Can you can­cel a sale deed or ATS?

The reg­is­ter­ing au­thor­ity is obliged to get a deed of can­cel­la­tion reg­is­tered if two par­ties in­volved in a prop­erty trans­ac­tion want to can­cel the deal

HT Estates - - NEWS - Su­nil Tyagi

In many trans­ac­tions of sale of im­mov­able prop­erty, par­ties ex­e­cute an sgree­ment to dell (ATS) as a pre­cur­sor to the sale deed. Un­like a sale deed, ex­e­cu­tion of ATS does not pass ti­tle of own­er­ship in favour of the buyer. In an ATS, par­ties set out terms such as ad­vance sale price, to­tal sale price, time­lines of pay­ment, time pe­riod within which the sale deed is to be ex­e­cuted, obli­ga­tions of the par­ties be­fore the sale, etc.

In some cases, the ATS does not ma­te­ri­alise into com­ple­tion of sale of the prop­erty and ex­e­cu­tion of sale deed for var­i­ous rea­sons such as breach or de­fault by ei­ther party of its obli­ga­tions con­tained in the ATS.

Now the ques­tion is: can a reg­is­tered ATS or sale deed can be can­celled if both the seller and buyer want it?

Can­cel­la­tion of a pre­vi­ous- ly ex­e­cuted and duly reg­is­tered ATS can be done if the par­ties ex­e­cute a can­cel­la­tion deed. It is a set­tled law that a bi­lat­eral con­tract such as an ATS or sale deed may be can­celled only if both buyer and seller agree and ex­e­cute a sep­a­rate deed of can­cel­la­tion. Can­cel­la­tion deed, be­ing a doc­u­ment re­lat­ing to trans­fer of own­er­ship of im­mov­able prop­erty, should be reg­is­tered by the sub-regis­trar pro­vided the re­quire­ments un­der Pro­viso to Sec­tion 32A of the Reg­is­tra­tion Act, 1908 (‘Act’), are duly com­plied with.

Sec­tion 32A of the Act pro­vides for com­pul­sory af­fix­a­tion of pho­to­graph and fin­ger­prints by per­sons pre­sent­ing the doc­u­ment for reg­is­tra­tion. Pro­viso to sec­tion 32A pro­vides that in case of any doc­u­ment re­lat­ing to the trans­fer of own­er­ship of im­mov­able prop­erty, the pass­port size pho­to­graph and the fin­ger­prints of each buyer and seller should be af­fixed to such a doc­u­ment.

In the mat­ter of GD Subra­ma­nian v sub regis­trar, P Shanmugam, B Dil­libabu and B. Vasu (2009 (1) CTC 709), the Madras High Court ob­served that the reg­is­ter­ing au­thor­ity is obliged to reg­is­ter any deed of can­cel­la­tion of sale deed which has been mu­tu­ally ex­e­cuted by the buyer and seller, pro­vided it is in com­pli­ance with the re­quire­ments of Sec­tion 32A. Fur­ther, the court also ob­served that the reg­is­ter­ing of­fi­cer is legally bound to re­ject and refuse to reg­is­ter a deed of can­cel­la­tion if it has been ex­e­cuted uni­lat­er­ally and with­out the knowl­edge and con­sent of the other party, and if it does not ful­fil the re­quire­ments of Sec­tion 32A.

Prospec­tive buy­ers hes­i­tate to pur­chase a prop­erty which has a his­tory of a can- celled trans­ac­tion of sale or ATS. How­ever, if can­cel­la­tion of the ATS has been done in ac­cor­dance with law and buy­ers un­der­take le­gal due dili­gence, risk may be min­imised. The new buyer may in­spect the orig­i­nal can­cel­la­tion deed ex­e­cuted by the seller with the pre­vi­ous buyer. The clauses of can­cel­la­tion deed must clearly and un­am­bigu­ously state that ATS, which was pre­vi­ously ex­e­cuted by the owner and pre­vi­ous buyer now stands can­celled. Also, the new buyer must en­sure that the can­cel­la­tion deed was duly reg­is­tered at the of­fice of sub-regis­trar in whose ju­ris­dic­tion this prop­erty is sit­u­ated.


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