Unregistered Agreement to Sell Creates No Vested Right to Challenge a Consent Decree Under Order XXIII Rule 3

The Plaintiff (owner of B-366, Chittaranjan Park) entered into a collaboration agreement with the Defendant for the construction of a multi-story building

The Plaintiff alleged the Defendant breached the agreement by failing to pay the balance consideration of ₹3.70 crores and failing to complete fittings

On 31.05.2019, the parties settled the suit via a Settlement Decree

Subsequently, the Applicants (third parties) filed I.A. 22003/2025 to set aside the decree, alleging fraud

They claimed they had entered into an unregistered Agreement to Sell (ATS) with the Defendant for the first floor of the property on 24.02.2018, which was allegedly witnessed by the Plaintiff but suppressed during the settlement

1. Whether a third party to a suit has the locus standi to seek the setting aside of a settlement decree under Order XXIII Rule 3 of the CPC on the grounds of fraud.

2. Whether an unregistered Agreement to Sell creates a vested interest or title in the suit property sufficient to invalidate a subsequent judicial settlement between the owner and a builder.

The court primarily applied Section 54 of the Transfer of Property Act, 1882, which stipulates that a contract for the sale of immovable property does not, of itself, create any interest in or charge on such property

It relied on Suraj Lamp & Industries (P) Ltd. (2) v. State of Haryana, which clarified that a transfer of immovable property can only be effected by a registered deed of conveyance

The court noted the principles from Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra, stating that the doctrine of part-performance under Section 53-A is a shield available only against the transferor and does not affect the ownership of the property until a registered sale deed is executed

The court reasoned that the Applicants' claim was based entirely on an unregistered Agreement to Sell dated 24.02.2018

Under Section 54 of the Transfer of Property Act, such a document fails to transfer any title or create any legal interest in the property

The court observed that until a registered sale deed is executed, the title remains exclusively with the owner

Consequently, the non-disclosure of this unregistered ATS during the mediation and settlement process did not constitute "fraud upon the court" because the ATS did not confer any legally recognized right that could override or impede the settlement between the Plaintiff (owner) and Defendant (builder)

Since the Applicants held no legal title or vested interest, they were deemed "third parties" with no locus standi to invoke Order XXIII Rule 3 of the CPC to challenge the compromise

The court affirmed that an unregistered Agreement to Sell is insufficient to establish a claim of fraud against a judicial decree recorded between the lawful titleholder and another party

The execution proceedings were directed to continue