Image source: https://economictimes.indiatimes.com/wealth/real-estate/will-rera-ensure-timely-possession-of-properties/articleshow/58492124.cms?from=mdr

This article has been written by Diksha Bhargava, pursuing a Diploma in Business Laws for In-House Counsels from LawSikho.

Introduction 

Ownership becomes clear and bonafide only on the execution of the sale deed. A sale deed is considered an authentic instrument because it establishes a clear title over the property since it is a compulsorily registrable document as per Section 17(1) of the Registration Act, 1908. On the other hand, if we talk about the agreement to sell under the Registration Act,1908 we see that it is not mandatorily registrable as per Section 17(2) of the Registration Act, 1908. However, with the enforcement of the RERA Act 2016, the position was changed. Section 13 of the Act requires the agreement to sell to be registered, which is not the case under the Registration Act and thus the validity of the agreement to sell comes into conflict. Though RERA Act, 2016 mentions registration of agreement to sell, the Registration Act, 1908 does not spell out the same. So which action is to prevail in case of an agreement to sell is a major question? 

To understand the dispute between RERA and Registration Act, it is important to know the difference between the agreement to sell and sale deed. This article gives a brief idea about an agreement to sell and sale a deed. Further, it explains the provisions applicable to the agreement to sell under RERA Act and Registration Act and resolves the conflict between the two acts. 

Agreement to Sell and Sale deed 

An agreement for selling is an agreement to sell a property in the future. This agreement defines the terms and conditions, under which the property should be transferred. Section 54, of the Transfer of Property Act, 1882, regulates the sales and transfer of house property, it states that an agreement for sale is a contract for the selling of immovable property, this contract defines the terms settled between the parties. Section 54 further states that it does not in itself create any interest or charge on such property.

Whereas a sale deed is a legal document that demonstrates that the seller has transferred the absolute ownership of the property to the purchaser. Through this document, the rights, interests, and title in property are secured by the new owner.

Agreement to Sell vs Sale deed: the difference

From the above definitions, it becomes abundantly clear that an agreement to sell contains a promise to transfer a property in the future, on fulfillment of certain terms and conditions. So this agreement itself does not create any rights or interest within the property for the proposed buyer. 

An agreement to sell is different from a sale deed because it does not create ownership in the property, for the proposed buyer. Ownership of an immovable property can only be transferred through a duly stamped and registered bona- fide sale deed. Also, it is not mandatory to register an agreement to sell which makes it an executory contract on the other hand it is mandatory to register a sale deed and make it an executed contract.

Relevant provision relating to Agreement to Sell under Registration Act, 1908 and The Real Estate (Regulation & Development) Act, 2016.

Section 17(2)(v) of the Registration Act, 1908 states that any document aside from the documents laid out in sub-section (1A) cannot in itself create, declare, assign, limit or extinguish any right, title, or interest for the value of one hundred rupees and upwards in immovable property, it merely creates a right to procure another document which, when executed would create, declare, assign, limit or extinguish any such right, title or interest. 

Section 17(1) states about documents that are necessary for the registration, while Section 17(2) states about documents that are not compulsory for registration under the act, thus making an agreement to sell also a document which is not compulsory for registration under the Registration Act, 1908.  

Whereas Section 13(1) of RERA Act, 2016 states that the promoter should not accept a sum of more than ten percent of the cost of the apartment, plot, or building, as the case could be, as an advance payment or as application fee from the individual without first getting into a written agreement for sale with such person and register such agreement for sale under any law for the time being in force. 

From analyzing the above provision it is clear that the promoter accepting more than ten percent of the cost, firstly should enter into a written agreement with the purchaser, and secondly, the promoter shall register such a document. 

Therefore it can be said that the RERA Act, 2016 has implicitly amended Section 17 of The Registration Act, 1908. However, the validity of the Agreement to sell still remains in dispute. 

RERA, 2016 vs Registration Act, 1908

On analysis of Section 13(1) of the RERA Act, it is very clear that it requires the agreement to sell to be registered which is not the case in the Registration Act. On further analysis, it is found that Section 88 of the RERA Act 2016 states that the act shall be in addition and not in derogation to any law for the time being in force. This means that the RERA Act 2016 has to be read with the Registration Act, 1908. Applying the provisions of Section 88 of the RERA Act, 2016 on the provisions of the Registration Act 1908, we can observe that Section 17(2)(v) of Registration Act, 1908 negates the RERA Act, 2016. 

However, Section 89 of the same act states that the provisions of the RERA Act shall have an effect, notwithstanding anything inconsistent contained in any other law for the time being in force. Therefore it gives an overriding effect to the RERA Act, 2016. Hence it can be said that the provisions of the RERA Act, 2016 shall prevail over Registration Act, 2016 with respect to the agreement to sell. 

However, even after the non-obstante clause under Section 89 of the RERA Act, 2016 the certainty, whether the agreement to sell creates right, title, or interest over the property is still in question. 

The fate of Agreement to Sell 

Section 49 of the Registration Act, 1908 gives that the documents which are required to be registered either under Section 17 of Registration Act, 1908 or under the Transfer of Property Act, 1882 will not, unless registered:

  1. affect any immovable property; or
  2. accord any power to adopt; or
  3. be treated as evidence in any transaction affecting such property or conferring such power.

However, the provision to Section 49 provides for an exception to the above rule i.e. an unregistered document affecting any immovable property, which is otherwise required to be registered either by the Registration Act or by the Transfer of Property Act, 1882, may be treated as evidence for a contract in a suit for specific performance or as evidence of any collateral transaction. 

In KB Saha & Sons Pvt Ltd vs. Development Consultant Ltd,  the main issue that arose was the insertion of contradictory clauses in the lease agreement and whether lease agreement entered into by the parties was illegal and invalid since it was not registered, The Supreme Court, in this case, held that a mandatorily registrable document, if discovered unregistered in a suit for specific performance, it can only be served as evidence of the fact that there was a contract executed between the seller and the buyer, and such unregistered document cannot be treated as evidence for proving other elements of the contract. Section 49 of the Registration Act clearly provides that if a document is required to be registered under Section 17 of the same act it will not be admissible as evidence. Hence, if a document is not admissible as evidence because of it being unregistered, none of its contents can be acknowledged as evidence.

Thus not registering a document, which is made mandatory by any law, has serious consequences, as the party seeking its enforcement may not be able to rely on the document to prove its contents. Thus depriving the party of specifically enforcing the contract. The same fate was of an agreement to sell where the seller, developers had taken advantage of non-enforcement of an agreement to sell. There have been several cases, where developers have not mentioned the date of possession in the agreement, leading to mental and financial trauma for the home buyers. Other problems that were faced by the consumers were delayed delivery, the title of the property, quality of the facilities provided and necessary changes, high interest rates charged on late payments, multiple bookings for the same property, project failures, etc. 

In the absence of any provision mandating the agreement to be registered, it did not have to face the consequences of Section 49 of the Registration Act, 1908. However  RERA Act 2016 under Section 3, makes it mandatory for the registration of a real estate project with the Real Estate Regulatory Authority, if the developer wishes to advertise, market, book or sell any property within the said project. Registration is also mandatory for ongoing projects for which the developer has not received the completion certificate. Therefore, the RERA Act, 2016 applies not only to future projects but also to ongoing projects where the construction began prior to 1 May 2017(implementation date of RERA in states). Section 13 of the RERA Act also mandates execution of the agreement to sell without which the promoter cannot accept any advance payment. 

Section 13, however, does not state the law under which such registration should take place whether it should be under the Registration Act, 1908, or The Transfer of Property Act, 1882, or the RERA Act itself. However, as per Section 89 of the RERA Act, Section 13 has the effect of altering Section 54 of the Transfer of Property Act and Section 17 of the Registration Act, which does not provide for mandatory registration of agreement to sell. 

Remedies available

But another question that arises is, what remedy can be exercised by the purchaser when there is a breach of the agreement to sell. This has been answered by Section 18 of the RERA Act, 2016 which states that,

  • The promoter should compensate the purchaser if he is not able to complete the project and deliver the possession of the property within the time frame as laid out in the agreement to sell. 
  • If the promoter fails to do so then the purchaser can file a complaint before RERA Authority and claim compensation. 
  • In case he is aggrieved by the order of Authority, then he can file an appeal with the Real Estate Regulatory Appellate Tribunal under Section 44 of the RERA Act 2016.

Conclusion 

It would be appropriate to conclude that RERA Act 2016 prevails over Registration Act for the purpose of the agreement to sell. Through RERA Act 2016 agreement to sell can be registered and enforced against unscrupulous activities in the court of law. However, there are no judicial pronouncements to prove the fact that RERA Act 2016, should prevail over Registration Act 1908 but registering an agreement to sell is a wise move and is backed by various laws such as RERA Act, The Indian Contract Act, Specific Relief Act

References

  1. https://www.mondaq.com/india/securities/984762/agreement-of-sale-in-rera-and-registration-act-a-conflict-yet-unresolved
  2. https://legalseva.net/agreement-to-sell-registration-under-rera/
  3. https://housing.com/news/agreement-sale-versus-sale-deed-main-differences/ 

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