Agreement to sell does not transfer ownership or confer any title: Supreme Court

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The Supreme Court recently reiterated that an agreement to sell does not transfer ownership rights or confer any title on the purchaser of the property [Munishamappa versus M. Rama Reddy & Ors].

The bench of Justices Vikram Nath and Rajesh Bindal made the observation while deciding a civil appeal in a property dispute.

“The agreement to sell is not a conveyance; it does not transfer ownership rights or confers any title,” the Court said.

In this case, the parties had entered into an agreement to sell in 1990. However, the seller later refused to execute the sale deed, leading to a dispute.

However, the primary issue before the Court was whether the agreement to sell itself was in violation of Section 5 of the Karnataka Prevention of Fragmentation and Consolidation of Holdings Act. The law prohibited the registration of certain sale deeds.

The parties had earlier entered into an agreement to sell certain property but deferred the execution of the sale deed due to the legal restriction under the Act.

When the law was repealed later, the seller refused to execute the sale deed. This led the intending purchaser to file a suit for specific performance in 2001.

The trial court in 2004 had dismissed the suit with the finding that the execution of the agreement to sell was doubtful and that the case was filed beyond the period of limitation. However, the first appellate court ruled in favour of the purchaser on both counts in 2008.

In the second appeal filed by the seller, the Karnataka High Court ruled that the agreement was in violation of Fragmentation Act and therefore, void. The matter then reached the top court in 2011.

The Supreme Court disagreed with the High Court after it found that no issue was framed with respect to the violation of the Act by the trial court. This issue was not even pleaded in the written statement by the defendant, the top court observed.

It also noted that the seller in his deposition during cross examination before the trial court, had agreed that he had signed the agreement to sell.

“Thus, in the absence of any issue framed, and given that neither party has pleaded any violation of Section 5 of the Fragmentation Act, the High Court apparently fell in error in holding that Agreement to Sell was in violation of Section 5 of the Fragmentation Act,” the Supreme Court said.

The bench headed by Justice Nath further observed that since the Fragmentation Act only barred the “lease/sale/conveyance or transfer of rights”, the agreement to sell cannot be said to be barred under the law.

The top court added that since the purchaser had filed the suit after the repeal of the law, the suit could have been decreed without “there being any violation to the law once the Fragmentation Act itself had been repealed in February 1991.”

The top court also observed that the High Court did not hold that the suit was barred under the Limitation Act.

It further noticed that the seller had received the full consideration and had also transferred the possession of the property.

Thus, the Court allowed the appeal and set aside the decision of Karnataka High Court’s decision. Consequently, it restored the decision of the first appellate court in favour of the purchaser.

Advocates Shailesh Madiyal, Vaibhav Sabharwal, Divija Mahajan and Akshay Kumar represented the appellant (purchaser).

Advocates Vaijayanthi Girish and Girish Ananthamurthy represented the respondent (seller).

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