Sale agreement, lawful possession of property protect buyers’ right: SC

Ghanshyam versus Yogendra Rathi case

One Yogendra Rathi filed a suit for eviction of Ghanshyam from a property at JJ Colony, Shakarpur, Delhi, and the profits earned through it. Rathi argued that he was the owner of the said property by virtue of an agreement to sell dated April 10, 2002. Rathi also stated that his ownership is also substantiated by a power of attorney, a memo of possession and a receipt of payment of sale consideration as well as a Will by Ghanshyam, bequeathing the property in Rathi’s favour.

Pursuant to the agreement to sell, the possession of the property was handed over to Rathi. Subsequently, on the request of Ghanshyam, Rathi leased the ground floor and one room on the first floor for three months to Ghanshyam. The tenant failed to vacate the suit premises despite the expiry of the period and termination of licence. When a notice was sent to Ghanshyam over this, he contested the suit on the ground that the property title documents were manipulated, without disputing their execution.

While giving a ruling in favour of Rathi, the trial court said that there was no evidence to prove that any of the documents were obtained by misrepresentation, manipulation or by fraud.

“The plaintiff- respondent (Rathi) has proved his right over the property and since the licence of the defendant-appellant stands determined, he is entitled to a decree of eviction and payment of mesne profits,” it said.

The trial court and the high court also dealt with the question whether the power of attorney, the Will, the agreement to sell along with the possession memo and the receipt of payment of sale would confer any title upon Rathi to entitle him for a decree of eviction and mesne profits.

While stating that Rathi was in a settled possession of the suit property at least in part-performance of the agreement which cannot be disturbed or disputed by Ghanshyan, the SC said: “Legally, an agreement to sell may not be regarded as a transaction of sale or a document transferring the proprietary rights in an immovable property. But, the prospective purchaser having performed his part of the contract and lawfully in possession acquires possessory title which is liable to be protected in view of Section 53A of the Transfer of Property Act, 1882. The said possessory rights of the prospective purchaser cannot be invaded by the transferer or any person claiming under him.”

Section 53A of the Transfer of Property Act deals with part-performance and prohibits sellers from enforcing against the buyer any right in respect of the property of which the buyer is in possession.

“Ghanshyam parted with the possession of the suit property by putting Rathi in possession of it under an agreement to sell. Rathi in this way came to acquire possessory title over the same. Ghanshyam ceased to be in possession of it as an owner rather occupied it as a licencee for a fixed period which stood determined by valid notice, leaving him with no subsisting right to remain in possession of the suit premises,” the two-judge Bench of justice Dipankar Datta and justice Pankaj Mithal said.

“In view of the aforesaid facts and circumstances, Rathi has rightly been held to be entitled for a decree of eviction with mesne profits. We do not find any error or illegality in such a decree being passed,” the Bench wrote in its order dated June 2, 2023, while dismissing Ghanshyam’s appeal.

The SC, however added: “The power of attorney executed is of no consequence … Neither a sale deed has been executed nor any action pursuant thereof has been taken by the power of attorney holder which may confer title upon Rathi. Non-execution of any document by the general power of attorney holder consequent to it renders the said general power of attorney useless.”

Are unregistered sale agreements valid?

In May this year, the Jammu & Kashmir and Ladakh High Court (HC) has also ruled that unregistered and insufficiently stamped instruments like sale agreements and sale deeds cannot affect an immovable property.

“A document that is required to be registered under Section 17 of the Registration Act but is not registered cannot affect the immoveable property that is the subject matter of that instrument. Thus, when the petitioners had based their suit for injunction demonstrating their alleged possession in respect of suit land on the basis of unregistered and insufficiently stamped instrument, which under law does not affect such immovable property, the petitioners had no prima facie case in their favour,” it said.