In a landmark clarification, the Supreme Court has reiterated that holding possession of a property under an agreement to sell does not amount to ownership unless a registered sale deed is executed, as required under the Indian Registration Act, 1908.
The Court emphasized that an agreement for sale, as per Section 54 of the Transfer of Property Act, 1882, neither transfers ownership nor creates any interest in the property. It reaffirmed that immovable property valued above ₹100 can only be legally transferred through a duly registered sale deed.
The dispute arose from an arrangement between a company and the property owner, the late Shri M.A. Shanmugam. The agreement involved transferring the company’s shares to Shanmugam in exchange for ownership of the property. While the company held possession of the property as part performance of the agreement, the sale deed was never registered in its favor. After Shanmugam’s death, his heirs executed the sale deed in favor of a third party.
The National Company Law Appellate Tribunal (NCLAT) had earlier ruled that the company’s possession of the property invalidated the sale deed executed by Shanmugam’s heirs. However, the Supreme Court overturned this decision, pointing out that without a registered sale deed from Shanmugam, ownership never legally transferred to the company.
The Court further noted that the company had not taken steps to enforce specific performance of the agreement. Thus, the NCLAT’s conclusion that the sale deed executed by the heirs was not binding on the company was deemed beyond its jurisdiction.
The ruling underscores the critical importance of proper registration in property transactions, reaffirming that mere possession or agreements cannot substitute for legally mandated procedures.
