Agreement to sell doesn't mean conveyance: SC

New Delhi: The Supreme Court has declared an agreement to sell a property is not a conveyance and it does not transfer ownership rights or confers any title. 

A bench of Justices Vikram Nath and Rajesh Bindal set aside Karnataka High Court's order, upon an appeal filed by Munishamappa against the dismissal his suit for specific performance of a contract.

The HC had allowed the second appeal by respondents M Rama Reddy and others, holding the contract related to agreement to sell with regard to a property entered into 1990 was in violation of the Karnataka Prevention of Fragmentation and Consolidation of Holdings Act.

The appellant paid entire consideration of Rs 23,000 and got the possession of the property, following the agreement to sell entered into in view of a prohibition on the sale due to bar contained in the Fragmentation Act.

Subsequently, the Act stood repealed.

The appellant sought execution of the sale deed, which was refused.

The appellant filed the suit for specific performance, which was dismissed by the trial court finding the agreement to sell was doubtful and it was beyond the period of limitation.

The appellant won in the regular first appeal. However, the High Court, on second appeal, declared that the agreement to sell was void for being in violation of the Fragmentation Act.

On appeal, the bench said no issue was framed with respect to the violation of the Fragmentation Act, and it was not pleaded in the written statement filed by the respondent.

The top court pointed out the defence taken by the respondent was that he never executed the agreement to sell. However, in his deposition during the cross-examination, he admitted to his signatures on the agreement to sell.

"Thus, the High Court apparently fell in error in holding that agreement to sell was in violation of Section 5 of the Fragmentation Act," the bench said.

Maintaining that the agreement to sell is not a conveyance as it does not transfer ownership rights or confers any title, the bench said what is prohibited or barred under the Fragmentation Act was the lease/sale/conveyance or transfer of rights. Therefore, the agreement to sell cannot be said to be barred under the Fragmentation Act, the court said.