le­gal reme­dies

Both the buyer and the seller have to mu­tu­ally agree to it and ex­e­cute a can­cel­la­tion deed

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Sunil Tyagi ht­es­tates@hin­dus­tan­times.com

In many trans­ac­tions of sale of im­mov­able property, par­ties ex­e­cute an agree­ment to sell (ATS) as a pre­cur­sor to the sale deed, which sets out terms of sale/puchase such as ad­vance sale con­sid­er­a­tion, to­tal sale con­sid­er­a­tion, time pe­riod within which the sale deed is to be ex­e­cuted and reg­is­tered, obli­ga­tions to be per­formed by the par­ties be­fore trans­fer can take place, etc. Un­like a sale deed, an ATS by it­self does not pass the ti­tle of own­er­ship in favour of the buyer.

At times, an ATS may not ma­te­ri­alise into com­ple­tion of sale of the property and ex­e­cu­tion of the sale deed for var­i­ous rea­sons, in­clud­ing non-per­for­mance/non­ful­fil­ment of con­di­tions by ei­ther party, non-pay­ment of con­sid­er­a­tion and so on in which case the af­fected party may ter­mi­nate the ATS as per and un­der the terms of the ATS. An­other im­por­tant ques­tion that arises is whether a reg­is­tered ATS can be can­celled if both the seller and buyer de­cide on such a can­cel­la­tion.

Can­cel­la­tion of a pre­vi­ously ex­e­cuted and duly reg­is­tered ATS of an im­mov­able property may be ef­fected by ex­e­cut­ing a can­cel­la­tion deed ex­e­cuted by the par­ties. It is set­tled by law that a bi­lat­eral con­tract re­lat­ing to sale/pur­chase of im­mov­able property such as ATS may be can­celled only if both the buyer and the seller mu­tu­ally con­sent to such can­cel­la­tion and ex­e­cute a sep­a­rate deed of can­cel­la­tion.

In the case of M/S Latif Es­tate Line In­dia Ltd vs Hadeeja Am­mal (2011), the Madras High Court held that a can­cel­la­tion deed, which is uni­lat­er­ally ex­e­cuted by the seller, does not cre­ate or ex­tin­guish any right, claim, ti­tle or in­ter­est in the im­mov­able property in ques­tion and is of no ef­fect. A can­cel­la­tion deed that is made with­out ob­tain­ing mu­tual con­sent of all par­ties in­volved would be il­le­gal, void and against pub­lic pol­icy in that it en­cour­ages fraud­u­lent trans­ac­tions. A uni­lat­eral can­cel­la­tion can be done by ap­proach­ing the civil court for ob­tain­ing a de­cree of can­cel­la­tion on grounds of fraud or other valid rea­sons.

A can­cel­la­tion deed of a doc­u­ment re­lat­ing to trans­fer of in­ter­est/own­er­ship of im­mov­able property is re­quired to be com­pul­so­rily reg­is­tered un­der the Reg­is­tra­tion Act, 1908 (Act). In the case of GD Subra­ma­nian v Sub Reg­is­trar, P Shan­mugam, B Dil­libabu and B Vasu (2009), the Madras High Court dealt with the is­sue of whether reg­is­tra­tion of a can­cel­la­tion deed which is uni­lat­er­ally ex­e­cuted by the seller is sus­tain­able un­der law. The high court held that when a can­cel­la­tion deed is ex­e­cuted by mu­tual con­sent by all par­ties to the sale, the reg­is­ter­ing of­fi­cer is bound to reg­is­ter the can­cel­la­tion deed pro­vided re­quire­ments like Sec­tion 32-A of the Act have been com­plied with.

How­ever, the reg­is­ter­ing of­fi­cer is legally obliged to re­ject and refuse reg­is­tra­tion of a can­cel­la­tion deed which was ex­e­cuted uni­lat­er­ally or with­out the knowl­edge and con­sent of all other par­ties or with­out hav­ing ful­filled the re­quire­ments un­der Sec­tion 32-A of the Act.

Cases in which sale of im­mov­able property has been made ab­so­lute by trans­fer of own­er­ship of the property from the seller to the buyer, the sale deed may be sub­se­quently an­nulled or can­celled by the par­ties only by ex­e­cut­ing a con­veyance deed for re-con­veyance.

In the case of M/S Latif Es­tate Line In­dia Ltd vs Hadeeja Am­mal (2011), the Madras High Court held that once the ti­tle to the property has been ab­so­lutely vested in the trans­feree (buyer), ti­tle and own­er­ship can­not be di­vested unto the trans­feror (seller) by ex­e­cu­tion and reg­is­tra­tion of a deed of can­cel­la­tion even with the con­sent of the par­ties. The proper course would be to re­con­vey the property by a sale deed/con­veyance deed by the trans­feree in favour of the trans­feror, which is duly stamped and reg­is­tered. The au­thor is se­nior -part­ner at Zeus Law, a cor­po­rate -commercial law firm. One of its ar­eas of -spe­cial­i­sa­tions is real es­tate trans­ac­tional and lit­i­ga­tion work. If you have any queries, email us at -ht­es­tates@hin­dus­tan­times.com or ht@zeus.firm.in

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