Supreme Court reaffirms registration Requirement for Property Sale

The Supreme Court of India (“Court”) in Sanjay Sharma v. Kotak Mahindra Bank Ltd has reaffirmed that ownership of immovable property cannot be transferred without the registration of a sale deed, even if possession is handed over and payment is made.

Background of the case:

A property in Old Rajinder Nagar, Delhi, originally owned by Champa Bhen Kundia, was mortgaged for a loan. Due to the non-payment of loan, Kotak Mahindra Bank (“Respondent No. 1/ Kotak”) took the possession and notice was served under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (“SARFAESI Act”).

Raj Kumar Vij, (“Respondent No. 2”) filed a case in the Debt Recovery Tribunal (“DRT”), and DRT ordered to deposit ₹2,00,000 to retain possession. However, Respondent No. 2 failed to pay ₹ 2,00,000 as ordered by the Debt Recovery Tribunal (“DRT”).

Thereafter, the property was auctioned, and Sanjay Sharma (“Appellant”) won with a bid of ₹7,50,000 and sale certificate was issued to the Appellant.

Respondent No. 2 challenged the auction in the Debt Recovery Appellate Tribunal (“Appellate Tribunal”) and the Appellate Tribunal directed the DRT to re-examine the case of respondent No.2, thereby the DRT allowed the case of Respondent No. 2 and set aside the auction by helding that respondent No.2 has the Right of Redemption under Section 13(8) of the SARFESI Act subject to deposit of amount due to respondent No.1 with 9% simple interest.

Thereafter, the Appellant challenged the order of DRT in Appellate Tribunal and the Appellate Tribunal sided with the Appellant and restored the auction sale by noting that Respondent No. 2's ownership claims were disputed.

Thereafter, writ petition was filed in the Delhi High Court wherein the decision of Appellate Tribunal of restoring the auction was reversed by giving the following order:

1. Return of INR 7,50,000 to the auction winner with interest
2. The Court allowed Respondent 2 to redeem the mortgage
3. Further, interest of 9% was set as the rate of interest for repayment

The Appellant was aggrieved by the order passed by the Division Bench of the High Court and subsequently, filed the present appeal before the Court.

Issues before Supreme Court:

Whether Respondent No. 2, claiming ownership based on unregistered Agreement to Sell, had the right to redeem the mortgaged property after the issuance of the sale certificate.

Judgment:

The Apex court held that all the documents relied upon by Respondent No. 2 to claim ownership of the secured asset are unregistered documents and fail to meet the requirements of a valid sale under Section 54 of the Transfer of Property Act. Accordingly, he did not have any title to claim the ownership of the premises as the agreement on which he relies is an unregistered sale deed.

The auction sale was done in due compliance with the statutory requirements and constituted a valid sale.  The Court held that ample opportunities were given to the respondent to avail the right of redemption but the same were not availed by the respondent.

Hence, the Court set aside the order of the High Court and restored the order of the Appellate Tribunal by ordering that the premises should be handed over to the Appellant i.e. the auction purchaser.

Relevant Provision:

Section 54 Transfer of Property Act 1882: "Sale" defined "Sale" is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.

Sale how made- 1 Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.

In the case of tangible immoveable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.

Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.

Contract for sale-A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties.

It does not, of itself, create any interest in or charge on such property.

Source:

Sanjay Sharma v. Kotak Mahindra Bank Ltd. & Ors. [SLP (C) No. 330/2017], dated 10^th December 2024