Law makes registration of sale agreement mandatory

  • Jeevan Prakash Sharma, Hindustan Times
  • Updated: Jan 18, 2016 16:00 IST
Registration of builder-buyer agreement is mandatory. (iStock)

Real estate laws and many judgments delivered by the Supreme Court have mandated the registration of sale agreement, ie, builder-buyer agreement, but some developers have managed to find loopholes in the legal provisions and exploited homebuyers everywhere in the NCR.

Legal experts say that had Section 17 of the Indian Registration Act (which makes registration of documents like sale agreement mandatory) been in practice in real estate, thousands of property buyers would not have become victims of property fraud and malpractice.

Registering a sale agreement is a wise move as it is also backed by various acts such as the Indian Contract Act, Specific Relief Act and various apartment acts enforced by many states. The Uttar Pradesh Apartment Act 2010 also requires all sale agreements to be necessarily registered in UP.

The downside of not registering a sale agreement was specifically highlighted by the apex court in its judgment in the TG Ashok Kumar vs Govindammal (2010) case.

“Unscrupulous property owners enter into agreements of sale and take huge earnest money deposits/advance, and then sell the property to others, thereby plunging the original agreement holder and the subsequent purchaser into litigation. Registration of agreements of sale will reduce such litigation.”

The judgment read: “If all agreements of sale are compulsorily registered that will go a long way to discourage generation and circulation of black money in real estate matters, as also undervaluation of documents for purposes of stamp duty. It will also discourage the growth of land mafias and musclemen who dominate the real estate scene in various parts of the country.”

Several Supreme Court and high court judgments have held that unregistered agreement of sale will not be recognised in a court of law. An important judgment on this issue was delivered by the Allahabad High Court in the Vijay Kumar Sharma vs Devesh Behri Saxena case in 2007. Sharma, the owner of a disputed 465 sq mt plot in Sector 15A, Noida, Uttar Pradesh, had received Rs 7 lakh as earnest amount from Saxena and had signed a sale agreement with him on January 22, 1993.

Later, Sharma had refused to honour the agreement, arguing that no completed, final, legal and binding sale agreement had been registered by the parties and the existing agreement could not be received as evidence of the alleged contract.

The court, citing legal provisions, had held that the contract for sale of immovable property in Uttar Pradesh had to be a registered document and an unregistered agreement of sell of immovable property was inadmissible as evidence.

Despite the legal provisions, however, many buyers complain that even if they want to get their sale-agreement registered, most developers are not interested. In such a situation, legal experts say that the state governments should take strict measures as they also stand to lose out on revenues.

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