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Synopsis

The Supreme Court has said an agreement for sale in respect of an immovable property does not transfer title in favour of the purchaser under the agreement.

"In view of Section 54 of the Transfer of Property Act, 1882, an agreement for sale does not create any interest in the property. The only mode by which an immovable property worth more than Rs 100 can be sold is by a sale deed duly registered in accordance with the Indian Registration Act, 1908," a bench of Justices Abhay S Oka and Ujjal Bhuyan said.

The court was dealing with an appeal filed by the Indian Overseas Bank against the findings recorded by the National Company Law Appellate Tribunal.

In the case, the NCLAT had recorded a finding that late M A Shanmugam who was the owner of the property, subject matter of the present appeals, had agreed to sell the property to the company against the transfer of shares of the company in his favour.

The NCLAT had also recorded a finding that the company was in possession by way of part performance of the contract.

Based on the said finding, the court noted the sale deed of October 31, 2011 purportedly executed by the legal representatives of late Shanmugam had been held as not binding on the company.

"So long as the original owner had not sold the property by execution of a registered sale deed, he continued to be the legal owner of the property. Admittedly, he had not executed a sale deed in favour of the company. Therefore, the NCLAT in its limited jurisdiction could not have held that the sale deed dated 31st October, 2011 was not binding on the company as the company was in possession by way of part performance of the contract," the bench said.

The court also found that there was nothing placed on record to show that the company filed a suit for specific performance for enforcing the agreement made by late Shanmugam.

"In the circumstances, we set aside the declaration granted by the NCLAT under the impugned judgment, which declared that the sale deed dated 31.10.2011 executed by original Respondents 2 to 6 in favour of original Respondent No 7 as not binding on the Respondent No1 Company," the bench said.

The bench, however, clarified it had made no adjudication on the ownership rights claimed by the different parties pursuant to the sale deed and the rights claimed by respondent no 10- company as well as by the appellant.

"Their remedies to seek declaration and/or to enforce their rights are kept open," the court said.

Case Title: Indian Overseas Bank Vs M A S Subramanian & Ors