Effect of Unregistered Agreements and Legal Principles

Can there be an unregistered "Agreement to Sell" an Immovable Property ?

Written by

VM

Delhi

S.17 (1) (b) of Registration Act, 1908 deals with  other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property. S.49 of RA, 1908 explains effect of unregistered documents. 

"A document required by law to be registered, if unregistered, is inadmissible as evidence of a transaction affect in immovable property. If a documents is inadmissible in evidence for want of registration none of this terms can be admitted in evidence and that to use a document for the purpose of proving an important clause would not be using it as a collateral purpose." - [2008] GCtR 4223 (SC).

As per S.17 of RA, 1908, there needs to be a compulsory registration of the document as per which there is a creation of any right or relinquishment of any right in any immovable property either in the present or in the future with the value of immovable property above hundred rupees. See Balraj v. Nathuram Sharma [2023] GCtR 2494 (Delhi).

Until the decision of the Judicial Committee in Dayal Singh v. Indar Singh, (1925-26) 53 IA 214 : (AIR 1926 PC 94) it was considered that an agreement for the sale of immovable property containing an acknowledgment of receipt of part of the purchase price paid by the buyer as earnest money did not require registration. 

It is well settled that the nomenclature given to the document is not decisive factor but the nature and substance of the transaction has to be determined with reference to the terms of the documents and that the admissibility of a document is entirely dependent upon the recitals contained in that document but not on the basis of the pleadings set up by the party who seeks to introduce the document in question. 

Further, in Rama v. Manda [2018] GCtR 80999 (Nagpur, Bombay), the unregistered document in respect of immovable property was found to be inadmissible as evidence. 

So, S.17 of Registration Act, 1908 and S.49 of Registration Act, 1908 clarifies what will be effect of unregistered documents. 

It is further to be noted that Registration (Rajasthan Amendment) Act, 2021 published in Rajasthan Gazette on 24 February 2025  has made position clear. S.17 was amended. S.17(1)(f) now says that "agreement to sell immovable property whether possession whereof has been or is handed over or not to the purported purchaser".

In Rajasthan there is Rajasthan Stamp Act, 1998. Schedule contains Entry 5(c) and stamp value will be 3% of total consideration of total consideration. When it is conveyance, then clause 21 will apply and it is 11% of market value. 

It indicates that whenever any immovable property above Rs. 100 is there then the agreement to sell has to be registered under Registration Act, 1908 ; further, the Indian Stamp Act, 1899 has to be followed and if these provisions are not followed, then an unregistered agreement to sell will face severe legal difficulties and the buyer / financer who has paid money / financed loan will face legal troubles in recovering his money. Any financer who has financed money for buying a house merely on the strength of an unregistered agreement to sell is going to face difficulty.