Supreme Court Ruling on Second Sale Deed Wherein First Sale Deed is pending registration.

The Supreme Court of India in the case of Kaushik Premkumar Mishra & Anr. v. Kanji Ravaria @ Kanji & Anr.[1] recently ruled that once a vendor has executed a sale deed, they cannot execute another deed for the same property merely because the first sale deed is pending registration. The court emphasized that the execution of a sale deed results in the vendor losing all rights to the property, regardless of whether the deed has been registered.

The bench comprising Justice Vikram Nath and Justice Ahsanuddin Amanullah, clarified that the consequence of non-registration is that the purchaser cannot use the deed as evidence due to the Transfer of Property Act, 1882, and the Registration Act, 1908. The court stated, “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.”

The court further elaborated that if a purchaser is unable to pay the stamp duty immediately, but the vendor has executed the sale deed and the purchaser is in possession of the property, the purchaser can pay the stamp duty later. The pending registration does not benefit the vendor, who has already relinquished all rights after executing the sale deed and receiving the consideration. The vendor cannot reclaim ownership of the property merely because the deed is pending registration. The purchaser, however, cannot use the unregistered document as evidence in court due to statutory provisions.

The court also declared that any subsequent sale deed executed by the vendor while the first deed is awaiting registration is void. If the vendor’s rights were severed by the first sale, any later deed executed without transparency and in bad faith is invalid.

In this matter at hand Respondent No. 2 had executed a sale deed in favor of Appellant No. 1 and his minor brother in 1985, which remained unregistered due to a deficiency in stamp duty payment. In 2010, Respondent No. 2 executed another conveyance deed for the same property in favour of Respondent No. 1. Upon discovering this, the appellants completed the registration of their sale deed in 2011. When Respondent No. 1 tried to interfere with their possession, the appellants filed a suit to cancel the second sale deed and sought a permanent injunction.

The Trial Court dismissed the suit in 2016, declaring the sale deed void because the appellants were minors when it was executed. However, the District Judge overturned this decision, decreeing the suit in favour of the appellants. Respondent No. 1 appealed to the High Court, which dismissed the suit in 2022. Aggrieved, the appellants approached the Supreme Court.

The Supreme Court addressed several issues, including whether the sale consideration was received, and the deed executed in 1985, whether the appellants being minors invalidated the deed, and whether Respondent No. 1 was a bona fide purchaser.

The court observed that the 1985 deed bore the signatures of Respondent No. 2 and attesting witnesses and was endorsed by the Sub-Registrar. Despite being impounded for stamp duty deficiency, the deed was registered once the duty was paid. The court noted that Respondent No. 2 never explicitly denied executing the deed or receiving consideration, indicating a misreading of evidence by the lower courts.

Regarding the appellants’ minority, the court noted that while appellant No. 1’s age was incorrectly recorded, his minor brother was represented by their mother, making the sale deed valid. The mother, as the natural guardian, was deemed to have acted on behalf of both sons.

The court opined that a subsequent purchaser, unaware of a prior sale, cannot be deemed a bona fide purchaser if the vendor had already transferred rights through a previous deed. Thus, the subsequent sale is invalid.

The Supreme Court allowed the appellants’ appeal, cancelled the sale deed in favour of Respondent No. 1, and imposed an exemplary cost of Rs. 10 lakhs on the respondents. The judgment highlighted the need for legal protections against vendors’ mala fide actions and emphasized the judiciary’s role in ensuring justice and trust in the legal system.

[1] Civil Appeal No.1573 of 2023