In the case of Indian Overseas Bank v. M.A.S. Subramanian & Ors., the Supreme Court of India addressed the legal implications of agreements for the sale of immovable property.
The Hon’ble Supreme Court reaffirmed that an agreement for the sale of immovable property does not confer ownership rights upon the purchaser. As per Section 54 of the Transfer of Property Act, 1882, such an agreement does not create any legal interest in the property. The only valid method for transferring immovable property valued above Rs. 100/- is through a duly registered sale deed in compliance with the Indian Registration Act, 1908.
Brief Facts:
Late Shri M.A. Shanmugam, the original owner of a particular immovable property, had entered into an agreement to sell this property to a company. The company took possession of the property based on this agreement, operating under the belief that they held ownership rights due to part performance of the contract. However, Shri Shanmugam passed away before executing a formal sale deed. Subsequently, his legal heirs executed a sale deed on October 31, 2011, in favour of another party. This led to disputes regarding the property’s ownership, with the company asserting rights based on the initial agreement and its possession of the property.
Final Judgment:
The Supreme Court held that an agreement for the sale of immovable property does not transfer title to the purchaser. According to Section 54 of the Transfer of Property Act, 1882, such an agreement does not create any interest or charge in the property. The Court emphasized that the only way to transfer ownership of immovable property valued over Rs.100/- is through a registered sale deed executed in accordance with the Indian Registration Act, 1908. In this case, since no registered sale deed was executed in favour of the company by Shri Shanmugam, the company did not acquire ownership rights. Consequently, the subsequent sale deed executed by Shri Shanmugam’s legal heirs was deemed valid.
This judgment reinforces the legal principle that mere agreements to sell do not confer ownership rights in immovable properties; a duly registered sale deed is essential for the transfer of title.