Vendor Cannot Execute Second Sale Deed While First Sale Deed Executed Over Same Plot Is Pending Registration: Supreme Court

The Supreme Court recently held that a vendor who has executed a sale deed cannot execute another deed with respect to the same plot just because the first sale deed is pending registration. The moment a deed is executed, the vendor loses all rights over the property and he cannot claim any right just because the deed has not been registered, it further stated.

The Court also opined that the only consequence of non-registration is that the purchaser cannot produce such a deed as evidence because of the provisions of the Transfer of Property Act, 1882 and the Registration Act, 1908.

To quote the bench comprising Justices Vikram Nath and Ahsanuddin Amanullah:

"The issue of registration of a document is with the State, which requires compulsory registration of documents so that it is not deprived of revenue by way of stamp duty payable on such transfers of immovable property. If the purchaser has no means to pay stamp duty or exorbitant demand of stamp duty is made by the registering authority which the purchaser is unable to pay at that time but he remains satisfied with the fact that the vendor has fairly and duly executed the sale deed presented it for registration and put him in possession of the purchased property which he is peacefully enjoying, he is always at liberty to pay the deficiency of stamp duty at any point of time. The document presented for registration will remain with the Registering Authority till such time, the deficiency is removed. However, this pendency of registration on account of deficiency cannot enure any benefit to the vendor, who has already eliminated all his rights by executing the sale deed after receiving the sale consideration. He cannot become the owner of the transferred land merely because the document of sale is pending for registration. It is the purchaser who cannot produce such document which is pending registration with respect to the immovable property in evidence before the Court of law as the same would be inadmissible in view of statutory provision contained in the TP Act as also the Act, 1908".

It was further held that the second sale deed executed by the vendor while the first deed is awaiting registration is void.

"Essentially, if the vendor's rights were already severed by the first sale, any later sale deed made without transparency and in bad faith is invalid."

Factual background

Respondent No.2 executed a sale deed in favor of appellant No.1 and his minor brother (represented by their mother) in 1985. This deed could not be registered on account of deficiency in payment of stamp duty and the registration remained pending in the office of Sub-Registrar.

In 2010, respondent No.2 executed a Conveyance Deed in favor of respondent No.1 (subsequent purchaser) with regard to the same property. After learning about the same, the appellants followed up registration of the sale deed in their favor. The deed came to be registered in 2011. However, as respondent No.1 tried to interfere with the appellants' possession of the suit property, the latter filed a suit for cancellation of a sale deed in respondent No.1's favor and sought permanent injunction.

The Trial Court dismissed the suit in 2016, holding the sale deed in appellants' favor to be void, primarily for the reason that both of them were minors at the time of execution. In appeal, the District Judge set aside the Trial Court's judgment and decreed the suit. Respondent No.1 alone assailed this decision before the High Court. In 2022, the appeal was allowed and the suit dismissed. Aggrieved by the High Court's judgment, the appellant approached the Supreme Court.

Issues

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

(i) Whether Respondent No. 2 received sale consideration and executed the sale deed in 1985?

(ii) Whether the sale deed of 1985 was void as the appellants were alleged to be minors?

(iii) Whether respondent No.1 was a bonafide purchaser for value by way of a subsequent sale deed?

Court Observations

On perusing the material on record, the Court observed that the deed of 1985 bore signature of respondent no. 2 and attesting witnesses, as well as contained the necessary endorsement by the Sub-Registrar. It was impounded for non-payment of stamp duty, but after the same was paid, the document was duly registered.

"This makes it abundantly clear that the sale deed was executed...and presented before the Sub-Registrar", it said.

Insofar as the Trial Court and the High Court proceeded on the premise that respondent no.2 denied the execution of sale deed and receipt of any consideration, it was noted that respondent No.2 never made a specific denial on the two aspects and there was a misreading of evidence by the courts.

"Both the said courts also failed to take into consideration that defendant no.1 the vendor (respondent no.2 herein) neither entered the witness box in support of his pleadings and to prove them, nor did lead any evidence, either oral or documentary, in support of his pleadings. There was no justification to treat a vague statement in the written statement of not recollecting about execution of sale deed, to be taken as a denial of the execution...Both the Courts again misread the deposition of appellant no.1 (PW-1) wherein he said that he does not have any proof of payment of the consideration to hold that no sale consideration was paid."

Further, the court rejected respondents' contentions regarding appellants being minor at the time of execution of sale deed. Though appellant No.1's age was incorrectly recorded as 18 years in the sale deed, it was noted that the other minor purchaser (appellant No.1's brother) was represented by their mother. As such, the sale deed was valid, in any case, so far as rights of the minor brother were concerned.

Additionally, considering that the mother was the natural guardian of appellant No.1, it was to be deemed that she was acting on behalf of both her minor sons, the court said.

"The issue of minority of appellant no.1 would also not be of any relevance for the reason that even if he was a minor at the time of the execution of the sale deed and he had so stated honestly in his deposition, the fact remains that the mother of appellant No.1 was already representing his younger brother as guardian who was stated to be a minor in the sale deed...it would be deemed that she was acting on behalf of both her minor sons."

Subsequent Purchaser Can't Claim Benefit As Bonafide Purchaser If Seller Did Not Have Right To Sell

While dealing with the claim of respondent No.1, the court opined that a subsequent purchaser, even if unware of prior sale, cannot be treated as a bonafide purchaser, as the protection available is nullified by the vendor's deceitful conduct and pre-existing transfer of rights. 

"The doctrine of bona fide purchaser for value applies in situations where the seller appears to have some semblance of legitimate ownership rights. However, this principle does not protect a subsequent purchaser if the vendor had already transferred those rights through a prior sale deed. The subsequent purchaser, even if unaware of the prior sale, cannot be considered bona fide because the vendor no longer had the legal right to sell the property. Thus, the protection afforded by the bona fide purchaser doctrine is nullified by the vendor's deceitful conduct and the pre-existing transfer of rights."

In facts of the case, the court said that respondent No.1 could avail such remedy as may be available under law to recover the sale consideration paid by him to respondent No.2. It further directed that the sale deed in favor of respondent No.1 be cancelled.

Conclusion

The Court allowed the appellants' appeal and decreed the suit. Taking into consideration the respondents' conduct, it imposed an exemplary cost of Rs.10 lakhs on them.

Notably, in its judgment, the court lamented continued suffering of common man at the hands of vendors, routed in the latter's mala fide intentions to gain double-benefits, either by arm-twisting or through manipulation of the legal processes. Voicing a concern for remedying the injustice in such cases, it said,

"It is in cases like these, the law comes to the aid of the weak. While adjudicating such cases, it is not just the lives and the properties of the people that we are dealing with, but also their trust in the legal system. In cases like the one before us, it is not for us to just mechanically analyse the contentious transactions but to also ensure that injustice is remedied and nobody is benefitted by their own wrongs."

Case Title: KAUSHIK PREMKUMAR MISHRA & ANR. VERSUS KANJI RAVARIA @ KANJI & ANR., CIVIL APPEAL NO.1573 OF 2023

Click here to read the judgment