Supreme Court On Unregistered Agreement To Sell​

In the Indian real estate market, buying a property often involves a preliminary step known as the "Agreement to Sell" or Bayaana. Many buyers and sellers enter into this agreement on simple stamp paper to save on registration costs. They proceed with the transaction believing that this document grants them substantial rights over the property. However, this common practice raises significant legal concerns when disputes arise between the parties. The crucial question that every property buyer must ask is simple. Does this unregistered piece of paper hold any value in a court of law if the deal falls through? It is important to understand the legal reality before entering into such contracts. An unregistered agreement does not transfer the title or ownership of the property. The law is clear that ownership can only be transferred through a registered Sale Deed. However, there is a silver lining for genuine buyers. The Supreme Court of India has recently clarified the legal standing of these documents. The Court has ruled that while an unregistered agreement cannot convey ownership, it plays a critical role as evidence in a suit for specific performance. This ruling effectively creates a safety net for buyers who need to enforce the contract in court.

The Legal Framework

To understand the Supreme Court's position, we must first look at the statutes that govern property transactions in India. The law is quite strict regarding documents that transfer rights in immovable property.

The General Rule Under the Registration Act, 1908

Two key sections of the Registration Act form the foundation of property documentation rules:

• Section 17: This section mandates that any document affecting immovable property worth ₹100 or more must be registered. This is a compulsory requirement to ensure the authenticity of property records.
• Section 49: This section outlines the consequences of non-compliance. It states that if a document required to be registered under Section 17 is not registered, it cannot affect the immovable property. Additionally, it generally cannot be received as evidence of any transaction affecting such property.

Clarifying Common Confusion: Agreement to Sell vs. Sale Deed

Many property buyers confuse an "Agreement to Sell" with a "Sale Deed," but they serve very different purposes.

• Agreement to Sell: This document creates a right to purchase the property. According to Section 54 of the Transfer of Property Act, a contract for sale does not, of itself, create any interest in or charge on such property. It is merely a promise to transfer the property in the future.
• Sale Deed: This is the final document that actually transfers the title and ownership from the seller to the buyer.

Therefore, while the Agreement to Sell initiates the process, it does not legally make you the owner. The confusion often leads parties to rely solely on the agreement without completing the necessary registration, which can be risky without legal backing.

The Latest Supreme Court Rulings

The legal landscape surrounding unregistered agreements has often been confusing for property buyers. However, recent judgments by the Supreme Court of India have provided much-needed clarity. We can understand the current legal position by looking at two distinct scenarios that buyers might face.

Scenario 1: Can it Transfer Ownership?

The first scenario addresses whether an unregistered agreement can act as a substitute for a Sale Deed. The answer from the Supreme Court is a definitive "No."

In recent judgments such as Shakeel Ahmed v. Syed Akhlaq Hussain (2023) and Mahnoor Fatima v. M/S Vishveswara Infrastructure (2025), the Court has reinforced that property titles cannot be transferred through unregistered documents. It is a common misconception that a combination of an Agreement to Sell, a General Power of Attorney (GPA), and a Will can effectively transfer ownership. The Court has struck this down, stating that no right, title, or interest passes to the buyer through such unregistered instruments.

This has immediate practical implications. You cannot claim to be the legal owner of a property purely based on these documents. Furthermore, the Court cited the precedent of Balram Singh v. Kelo Devi (2022) to establish that a suit for a permanent injunction simpliciter is not maintainable. This means you cannot ask the court to stop a third party from interfering with your possession if you are relying solely on an unregistered agreement without also asking for specific performance of the contract.

Scenario 2: Can it be used as Evidence for Specific Performance?

While the first scenario closes one door, the second scenario opens a vital window for genuine buyers. The question here is not about immediate ownership, but about enforcing the seller's promise to sell.

The Supreme Court, in the latest update, Muruganandam v. Muniyandi (2025) and the earlier case of S. Kaladevi v. V.R. Somasundaram, clarified the application of the Proviso to Section 49 of the Registration Act. The ruling holds that even if an Agreement to Sell is unregistered, it can be received as evidence in a suit for specific performance.

This distinction is crucial for buyer protection. If a seller backs out of the deal after signing the agreement, the buyer can approach the court. The buyer can present the unregistered agreement not to prove they already own the property, but to prove that a valid contract exists. The court can then admit this document as evidence to force the seller to execute a proper Sale Deed. This ruling ensures that sellers cannot hide behind the technicality of non-registration to cheat a buyer who has a valid agreement.

Comparison Table: What Can You Do vs. What You Can not

To summarize the legal position effectively, the following table breaks down what actions are permissible based on an unregistered Agreement to Sell.

Critical Nuance: The "Collateral Purpose" Exception

There is an interesting legal exception that often saves buyers in difficult situations. This is known as the "collateral purpose" rule. Even when a document is inadmissible for its main purpose because it is unregistered, the court may still look at it for secondary or "collateral" reasons.

This does not mean the document becomes fully valid. It simply means the court can use it to verify specific facts surrounding the transaction.

• Proving the Money Trail: If a buyer has paid a significant advance or "token money" to the seller, the unregistered agreement can be used as evidence to prove that this financial transaction took place. It acts as proof of payment.
• Establishing Nature of Possession: If the buyer has already moved into the property, the seller might try to claim they are a trespasser. The unregistered agreement can be shown to prove the "nature of possession." It confirms that the buyer entered the property legally with the seller's consent, not as an illegal occupant.

However, it is vital to remember the limit of this exception. These collateral purposes are restricted to proving facts like possession or payment. They cannot be used to prove that the buyer has become the owner of the property.

Practical Advice for Clients

Navigating the legal intricacies of property transactions can be daunting. Based on the current legal landscape established by the Supreme Court, here is what buyers and sellers must keep in mind to protect their interests.

• For Buyers: Do not rely solely on a notarized agreement for your long-term security. It is a fragile shield. If a dispute arises and the seller refuses to honor the deal, do not waste time merely claiming to be the owner. Instead, immediately file a suit for Specific Performance. You must act quickly because the limitation period to file this suit is three years from the date fixed for performance. If you miss this window, even the unregistered agreement may not save you.
• For Sellers: Do not assume that you are immune to legal action just because the agreement is unregistered. You cannot simply walk away from the deal without consequences. As the courts have ruled, the buyer can still drag you to court using that unregistered document as evidence to enforce the contract.
• The Golden Rule: The best course of action is always to register the Agreement to Sell. Registration unlocks the powerful protection of Section 53A of the Transfer of Property Act, known as the doctrine of "Part Performance." If you have paid part of the money and taken possession, Section 53A protects your possession against the seller, even before the final Sale Deed is executed. However, this statutory protection is most effective when the underlying agreement is registered.

Conclusion

The legal stance on unregistered agreements is now clear. An unregistered Agreement to Sell is not a worthless piece of paper, but it is also not a title deed. The Supreme Court has struck a necessary balance in its recent rulings. It prevents tax evasion by denying full ownership rights to unregistered documents, while simultaneously protecting genuine buyers from fraudulent sellers by allowing these documents as evidence in specific performance suits. While the courts have provided a safety net, relying on it should be a last resort. The smartest move for any property buyer is to ensure proper registration at the very beginning. Paying the stamp duty and registration fees is a small price to pay for the absolute legal security it provides. It transforms your agreement from a potential legal hurdle into undeniable proof of your rights.

Disclaimer: This blog is for informational purposes only and does not constitute legal advice; please consult a qualified legal expert for specific property matters.