Supreme Court Affirms: Agreement to Sell Doesn’t Confer Ownership Rights or Title

In a landmark ruling, the Supreme Court emphatically clarified that the mere existence of an agreement to sell does not result in the transfer of ownership rights or the conferral of any title. The pronouncement was made by a distinguished bench comprising Justices Vikram Nath and Rajesh Bindal.

The judicial pronouncement dispels any misconceptions surrounding the nature of agreements to sell, emphasizing that they do not operate as conveyances and do not effectuate the transfer of ownership or title. This judicial stance holds particular significance in light of the Karnataka Prevention of Fragmentation and Consolidation of Holdings Act, 1966 (Fragmentation Act).

The court’s deliberations led to the unequivocal conclusion that an agreement to sell does not fall within the purview of the Fragmentation Act, as it does not involve the lease, sale, conveyance, or transfer of rights. The case under consideration originated from a civil appeal filed in 2011, which centered on an agreement to sell executed in 1990. This agreement, made in anticipation of the Fragmentation Act’s repeal (which occurred in 1991), became the subject of legal contention when the defendants sought specific performance after the refusal to execute the sale.

The trial court initially dismissed the suit, only for the first appellate court to reverse the decision. However, the High Court later overturned the first appellate court’s judgment, asserting that the agreement was barred under the Fragmentation Act.

The Supreme Court, dissecting the legal intricacies, underscored that Section 5 of the Fragmentation Act specifically pertains to the lease, sale, conveyance, or transfer of rights. As an agreement to sell does not establish any rights on the land, the court maintained that it cannot be deemed as prohibited by the Act. Notably, the court highlighted that the suit was filed post the repeal of the Fragmentation Act, a crucial factor influencing the court’s decision to allow the appeal.

The judgment further delved into the legal framework, citing Section 54 of the Transfer of Property Act, which explicitly states that a Contract for Sale, by itself, does not create any interest or charge on the property. This comprehensive legal clarification, encapsulated in the case of Munishamappa v. N. Rama Reddy and others, marks a significant milestone in the understanding and application of property law in India.