Unregistered Agreement To Sell Doesn't Grant Ownership Rights, No Suit For Declaration Can Be Filed Based On Such Agreements: J&K High Court

Clarifying that the appropriate recourse for the beneficiary-vendee in cases of agreement violations is to seek specific performance of the contract a bench of Justice Rajnesh Oswal observed,

“On the basis of an agreement to sell, the remedy available to the proposed vendee is to seek the specific performance of contract but in no way a suit for declaration as owner on the basis of an agreement to sell can be filed”.

Background:

The case involved a land dispute in Srinagar. The petitioners claimed ownership of an 84-kanal property based on an agreement to sell they had entered into with the purported owner's attorney in 2007. However, the agreement was never registered. The petitioners filed a suit seeking ownership rights, which was later settled through a compromise recorded by a Lok Adalat (a quasi-judicial forum for dispute resolution).

When the petitioners approached revenue authorities to have their ownership rights reflected in the land records, they were asked to register the compromise deed. The petitioners challenged this requirement by filing a writ petition in the High Court.

The petitioners argued that the Lok Adalat award, being deemed a decree, did not require registration under the Registration Act. They contended that Section 17 of the Act only applied to decrees creating new rights, not those recognizing pre-existing ones.

The respondents, including the revenue authorities, countered that the unregistered agreement to sell did not create any ownership rights in the first place. They argued that the compromise was merely an attempt to bypass stamp duty payment and circumvent the Jammu and Kashmir Migrant Immovable Property (Preservation, Protection and Restraint on Distress Sales) Act, 1997 which regulates the sale of property owned by migrants in J&K.

Courts Observations:

Acknowledging the petitioners' lack of pre-existing rights based on the unregistered agreement Justice Oswal stated,

“The petitioners, admittedly, had filed the suit on the basis of an agreement to sell, which as per law does not confer any title or ownership qua the immovable property in favour of a person”.

It added,

“Once no right in the immovable property was vested in the petitioners pursuant to the agreement to sell, the same could not have formed the basis for filing a suit seeking ownership over the suit property”.

Citing Ripudaman Singh vs Tikka Maheshwar Chand (2021) the bench emphasised that agreements aimed at avoiding stamp duty payment cannot be used to claim ownership and noted that in the instant case neither the agreement to sell nor the compromise entered into between the parties was registered.

“..Without paying the stamp duty, both the documents were executed by the parties to the suit. The Hon'ble Supreme Court of India has deprecated the practice of entering into agreements without paying the stamp duty resulting in to loss to the state exchequer”, the bench remarked.

Furthermore, the Court noted that the property's owner might be a migrant as it referred to a previous writ petition filed by the alleged owner, seeking protection under the Migrant Property Act.

“The attorney holder concealed this fact not only before the learned trial court i.e. 1st Additional District Judge, Srinagar, but also before Lok Adalat. Had that fact been brought to the notice of the trial court as well as the Lok Adalat, then the award would never have been passed”, said the court.

Considering these factors, the court did not quash the requirement for registration. However, recognizing the petitioners' willingness to comply with the law, the Court directed the District Magistrate of Srinagar to investigate the property's status under the Migrant Property Act.

“if the same is covered under the said Act, then the petitioners shall follow the mandate of Section 3 of the Act (supra). Copy of this order be sent to District Magistrate, Srinagar for compliance”, the bench concluded.

Case Title: GHULAM QADIR MIR & OTHERS Vs UT OF J&K

Citation: 2024 LiveLaw (JKL) 103

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