Unregistered Sale Agreements Are Admissible As Evidence In Suits For Specific Performance: Kerala High Court

The Division Bench consisting of Justice Satish Ninan and P. Krishna Kumar has clarified the position of law as regards the admissibility of unregistered documents as evidence in suits for specific performance by looking into the interplay between Section 17 and Section 49 of the Registration Act.

Facts

A suit for specific performance was initiated by the first respondent (plaintiff) against the appellant (first defendant/defendant) pursuant to an agreement for the sale of immovable property in 2014. As per the agreement (Exhibit A2), the defendant agreed to sell his property to the plaintiff at Rs. 9,000/- per cent within 3 months. This agreement was part of a broader compromise agreement involving multiple other parties, whereby the plaintiff and the others agreed to transfer their properties.

The plaintiff paid the entire sale consideration to the defendant and even purchased the requisite stamp paper to execute the agreement. The other parties of the compromise agreement and the plaintiff also transferred their respective properties in accordance with the terms of the compromise agreement. However, the defendant did not execute the sale deed. Hence, the suit was initiated.

The defendant opposed the suit, saying that he was not a party to the compromise agreement. He also argued that the sale agreement was not binding since it was unregistered. Moreover, it was also contended that the actual sale price agreed to was Rs. 61,000 per cent instead of Rs. 9,000. A counterclaim for recovery of possession was also raised, stating that the plaintiff trespassed on the land and altered its physical features prior to the expiry of the agreement period.

The trial court decreed the suit in favour of the plaintiff and dismissed the counterclaim of the defendant. Hence, the appeal was preferred by the defendant.

Finding

The Court looked into the relevant provisions of the Registration Act, namely, Section 17(1)(f) and Section 49. As per the newly added clause (f) to Section 17(1), all contracts for sale are mandatorily required to be registered with effect from 13.09.2013. Section 49 lays down the effect of non-registration of documents that are required to be registered under law.

The general rule, as per Section 49, is that an unregistered document that is compulsorily registrable under Section 17 shall neither affect any immovable property referred to therein nor be received as evidence of any transaction affecting such property. However, the Court noted that the exceptions to this general rule permit admission of unregistered document as evidence of contract in a suit for specific performance.

It observed:

“…Nevertheless, the section carves out specific exceptions to this general rule. Notably, an unregistered document affecting immovable property may still be admitted in evidence: (a) as evidence of a contract in a suit for specific performance, and (b) for the purpose of proving any collateral transaction not required to be effected by a registered instrument…”

The Court also referred to the judgment of the Apex Court in R. Hemalath v. Kasthuri wherein the impact of the amendment made by Tamil Nadu to Section 17(1) of the Registration Act was looked into. The Apex Court considered the newly inserted clause (g) to Section 17(1), which mandated registration of all agreements relating to the sale of immovable property valuing more than 100 rupees. The Apex Court noted that no amendment was brought into Section 49 and therefore, an agreement for sale remains admissible in evidence in a suit for specific performance, by virtue of the proviso to Section 49.

Applying the same principle, the Division Bench arrived at the conclusion that the legislative intent behind the amendment of Section 17 and the non-amendment of Section 49 by the State Legislature was to retain the admissibility of unregistered documents in suits for specific performance.

The Court's observation is extracted below:

“…It is evident from the Amendment Act that the legislature, in its wisdom, chose not to amend Section 49, even as it introduced clause (f) to Section 17(1) of the Act. By retaining the proviso to Section 49, the legislature presumably intended to preserve the exceptions it contains—particularly, the admissibility of unregistered documents in suits for specific performance. Consequently, the legal effect of the proviso remains intact and is not diluted by the amendment.”

Regarding the question of whether the trial court was right in granting specific performance, the Court found that, based on the evidence on record, the trial court's decree was justified.

The Court noted that, as per the evidence on record, the execution of the sale agreement and payment of sale consideration were undisputed. As per the evidence adduced by the plaintiff, the fair value of land was less than Rs. 9,000/- per cent. It was also noted that the evidence was brought in before the trial court to prove the compromise agreement and the signing of the same by the defendant's Power of Attorney holder. Moreover, since the plaintiff had already transferred his land, failure of the defendant to enforce the contract and transfer the agreed property would cause undue hardship and substantial loss to the plaintiff.

Thus, the Court dismissed the appeal and upheld the judgment of the trial court.

Case No: RFA Nos. 593/2017 & 75/2019

Case Title: Shaju v. Victory Granite Bricks Pvt. Ltd. & Anr.

Citation: 2025 LiveLaw (Ker) 362

Counsel for the Appellant: T.R.S. Kumar, Deena Joseph, K.V. Sabu, Sobin Soman

Counsel for the Respondents: S.Sujith & T.M.Chandran – R1

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