   obtain   another document   which   will,   when   executed,   create, declare, assign, limit or extinguish any such right, title or interest; or (vi) any decree or order of a Court [except a decree or order expressed to be made on a compromise and comprising immovable property other than that which   is   the   subject­matter   of   the   suit   or proceeding]; or (vii)   any   grant   of   immovable   property   by [Government]; or  (viii)   any   instrument   of   partition   made   by   a Revenue­Officer; or (ix)   any   order   granting   a   loan   or   instrument   of collateral   security   granted   under   the   Land Improvement Act, 1871, or the Land Improvement Loans Act, 1883; or (x)   any   order   granting   a   loan   under   the Agriculturists, Loans Act, 1884, or instrument for securing the repayment of a loan made under that Act; or [(xa)   any   order   made   under   the   Charitable Endowments   Act,   1890  (6  of   1890),   vesting   any property in a Treasurer of Charitable Endowments or divesting any such Treasurer of any property; or] (xi)   any   endorsement   on   a   mortgage­deed acknowledging the payment of the whole or any part of the mortgage­money, and any other receipt for payment of money due under a mortgage when the   receipt   does   not   purport   to   extinguish   the mortgage; or (xii) any certificate of sale granted to the purchaser of any property sold by public auction by a Civil or Revenue­Officer. [Explanation.—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.]” 

8. By Tamil Nadu Amendment Act, 2012, Section 17(1)(g) has been inserted and “explanation” to Section 17(2) has been omitted. Section 17(1) (g) as inserted by Tamil Nadu Amendment Act, 2012, reads as under : “17(1)(g) instruments of agreement relating to sale of immovable property of the value of one hundred rupees and upwards.”

…………………………………J.             

(M. R. SHAH) …………………………………J.

(KRISHNA MURARI)

New Delhi,  April 10, 2023