Agreement to Sale, General power of attorney and will do not confer title in immoveable property. GHANSHYAM V. YOGENDRA RATHI

Posted On - 5 March, 2024 • By - Jayanth Ravi

[1]Quite often, a buyer thinks that after signing an Agreement for Sale and paying the seller the full consideration along with obtaining a Power of Attorney to handle the immovable property, he has transferred ownership of the subject property. However, in a recent ruling, Ghanshyam v. Yogendra Rathi, the Hon’ble Supreme Court of India addressed the question of when an Agreement to Sell would be considered a title document and provided clarity regarding a valid transfer of the immovable property in the purchaser’s favour.

The appellant, Ghanshyam, was the owner of the suit property in Delhi. He and Yogendra, the respondent, entered into an agreement to sale for the suit property, and he was paid the full sale value. A GPA and a Will were executed by the appellant in the respondent’s name. Although the respondent received possession, no sale deed was signed between them. The respondent allowed the appellant to use a certain section of the premises (licenced premises) for a period of three months, but he persisted in occupying it after the licence period had ended.

The Respondent filed an eviction suit against the Appellant and sought for mesne profits. Based on an Agreement to Sell, GPA, a memo of possession, payment made for the sale, and the Will, the respondent asserted title over the suit property. The appellant argued that the respondent had falsified the paperwork, but he did not contest the execution of documents or the receipt of the sale payment.

The Respondent successfully established his right to the immovable property in the trial court, leading to a decree for eviction and payment of mesne profits against the Appellant. However, upon appealing the decision, the Appellant questioned the validity of the documents presented by the Respondent as conferring title. Since the Appellant failed to raise this issue during the trial or the first appeal, the High Court dismissed the Second Appeal, stating it did not involve a substantial legal question. Dissatisfied with this dismissal, the Appellant pursued a Civil Appeal with the Supreme Court.

The SC underscored a crucial principle of Registration Act and Property Laws that the transfer of title in immovable properties cannot be effectuated through an Agreement to Sell. The Supreme Court clarified that an Agreement to Sell does not confer absolute title but acknowledged the respondent’s de facto possessory right over the property, protected under Section 53A of TOPA, due to possession evidenced by a possession memo. The Power of Attorney and Will executed by the appellant in favour of the respondent were deemed ineffective to confer title during the appellant’s lifetime, as per Section 54 of TOPA. In this regard, reference was made to two other decisions of the Delhi High Court in Imtiaz Ali v. Nasim Ahmed[2] and G. Ram v. Delhi Development Authority[3].

The respondent’s possession of the property was considered at least in part-performance of the Agreement to Sell, protecting it from disturbance by the appellant. The appellant, having his license terminated, was obligated to restore possession to the respondent. The Court also highlighted the importance of complying with legal requirements such as stamping and registering deeds to ensure the validity of property transfers. Failure to do so may result in defects in conferring title, necessitating court intervention for remedy. Overall, emphasis is laid on the legal nuances surrounding property transactions, the significance of proper documentation, and the need for compliance with relevant laws to establish and protect property rights. The plaintiff-respondent was rightly entitled to a decree of eviction with mesne profits and the court did not find any error or illegality in such a decree being passed.

[1] (2023) 7 SCC 361.

[2] AIR 1987 DELHI 36.

[3] AIR 2003 DELHI 120.