Agreement to sell does not transfer ownership or confer any title, says SC

NEW DELHI — The Supreme Court has said that entering into an agreement to sell does not transfer ownership rights or confer any title in favour of the proposed buyer.

“The Agreement to Sell is not a conveyance; it does not transfer ownership rights or confer any title,” observed a bench of Justices Vikram Nath and Rajesh Bindal as it decided a special leave petition filed against an order of the Karnataka High Court.

In 1990, the parties had executed an agreement to sell after the entire sale consideration was paid and possession was handed over to the appellant-proposed buyer. Under this agreement, it was also stipulated that the sale deed would be executed once restriction under the Karnataka Prevention of Fragmentation and Consolidation of Holdings Act was lifted.

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Later in 1991, the Fragmentation Act was repealed but respondents refused to execute the sale deed. This resulted in filing a suit for specific performance which was decreed by the first appellate court.

On appeal, the High Court in its impugned 2010 decision had dismissed the suit for specific performance saying that the Agreement to Sell was void in view of the prohibition imposed on registration of the sale deed under the Fragmentation Act.

“In the absence of any issue framed, and given that neither party has pleaded any violation of Section 5 of the Fragmentation Act, the High Court apparently fell in error in holding that Agreement to Sell was in violation of Section 5 of the Fragmentation Act,” the Supreme Court said, adding that lease, sale, conveyance or transfer of rights were barred and “the Agreement to Sell cannot be said to be barred under 5 the Fragmentation Act.”

“The appeal deserves to be allowed. The impugned order and judgment of the High Court dated 10.11.2010 is hereby set aside, and the judgment of the First Appellate Court dated 17.04.2008, decreeing the suit of the appellant, stands restored,” the top court held.

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