Source: Supreme Court 

Why in News? 

• A bench of Justice Vikram Nath and Justice PB Varale held that mere non performance of agreement to sell does not amount to the offence of cheating and breach of trust.         
• The Supreme Court held this in the case of Radheyshyam & Ors v. State of Rajasthan & Anr.  

What is the Background of Radheyshyam & Ors v. State of Rajasthan Case? 

• The Respondent and the Appellant entered into an agreement to sell with respect to the sale of a property. 
• An advance of Rs. 11 Lakhs was made at the time of agreement to sell by the respondent and he further agreed to make the payment of Rs. 1 crore by 30th September 2020. 
• The entire amount was to be paid within 18 months from the date of execution of Agreement to sell. 
• It appears that the sale was not executed and the Respondent filed a First Information Report (FIR) stated that the Appellants refused to execute the registry and have duped him of Rs. 1 crore. 
• It is to be noted that a civil suit in this regard is pending. 
• The Appellants thereafter filed an application for quashing the FIR filed under Section 420 and Section 406 of Indian Penal Code, 1860 (IPC) before the High Court under Section 482 of Criminal Procedure Code, 1973 (CrPC). 
• The High Court of Rajasthan refused to quash the FIR. 
• Against the above order the Appellant came to the Supreme Court. 

What were the Court’s Observations? 

• The Court held that mere non performance of agreement to sell does not by itself amount to cheating and criminal breach of trust. 
• It was observed that the act of filing the FIR appeared to be an act of arm twisting to get the deed executed by the Respondents. 
• The Court held that a bare perusal of FIR will show that a commercial transaction took place between the parties and the merely because the agreement to sell was not executed it would not mean that the offence of cheating or breach of trust was committed. 
• It was observed that this was not a case where the Respondents were duped or deceived rather this is a civil dispute where redressal can happen by way of a civil suit for non performance of Agreement to sell. 
• Thus, the Court concluded that the High Court committed an error by not quashing the FIR.

What is Agreement to Sell under Transfer of Property Act, 1882 (TPA)? 

• An agreement to Sell is the transfer of property that can take place in a future date. 
•  Section 54 of TPA defines “sale”. This Section also defines “Contract for Sale”. 
• A “Contract for Sale” (Agreement to sell) is a contract that sale of immovable property shall take place on terms settled between the parties. 
  • Section 54 further provides that it does not of itself create any interest in or charge on such property.

What is the Difference between Sale and Agreement to Sell under TPA?

What is the Status of Agreement to Sell with Respect to an Immovable Property? 

• Ghanshyam v. Yogendra Rathi (2023) 
  • The agreement to sell is not a document of title and may not confer absolute title upon a party by virtue of Section 54 of TPA. 
  • However, the agreement to sell, payment of entire sale consideration corroborated by the receipt of payment and the fact that a person was put in the possession of the property will result in the party having possessory rights over the suit property. 
  • This possessory right is not liable to be disturbed. 
  • Thus, the agreement to sell combined with conditions under Section 53A of TPA results in the remedy of part performance that protects the possessory rights of a person.    
• Suraj Lamp and Industries Pvt. Ltd v. State of Haryana (2012) 
  • As per Section 54 of TPA sale of an immovable property can only happen by way of a registered instrument and an agreement to sell does not create any right title or interest in the subject matter. 
  • According to TPA the Agreement to sell with or without possession is not conveyance. 

What is the Evidentiary Value of Unregistered Agreement to Sell? 

• Section 17 of the Registration act, 1908 (RA) provides for the documents that are compulsorily registrable. 
•  Section 17 (1A) added in 2001 by way of amendment provides that the documents containing contracts for transfer of any immovable property for the purpose of Section 53 A of TPA shall be registered and if it is not registered then after the commencement of the amendment such a document will have no effect for the purpose of Section 53 A of TPA.  
• Thus, as a result of this Amendment relief for part performance under Section 53 A can only be claimed when the agreement to sell is registered. 
• R. Hemlatha v. Kashthuri (2023) 
  • The Court here discussed the applicability of Section 49 of RA in a suit for specific performance. 
  • Section 49 of RA provides for the effect of non-registration of documents that are required to be registered. 
    • The proviso provides that an unregistered document affecting immovable property and required by TPA to be registered may be received  
      • as evidence of a contract in a suit for specific performance under Chapter II of Specific Relief Act (SRA), or 
      • As evidence of collateral transaction not required to be effected by registered instrument. 
  • The Court therefore, held in this case that the unregistered Agreement to Sell shall be admissible in evidence in a suit for specific performance as the proviso is exception to Section 49 of RA.