Supreme Court: Though Agreement to Sell Does Not Confer Title, Section 53A of Transfer of Property Act Protects Possession Rights of Prospective Purchasers

Supreme Court: Though Agreement to Sell Does Not Confer Title, Section 53A of Transfer of Property Act Protects Possession Rights of Prospective Purchasers

The Supreme Court coram comprising of Justices Dipankar Datta and Pankaj Mithal have observed that even though, 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 is liable to be protected in view of Section 53A of the Transfer of Property Act, 1882.

In the present case, the Appellant- Mr. Ghanshyam was the owner of a property situated in Delhi (suit property). He entered into an Agreement to Sell dated 10 April, 2002 with Mr. Yogendra Rathi- Respondent for sale of Suit Property and received the entire sale consideration from the Respondent.

On the same day, the Appellant executed a will bequeathing the Suit Property to the Respondent. The Appellant further executed a General Power of Attorney in favor of the Respondent. The possession of the Suit Property was handed over to the Respondent, however, no sale deed was executed.

The respondent allowed the appellant to occupy the ground floor and one room on the first floor of it for a period of 3 months as a licensee; the appellant failed to vacate the suit premises despite expiry of the license period and termination of license vide notice dated 18 February, 2003. The Respondent filed a suit against the Appellant seeking the latter’s eviction from the Suit Property and recovery of mesne profits.

The Respondent claimed his ownership on the Suit Property on the strength of the Agreement to Sell dated 10 April, 2002, General Power of Attorney, memo of possession, receipt of payment of sale consideration and a will dated 10 April, 2002.

The Appellant contended that the documents cited by the Respondent have been manipulated on blank papers. However, there was no evidence of the same. Execution of such documents or receipt of sale consideration was not disputed by the Appellant.

According to the Trial Court there was no manipulation of documents and thus, the Respondent was entitled to decree for eviction and recovery of mesne profits.

Aggrieved, the appellant filed a first appeal and thereafter a second appeal before the High Court and both were decided in favor of the Respondent. Subsequently, the Appellant filed an appeal before the Supreme Court.

The Apex Court at the outset remarked that agreement to sell is not a document of title or a deed of transfer of property by sale and as such, may not confer absolute title upon the respondent over the suit property in view of Section 54 of the Transfer of Property Act, 1882.

Averting to the present case nonetheless, the Court observed that agreement to sell, the payment of entire sale consideration as mentioned in the agreement itself and corroborated by the receipt of its payment and the fact that the respondent was put in possession of the suit property in accordance with law was also established by the possession memo on record, which proved that the respondent was de-facto having possessory rights over the suit property in part performance of the agreement to sell.

This possessory right of the respondent is not liable to be disturbed by the transferer, i.e., the appellant, opined the bench.

The Apex Court referred the decisions passed in the cases of Imtiaz Ali vs. Nasim Ahmed and G. Ram vs. Delhi Development Authority which inter-alia observed that an agreement to sell or the power of attorney are not documents of transfer and as such the right title and interest of an immovable property do not stand transferred by mere execution of the same unless any document as contemplated under Section 54 of the Transfer of Property Act, 1882, is executed and registered under Section 17 of the Indian Registration Act, 1908.

The bench further referred to the decision of the Supreme Court in Suraj Lamp & Industries Pvt. Ltd. vs. State of Haryana & Anr. which had also deprecated the transfer of immovable property through sale agreement, general power of attorney and will instead of registered conveyance deed.

Therefore, the bench observed that, “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.”

The bench held that the respondent admittedly was settled with possessory title in part performance of the agreement to sell dated 10 April, 2002 and that the appellant had lost his possession over it and had acquired the right of possession under a license simpliciter, exhausted his right to continue in possession after the license has been determined.

Accordingly, the bench upheld the High Court’s view that the Respondent was entitled to a decree for eviction with mesne profits.