In a landmark judgment, the Supreme Court of India has clarified a crucial aspect of property law, stating that an agreement to sell does not transfer ownership rights or confer any title on a property. This significant ruling, delivered by a bench comprising Justices Vikram Nath and Rajesh Bindal, addresses a common misconception in property transactions.
The case, Munishamappa v. N. Rama Reddy and others, centered around a property transaction that took place under the shadow of the Karnataka Prevention of Fragmentation and Consolidation of Holdings Act, 1966 (Fragmentation Act). The parties had entered into an agreement to sell a property in 1990, anticipating the repeal of the Fragmentation Act, which eventually happened in 1991. However, when the seller later refused to execute the sale deed, the intending purchaser filed a suit for specific performance in 2001.
The trial court dismissed the suit in 2004, expressing doubts about the execution of the agreement and citing the limitation period. This decision was overturned in 2008 by the first appellate court, which ruled in favor of the purchaser. The seller then appealed to the Karnataka High Court, which declared the agreement void, stating it violated the Fragmentation Act. This led to the Supreme Court appeal in 2011.
In its judgment, the Supreme Court observed,
“Agreement to Sell is not a conveyance; it does not transfer ownership rights or confers any title.”
The bench elaborated that the Fragmentation Act barred the
“lease/sale/conveyance or transfer of rights,”
but since an agreement to sell does not create any rights on the land, it could not be considered as barred under the Act.
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The Court also noted that the suit was filed after the repeal of the Fragmentation Act, and thus, there was no violation of the law. The Supreme Court pointed out that the seller had received full consideration and transferred possession of the property. It emphasized that Section 54 of the Transfer of Property Act clearly states that a Contract for Sale does not, of itself, create any interest in or charge on such property.
Concluding the matter, the Supreme Court set aside the Karnataka High Court’s decision and restored the ruling of the first appellate court in favor of the purchaser. This judgment reinforces the legal principle that an agreement to sell is distinct from actual conveyance and does not by itself transfer ownership or confer title to a property, providing clarity and guidance in property law.
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