InCivil Appeal No. 10327 of 2011 -SC- Supreme Court reaffirms: Agreement to Sell does not transfer Ownership or confer Title
Justice Vikram Nath & Justice Rajesh Bindal [02-11-2023]

Read Order: Munishamappa V. M.Rama Reddy &Ors

Chahat Varma

New Delhi, November 17, 2023: The Supreme Court has reaffirmed its longstanding position that an agreement to sell does not constitute a conveyance, and does not transfer ownership rights or confer any title to the property involved.

This decision came following an appeal challenging a judgment and order of the High Court of Karnataka, which resulted in the dismissal of a suit for specific performance of a contract filed by the appellant.

Briefly stated, on 28.05.1990, an agreement to sell was entered into between the appellant and the respondents, where the property was to be sold for Rs. 23,000. The entire sale consideration was paid before the execution of the agreement, and possession of the property was handed over to the appellant. Due to the prohibition on the registration of the sale deed under Section 5 of the Karnataka Prevention of Fragmentation and Consolidation of Holdings Act, 1996, it was agreed that the sale deed would be executed once the restriction was lifted. The Fragmentation Act was subsequently repealed on 05.02.1991. Despite repeated requests by the appellant, the respondents delayed executing the sale deed. The appellant then filed a suit for specific performance. The Trial Court, in its judgment dated 28.09.2004, dismissed the suit, citing doubts about the execution of the Agreement to Sell and the suit being beyond the limitation period.

Thereafter, the Regular First Appeal, filed by the appellant, was allowed. The First Appellate Court found the suit within the limitation period and established the execution of the Agreement to Sell. The respondents then filed a Second Appeal before the High Court, which was allowed on 10.11.2010, solely on the ground that the Agreement to Sell violated the Fragmentation Act and was therefore deemed void.

The division bench of Justice Vikram Nath and Justice Rajesh Bindal observed that there was no issue framed regarding the violation of the Fragmentation Act, and it was not pleaded in the written statement filed by the respondent. The respondent's defence was centred on denying the execution of the Agreement to Sell, but during cross-examination, he admitted to his signatures on the document. Thus, the absence of any framed issue and the fact that neither party pleaded a violation of Section 5 of the Fragmentation Act led the bench to conclude that the High Court had erred in holding that the Agreement to Sell was in violation of the Fragmentation Act.

The bench clarified that the Agreement to Sell is not a conveyance and does not transfer ownership rights or confer any title. It emphasized that what the Fragmentation Act prohibited or barred was the lease, sale, conveyance, or transfer of rights. Consequently, the bench concluded that the Agreement to Sell could not be considered as barred under the Fragmentation Act.

With the above observations, the appeal was allowed. The impugned order and judgment of the High Court dated 10.11.2010 was set aside, and the judgment of the First Appellate Court, which decreed the appellant's suit, was restored.