An unregistered sale agreement between the buyer and seller for an immovable property is generally assumed to be invalid, but it is a valid contract. However, the important question arises about its validity as an evidence in the court of law, as it is not registered.
Based on Section 17 of the Registration Act, 1908 the sale agreement for an immovable property has to be registered mandatorily is the value exceeds Rs. 100.
But in circumstances when a seller violates the terms in the sale agreement and denies the sale, the buyer can approach the civil court for a specific performance suit. In a specific performance suit the buyer would pray the court to appoint an advocate commissioner to act on behalf of the seller and execute the sale deed as per the terms of the sale agreement.
In the above circumstance, “Unregistered Sale Agreement” is a valid evidence in the court of law. In terms of legal provision for the same, Section 49 of the Registration Act, 1908 makes the unregistered sale agreement as a valid evidence only for the Suit for Specific Performance. So in the current circumstance it is important to read Section 17 along with Section 49 of the Registration Act, 1908 to come to the correct conclusion and help the client in getting a proper remedy.
So we hereby conclude that when it comes to the applicability of the law, bare law cannot to applied as such and based on the circumstance and other factors a few other interpretation has to be made. So it is always advisable to consult with a good Civil Lawyer and not to assume legal validities based on bare sections.
The High Court of Madras in the case of K.Rangasamy vs A.Shanmugam on 5 December, 2016, has clearly considered such a situation and has passed a superseding judgement.
Extract from the Judgment “the suit is filed for specific performance on the basis of unregistered sale agreement dated 21.01.2014. As per Section 17 of the Registration Act, registration of document is compulsory, but as per Section 49 of the Registration Act, unregistered sale agreement is admissible in evidence. So it is appropriate to extract Sections 17 and 49 of the Registration Act, to conclude.”
While the above conclusion being so, it is always safe to have your agreements for immovable property to be registered according to the Registration Act, 1908 by paying the necessary registration charges. It helps in establishing the ownership of the property and avoiding any disputes related to it in the future. It is always advisable to seek legal advice from a good property lawyer expertise in Specific Performance Suits before proceeding with the same.
Frequently Asked Questions
Can an unregistered sale agreement be used for obtaining a loan from a bank?
Answer: Banks generally do not accept unregistered sale agreements as security for loans. They require registered sale deeds as proof of ownership of the property.
What is the penalty for not registering a sale agreement within the prescribed time limit?
Answer: The penalty for not registering a sale agreement within the prescribed time limit is two percent of the total value of the property or Rs. 10,000, whichever is higher.
Can an unregistered sale agreement be registered later?
Answer: Yes, an unregistered sale agreement can be registered later, provided it is within the prescribed time limit of four months from the date of execution of the agreement. However, if the time limit has expired, a fresh agreement must be executed.
Will the advance paid in an unregistered sale agreement be returned?
Answer: Yes, the amount paid as advance by the buyer in an unregistered sale agreement may be returned by the seller if the terms of the sale agreement warrants such a refund, else it is not mandatory to be refunded in case if the buyer violates the agreement.