In a significant ruling, the Supreme Court of India, comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan, reiterated the settled principle under Indian property law that an agreement for the sale of immovable property does not confer ownership rights unless a registered sale deed is executed. The case, Indian Overseas Bank v. M.A.S. Subramanian & Ors. (Civil Appeal Diary No. 38616 of 2018), arose from a dispute over the ownership of land associated with a company.
Case Background:
The dispute involved Indian Overseas Bank and M.A.S. Subramanian along with other respondents. The crux of the case was whether an agreement to sell the land to a company by the late Shri M.A. Shanmugam, the original owner, granted title to the company. The National Company Law Appellate Tribunal (NCLAT) had earlier held that the land belonged to the company due to possession under part-performance of a contract, and this finding was contested before the Supreme Court.
Legal Issues:
1. Validity of Ownership Based on an Agreement to Sell:
The Supreme Court analyzed whether the possession and agreement to sell could confer ownership in the absence of a registered sale deed.
2. Role of NCLAT in Determining Ownership:
The court considered whether the NCLAT had the jurisdiction to declare the sale deed invalid.
3. Application of Section 54 of the Transfer of Property Act, 1882:
Section 54 clearly states that an agreement to sell does not, by itself, create any interest or title in the property.
Court’s Decision:
The Supreme Court partially allowed the appeal, setting aside the NCLAT’s declaration that the sale deed dated October 31, 2011, was not binding on the company. The court observed:
“An agreement for sale in respect of an immovable property does not transfer title in favor of the purchaser under the agreement. The only mode by which an immovable property worth more than ₹100 can be sold is by a sale deed duly registered in accordance with the Indian Registration Act, 1908.”
The judgment clarified that possession under part-performance of a contract does not equate to ownership unless the contract is specifically enforced through a legal mechanism.
Observations:
The court emphasized the need for registered documentation to establish ownership and stated:
“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.”
Additionally, the bench noted the absence of any suit for specific performance filed by the company to enforce the alleged agreement.
Representation:
– For the Appellant (Indian Overseas Bank): Senior Advocate Mr. Kunal Tandon, along with advocates Mr. Kush Chaturvedi, Ms. Prerna Priyadarshini, and others.
– For the Respondents: Advocates Mr. R. Jawahar Lal, Ms. Nappinai (Senior Advocate), Mr. Balaji Srinivasan, and their teams represented the respondents.
