Scope of an Agreement of Sale

Scope of an Agreement of sale


Section 54 of the Transfer of Property Act makes it clear that a contract of sale, that is, an agreement of sale does not, of itself, create any interest in or charge on such property. This Court in Narandas Karsondas v. S.A. Kamtam and Anr., (1977) 3 SCC 247 observed:

A contract of sale does not of itself create any interest in, or charge on, the property. This is expressly declared in Section 54 of the Transfer of Property Act. See Rambaran Prosad v. Ram Mohit Hazra, (1967) 1 SCR 293. The fiduciary character of the personal obligation created by a contract for sale is recognized in Section 3 of the Specific Relief Act, 1963, and in Section 91 of the Trusts Act. The personal obligation created by a contract of sale is described in Section 40 of the Transfer of Property Act as an obligation arising out of contract and annexed to the ownership of property, but not amounting to an interest or easement therein.

In India, the word ‘transfer’ is defined with reference to the word ‘convey’. The word ‘conveys’ in Section 5 of Transfer of Property Act is used in the wider sense of conveying ownership….that only on execution of conveyance ownership passes from one party to Another….

In Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra, (2004) 8 SCC 614 Apex Court held:

Protection provided under Section 53A of the Act to the proposed transferee is a shield only against the transferor. It disentitles the transferor from disturbing the possession of the proposed transferee who is put in possession in pursuance to such an agreement. It has nothing to do with the ownership of the proposed transferor who remains full owner of the property till it is legally conveyed by executing a registered sale deed in favor of the transferee. Such a right to protect possession against the proposed vendor cannot be pressed in service against a third party.

It is thus clear that a transfer of immoveable property by way of sale can only be by a deed of conveyance (sale deed). In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immoveable property can be transferred.

Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of Sections 54 and 55 of Transfer of Property Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under Section 53A of Transfer of Property Act). According to Transfer of Property Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of Transfer of Property Act enacts that sale of immoveable property can be made only by a registered instrument and an agreement of sale does not create any interest or charge on its subject matter.

Ref : Suraj Lamp and Industries Pvt. Ltd. Vs State of Haryana and Another-11/10/2011


1-Distinction Between Agreement of Sale and Sale Agreement

2-Agreement of sale does not confer title, therefore, the agreement holder, even assuming that the agreement is valid, does not acquire any title to the property