What is the validity of a Sale Agreement Without Registration?

A Sale Agreement outlines the terms and conditions for the sale of movable or immovable property to the buyer. According to the Indian Registration Act of 1908, all transactions involving the transfer of rights to immovable property valued at more than Rs. 100/- must be registered. The blog will discuss the validity of a sale agreement without registration. 

• Under Section 54 of the Transfer of Property Act, 1882, the sale is defined as the transfer of ownership for a price, and the transfer of immovable property valued at more than One Hundred Rupees needs a registered document. 
• Importantly, Section 54 only requires registration of the sale deed, i.e., the instrument that facilitated the sale of the property, and not the Agreement to Sell.
• Since the document must be registered, a non-registered deed of sale without delivery of the property is insufficient. 
• In line with Section 54, even if permissible under the Registration Act, such an unregistered agreement of sale cannot transfer title to the purchaser. In this blog, we will discuss the validity of a sale agreement without registration.

Learn about the importance of property paper verification in India, especially when entering into a Sale Agreement.

Validity of a sale agreement without registration

Unregistered Sale Contracts are legally binding, and inadequate stamp payments may be compelled to be paid by court order. The validity of a sale agreement without registration is three years from the date of execution. 

In the case of a negative agreement condition, such as the buyer’s need to register the property within three months, the statute of limitations is extended by that period of time. It is in the party’s best interest to comply with the following contract provisions that may be advantageous to him:

• In order to correctly cancel an unregistered agreement of sale, the party must give a revocation notice for cancellation of the agreement, notwithstanding the fact that the agreement has ended as the validity of a sale agreement without registration is only 3 years.
• This is contingent on the agreement’s conditions, although it is advised that the advance be refunded as the validity of a sale agreement without registration is only 3 years.
• If a document is prepared for the express purpose of transferring property but is not accompanied by a transfer of possession, the document must be registered since delivery of possession is not necessary to accompany a registered document. It must be kept in mind while deciding on the validity of a sale agreement without registration.
• The question arises regarding the validity of a sale agreement without registration and a conveyance of possession and the transferee claims to rely on both. Prior to the signing of the unregistered oral agreement to sell and the transfer of possession, the buyer may have a claim to the property’s title. 
• As the delivery of possession is considered part of the selling transaction, the registered sale paperwork may be unnecessary, and the transfer of possession will serve to transfer ownership. The validity of a sale agreement without registration is 3 years in such cases. 

Therefore, the provisions of Section 54 must be looked into while deciding the question of the validity of a sale agreement without registration. The following formalities are outlined in Section 54:

• The sale deed must be registered when an immovable property has a value exceeding Rs. 100 is sold. 
• If the amount of the transaction is less than Rs. 100, either a registered deed or delivery of the property may suffice since the goal is to make each transaction public.

Therefore, the validity of a sale agreement without registration is that there should be no nullification of the transaction based only on the lack of proof of an oral agreement accompanied by the surrender of possession prior to the execution of the unregistered agreement of sale where the property was given. 

Judicial Interpretation

• If both the oral sale and possession transfer are present, then the transaction is regarded to be complete and the validity of a sale agreement without registration is 3 years in such cases.
• The transfer of possession is not needed simultaneously with the signing of an unregistered sale instrument for the sale of immovable property valued at less than Rs. 100. 
• Therefore, regarding the validity of a sale agreement without registration, it can be said that the sale would be valid even if the property is delivered in line with the sales contract after its execution. 
• It was ruled that if the selling price is less than Rs. 100, non-registration would not impair the validity of a sale agreement without registration of the transfer if the transferee can show an oral sale, and delivery of possession would be in fulfillment of the oral sale. Therefore, it may be deemed separate from the other. Consequently, a lawsuit must be filed to register the deed in court.
• Due to evidence of an incorrectly stamped and unregistered agreement of sale, the Supreme Court questioned the validity of a sale agreement without registration and recently confirmed a Trial Court order permitting the plaintiff to pursue action for the recovery of money that he was supposed to pay at the signing of the Agreement for Sale.
• Legal consultation must be taken to know more about the validity of a sale agreement without registration.

Conclusion

The blog discusses the validity of a sale agreement without registration. The validity of a sale agreement without registration is for three years from the date of registration. 

However, In the current legal climate, an unregistered document that is needed to be registered has significant consequences, since the party seeking its enforcement cannot rely on the document to support its contents. This approach may hinder the party from carrying out its contingency plan. 

Therefore, it is suggested that one must get the agreement of sale registered after taking legal consultation.