Supreme Court Rules Vendor Cannot Execute Multiple Sale Deeds for Same Property

July 30, 2024

The Supreme Court recently ruled that a vendor who has executed a sale deed for a property cannot execute another deed for the same plot if the first deed is still pending registration. The Court clarified that once a deed is executed, the vendor forfeits all rights to the property, and the lack of registration does not restore these rights. The sole impact of non-registration is that the purchaser cannot use the deed as evidence, as outlined by the Transfer of Property Act, 1882, and the Registration Act, 1908.

The bench, consisting of Justices Vikram Nath and Ahsanuddin Amanullah, stated:

The registration of documents is under State jurisdiction, which mandates compulsory registration to ensure stamp duty revenue from property transfers. If a purchaser cannot immediately pay the stamp duty or faces excessive demands from the registering authority, they can rectify the deficiency at any time. The sale deed remains with the Registering Authority until the shortfall is addressed. However, pending registration does not benefit the vendor, who has relinquished all rights by executing the sale deed and receiving the sale consideration. Consequently, the vendor cannot reclaim ownership simply due to pending registration. Conversely, the purchaser cannot use a document pending registration as evidence in court, as it would be inadmissible under the TP Act and the Act of 1908.

It was determined that a second sale deed executed by the vendor while the first deed is pending registration is void. The Court emphasized that if the vendor’s rights were fully transferred by the first sale, any subsequent sale deed executed in bad faith or without transparency is deemed invalid.

Factual Background

Respondent No. 2 executed a sale deed in 1985 in favor of appellant No. 1 and his minor brother (represented by their mother). Due to a deficiency in stamp duty payment, the registration was not completed and remained pending with the Sub-Registrar’s office.

In 2010, Respondent No. 2 executed a Conveyance Deed in favor of Respondent No. 1 (the subsequent purchaser) concerning the same property. Upon discovering this, the appellants pursued the registration of their sale deed, completed in 2011. When Respondent No. 1 attempted to interfere with the appellants’ possession, the appellants filed a suit seeking cancellation of the sale deed in Respondent No. 1’s favor and requested a permanent injunction.

In 2016, the Trial Court dismissed the suit, declaring the sale deed in favor of the appellants void on the grounds that both appellants were minors at the time of execution. On appeal, the District Judge overturned this decision and decreed in favor of the appellants. Respondent No. 1 alone challenged this decision before the High Court, which in 2022 allowed the appeal and dismissed the suit. Dissatisfied, the appellants approached the Supreme Court.

The Supreme Court addressed several issues in the case, including:

Whether Respondent No. 2 received sale consideration and executed the 1985 sale deed.
Whether the 1985 sale deed was void because the appellants were alleged to be minors.
Whether Respondent No. 1 was a bona fide purchaser for value by way of a subsequent sale deed.

Court Observation

Upon reviewing the case materials, the Court noted that the 1985 sale deed was signed by Respondent No. 2 and the attesting witnesses, and included the required endorsement by the Sub-Registrar. Although initially impounded due to unpaid stamp duty, it was registered after the duty was paid. The Court found that both the Trial Court and the High Court erred in assuming Respondent No. 2 denied executing the sale deed and receiving consideration, noting that Respondent No. 2 did not specifically deny these points and that the lower courts misinterpreted the evidence.

Regarding the appellants’ minority status, the Court rejected claims that this invalidated the sale deed. Appellant No. 1’s minority status was deemed irrelevant as their mother, acting as their guardian, was representing both sons in the transaction.

On Respondent No. 1’s claim, the Court held that a subsequent purchaser cannot claim bona fide purchaser status if the seller lacked the right to sell. The doctrine of bona fide purchaser for value applies only when the seller appears to have legitimate ownership rights. The prior transfer of rights through a valid sale deed nullifies this protection.

Conclusion

The Court upheld the appellants’ appeal and decreed in their favor, imposing an exemplary cost of Rs. 10 lakhs on the respondents. The judgment emphasized addressing injustices arising from vendors’ attempts to secure double benefits and stressed the importance of supporting the vulnerable and ensuring justice.

Posted and reproduced in Public Interest by

Adv. Sulaiman Bhimani Legal Consultant

Expert in RERA & Consumer Matters, Co-operative Scty Matters,

Deem Conveyance, Family Matters, and Property Disputes.

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