An unregistered agreement to sell remains admissible for specific performance, subject to curing stamp deficiency.

The Plaintiffs/Appellants entered into an Agreement to Sell dated 10 May 2019 concerning Shop No. 113, Sabzi Mandi, Okhla, New Delhi, for a consideration of ₹12,00,000. A General Power of Attorney, Will, Possession Letter and Receipt were also executed, and the Plaintiffs alleged that the entire consideration was paid and possession was delivered.

Since the Defendant was already occupying the premises, the parties simultaneously executed an 11-month Rent Agreement under which the Defendant continued in physical possession as tenant at a monthly rent of ₹10,000.

After defaults in rent and termination notices dated 14 March 2022 and 5 April 2022, the Defendant disputed the Plaintiffs’ title and the validity of the documents executed in 2019.

The Plaintiffs consequently instituted a suit for specific performance, possession and recovery of arrears of rent/use and occupation charges.

The Trial Court framed a preliminary issue regarding the non-registration and insufficient stamping of the Agreement to Sell and rejected the plaint under Order VII Rule 11(d) of the CPC, holding that the suit was barred by Sections 53-A of the Transfer of Property Act, 1882 and 17(1-A) read with the proviso to Section 49 of the Registration Act, 1908.

The Plaintiffs appealed to the High Court.

Whether an unregistered Agreement to Sell, which records delivery of possession or part performance, is incapable of forming the basis of a suit for specific performance by reason of Sections 53-A of the Transfer of Property Act, 1882 and 17(1-A) of the Registration Act, 1908?

Whether insufficiency of stamp duty on the Agreement to Sell constituted a statutory bar to the suit and justified rejection of the plaint under Order VII Rule 11(d) of the CPC?

Whether the Agreement to Sell could be admitted in evidence upon payment of the deficient stamp duty and applicable penalty, and what stamp duty was payable in the circumstances?

Order VII Rule 11(d) of the CPC permits rejection of a plaint only where the suit appears from the plaint to be barred by law.

Sections 17(1-A) and 49 of the Registration Act, 1908, under which an agreement falling within Section 53-A of the Transfer of Property Act must be registered to claim protection of part performance, but an unregistered document may nevertheless be received as evidence of a contract in a suit for specific performance under the proviso to Section 49.

Section 53-A of the Transfer of Property Act was treated as conferring a defensive protection of part performance, not as imposing a bar on a suit for specific performance.

Under Sections 33 and 35 of the Indian Stamp Act, 1899, an insufficiently stamped instrument must be subjected to payment of deficient duty and penalty before being admitted in evidence; insufficiency of stamping is therefore a curable evidentiary defect and not, by itself, a ground for rejection of the plaint.

Article 23-A of Schedule I to the Stamp Act applies 90% of the conveyance duty to an agreement involving part performance and delivery of possession, while Article 23 prescribes the applicable conveyance rate, including the concessional rate for the share held by a woman in jointly held property.

The Court relied on Ram Kishan v. Bijendra Mann, Avinash Kumar Chauhan v. Vijay Krishna Mishra, Omprakash v. Laxminarayan, Peteti Subba Rao v. Anumala S. Narendra and H.C. Dhanda Trust v. State of Madhya Pradesh.

The High Court held that the Trial Court had conflated the evidentiary consequences of non-registration with the maintainability of the suit.

Although an agreement involving delivery of possession is compulsorily registrable for invoking Section 53-A protection, non-registration does not prevent the agreement from being relied upon as proof of the contract in a specific-performance suit under the proviso to Section 49 of the Registration Act.

The Plaintiffs were not seeking to enforce Section 53-A protection; rather, they sought specific performance and possession. Accordingly, the unregistered Agreement to Sell could form the basis of the suit, although it could not be used to claim statutory protection of part performance.

The Court further held that insufficient stamping affected admissibility, not the existence or maintainability of the suit. Since the defect could be cured by payment of deficient stamp duty and penalty under Section 35, it could not justify rejection under Order VII Rule 11(d).

Because the Agreement to Sell recorded delivery of possession and was therefore a conveyance in the nature of part performance, the Court calculated stamp duty at 5% of the ₹12,00,000 consideration, amounting to ₹60,000.

After crediting the ₹50 already paid, the deficiency was ₹59,950, on which a penalty of ten times the deficiency was directed, subject to the Collector’s power to consider refund under Section 40.

Insufficient stamping was also held to be a curable defect and not a ground for rejection of the plaint under Order VII Rule 11(d).

The impugned judgment and decree dated 9 May 2023 were set aside, and the suit was restored and remanded to the Trial Court.

The Plaintiffs were directed to deposit deficient stamp duty of ₹59,950 and penalty of ₹5,99,500 within one month, after which the Agreement to Sell would be admitted in evidence and the suit would proceed.

The matter was also directed to be forwarded to the competent Collector for consideration of any refund of the penalty under Section 40 of the Stamp Act, without delaying the suit.

All merits-based contentions were left open.