To execute the transfer of a property, the buyer and seller draft and register a sale deed. This is the legal document that acts as the proof of the property transfer. But, can a sale deed be cancelled by a buyer or a seller after it has been registered with stamp duty and registration charges? What if the buyer changes his mind after the purchase? What if the seller wants to revoke the sale deed? What is the legal position on the matter of cancellation of the sale deed? Check out this guide that throws light on sale deed, when it can be done and its impact.
What is a sale deed?
A sale deed is a legal document that is used to transfer property ownership from seller to buyer. This contains all property related information including buyer details, seller details and property details that binds the sale of property legally.
What does a sale deed include?
Date: The date when the property is being transferred will be mentioned. This will help in knowing the ownership timeline.
Details of the seller and buyer: A sale deed carries names, age details and addresses of both the buyer and the seller.
Property description: The sale deed carried complete detail of the property, including the total area, details of construction, the exact address and surroundings.
Property value: Sale deed mentions the amount for which the property is being sold. It provides the exact breakup of the payment. It mentions how much money has been paid as advance and how much paid at the time of registration. It mentions stamp duty and registration fee details as well along with the mode of payment.
Payment terms: In case the entire amount has not been paid, this will include the time frame by which all the payment has to be made and the interest that has to be paid in case of a delay.
Rights and liabilities: The sale deed mentions the rights over the property that are being transferred to the buyer. It also mentions any ongoing liabilities that the buyer may have to accept, for instance the maintenance charge.
Stamp duty: According to the state law, the stamp duty has to be paid for legally registering the document. The sale should be registered.
Signatures of both parties: Seller and buyer should sign on the deed before witnesses and registration is done at the sub-registrar office (SRO).
Reasons why a sale deed can be cancelled
- Mutual consent: If the buyer and seller agree to not go ahead with the deal, it can be cancelled.
- Breach of contract: In case a buyer or seller doesn’t respect the contract, the sale deed can be cancelled.
- Fraud: In case of a fraud by either of the party, the sale deed can be cancelled.
- Legally unfit: If found that one of the parties cannot proceed with the deal of transfer of ownership of property, the sale deed can be cancelled.
- Problem in encumbrance certificate: If the encumbrance certificate shows that the title of the property is not clear, the sale deed can be cancelled.
- Misrepresentation: Misrepresentation of facts and people is a leading ground to appeal for sale deed cancellation.
- Major mistake: In case the sale deed document carries major mistakes, it must be cancelled. Small mistakes in the deed can be rectified through a rectification deed.
- Use of force or undue influence: If any party has been forced to enter into a sale, they are free to retract the transaction. However, they will have to prove the charge for sale deed cancellation.
- Void sale deed: A binding sale deed is that which is drafted keeping in mind the nitty of the law of the land. In case of any oversight, such a contract will have no enforceability. This is where the terms void contract and voidable contract come into picture.
- Competence of parties: Parties involved in the contract must be eligible to enter into a contract. In case they are incompetent, the sale will be void and can be called on this ground.
What are the limitations of cancellation of sale deed?
- Valid reason: A sale deed can be cancelled only when there is a valid reason. In the absence of a valid reason, the cancellation of sale deed is invalid.
- Absence of mutual consent: Some cancellation of sale deed require mutual consent to proceed. In case, one party doesn’t agree then the process becomes tricky and legal help would be needed to proceed with cancellation of sale deed.
- Time-limit: If decided the cancellation of sale deed should be done within a given time frame. Any delay will indicate lack of seriousness and then this will defeat the purpose.
- Presence of third party: If a property has been transferred to third party, then cancellation of sale deed will be difficult unless the third party is also present.
- Legal approval: The cancellation of sale deed should be okayed by the sub-registrar officer.
Sale deed cancellation under Specific Relief Act
Under the Specific Relief Act, 1963, a sale deed can be cancelled within three years of its execution based on the grounds prescribed from Section 31 to 33.
Section 31 of the Specific Relief Act, 1963, states that any person against whom a written instrument is void or voidable, and who has reasonable apprehension that such instrument, if left outstanding may cause him serious injury, may sue to have it adjudged void or voidable; and the court may, in its discretion, so adjudge it and order it to be delivered up and cancelled.
“If the instrument has been registered under the Indian Registration Act, 1908 (16 of 1908), the court shall also send a copy of its decree to the officer in whose office the instrument has been so registered; and such officer shall note on the copy of the instrument contained in his books the fact of its cancellation,” it says.
See also: What if your bank loses your sale deed?
Legal acts that govern cancellation of sale deed
- Section 31 of Specific Relief Act, 1963
- Through this act, a party can ask for cancellation of sale deed.
- Indian Contract Act, 1872
-Through this act sale deed can be cancelled on the basis of misrepresentation of facts, fraud or by mistake.
- Civil Procedure Code, 1908
-Party can ask for cancellation of deed in civil court
- Registration Act, 1908
-In case a deed is signed, it can be revoked by signing a registered cancellation deed.
Steps to cancel a sale deed
Mutual agreement
Both buyer and seller should agree to cancel the deed mutually and then proceed.
Draft the agreement to cancel deed
A cancellation deed must be drafted that will mention that the deed is being cancelled mutually and the reason that has been agreed upon.
Stamp duty and registration
The cancellation deed must be executed on the stamp paper and it has to be registered at the same SRO where the original deed was registered.
File a court case
In case it is not mutual, then send a legal notice to the faulty party. This should be followed by filing a court case.
How to file suit for sale deed cancellation?
Step 1: Hire a lawyer; file a civil suit
In case a sale deed has to be cancelled legally, a person has to file a civil case before the civil court or district judge level court based on the value of the property.
Step 2: Arrange supporting documents
The person (plaintiff) who is unhappy with the deal and seeks cancelation should cite the reason such as fraud, forgery, misleading etc. and submit the documents to prove the charge.
Step 3: Hearing and arguments
Next, the court will issue a notice to other party for a written statement on these claims. If need by the court may call the defendant party for a cross –examination.
Step 4: Court order
After hearing arguments of both parties, if the person who wants to cancel the deed successful proves to the court the reasons, the court can issue an order mentioning that the sale deed is null and void and a fresh registration is cancelled. If the court finds merit in the case, they will order cancellation of the sale deed. A copy of the order will be sent to the sub-registrar office concerned to effectuate the cancellation. The court might also direct the defaulting party to refund the aggrieved party within a specific time window.
In case the court doesn’t agree with the reasons mentioned by the person who wanted to cancel the deed, it will dismiss the suit.
Step 5: Cancellation of the deed
Following the court order the SRO will cancel the sale deed and provide you documentary evidence of the cancellation. Using this document, you can apply for refund of stamp duty and registration fee paid.
What is the time limit for cancellation of sale deed?
According to Specific Relief Act 1963, a petition can be filed within three years from the date of registration of the cancellation deed. As this is legally fixed time frame, once this passes, one cannot apply for cancellation of sale deed. Such cases will be rejected immediately by the court. Note that in cases of fraud detected, the date of penalty will be from the date fraud was found out and not necessarily the deed registration date. The court will excuse any delay if a party can prove that it was forcibly prevented from approaching the court for the many years.
What happens after a sale deed is cancelled?
Once a sale deed is cancelled, the interest of the property is back with the original owner. This means the buyer has no interest in the property anymore. The court may require the party to whom such relief is granted to restore any benefit which he may have received from the other party as part of the sale.
The effects include:
- Financial loss: There may be financial losses including token money, lawyer fees, part of the stamp duty and other charges.
- Legal: In case the sale deed is cancelled owing to legal complications, the one found guilty may also face some penalities.
- Market impact: Frequent cancellations can impact the reputation of both buyer and seller in the real estate market.
- Reversal of ownership: Once the sales deed is cancelled, the ownership is reversed and the buyer loses all rights on the property.
Does a buyer get a refund of stamp duty after sale deed is cancelled?
Yes, a buyer is entitled to get a refund of 98% of the stamp duty in case the sale deed is cancelled. This is possible only if the buyer makes an application for the same at the sub-registrar’s office.
What is the court fees for cancellation of sale deed?
In a suit for cancellation of sale deed, the court fees is calculated based on the value for which the document was executed, and not on the market value of the property. This has to be paid upfront when the sale deed cancellation file is being filed. The court’s registry checks the documents and calculates the fee for the case. No hearing will take place until the court fees is paid by the petitioner. The minimum court fee is Rs 19.50 under Article 17 (iii) of Second Schedule of the Act. Once the fee is paid, the case is accepted and a hearing number is given to the petitioner.
Housing.com POV
In short, cancellation of a sale deed can be a mutual decision between the seller and the buyer, if there is an agreement between the parties involved. The sub-registrar is obligated to register the cancellation deed if both the seller and purchaser jointly present it. In cases where one party requests cancellation while the other refuses, the person seeking cancellation must approach the court. In this case, the sub-registrar will cancel the deed after an order to this effect if passed by the court.
Once the cancellation is executed, the buyer relinquishes all rights to the property, and these rights cannot be claimed by their legal heirs. The validity of the cancellation deed can only be confirmed through a thorough examination of its contents. It is advisable to have the cancellation deed reviewed by a lawyer before finalising the process. This legal scrutiny ensures that the cancellation is done in accordance with the law and meets all necessary requirements.
FAQs
What is the time limit for cancellation of a sale deed?
A sale deed can be cancelled within 3 years of its registration. After the lapse of that time period, doing so is not possible.
Is cancellation deed a valid document?
Yes, a cancellation deed is a legally binding document. It terminates the buyer’s rights to the property.
What are the legal grounds for sale deed cancellation?
Sections 31 to 33 of the Specific Relief Act state the grounds on which sale deed can be cancelled. These include: *When an individual believes the deed is voidable or might cause harm. *When both parties agree to cancel the deed.