Agreement To Sell Doesn't Transfer Ownership Rights Or Confer Title : Supreme Court

The Supreme Court reiterated that an agreement to sell does not transfer ownership rights or confers any title.

"Agreement to Sell is not a conveyance; it does not transfer ownership rights or confers any title," observed a bench comprising Justices Vikram Nath and Rajesh Bindal.

Therefore, the bench held that the agreement to sell was not barred under the Karnataka Prevention of Fragmentation and Consolidation of Holdings Act, 1966 (Fragmentation Act).

The civil appeal, filed in 2011 in the Supreme Court, pertained to an agreement to sell executed in the year 1990. It was executed in the anticipation that the Fragmentation Act will be repealed, which eventually happened in 1991. When there was refusal to execute the sale, the defendants filed a suit for specific performance of contract. While the trial court dismissed the suit, the first appellate court allowed it. In second appeal, the High Court reversed the first appellate court's judgment, and dismissed the suit, holding that the agreement was barred under the Fragmentation Act.

The Supreme Court noted that the bar under Section 5 of the Fragmentation Act was the lease/sale/conveyance or transfer of rights. Since the agreement to sell is not creating any rights on the land, it cannot be held to be barred by the Act, the Court held. Also, the suit was filed after the repeal of the Fragmentation Act, the Court noted, allowing the appeal.

In this context, it may be noted that Section 54 of the Transfer of Property Act expressly states that a Contract for Sale, does not, of itself, create any interest in or charge on such property.

Case Title : Munishamappa v. N. Rama Reddy and others

Citation : 2023 LiveLaw (SC) 987

Click here to read the judgment

CA 10

Click here to read the order