Unregistered agreement to sell is admissible for collateral purposes but cannot support claims for mesne profits.

The original plaintiffs (Partners of Shradhdha Heat Treatment) filed a suit seeking the cancellation of a notarized Agreement to Sell dated 10.08.2011, recovery of possession of industrial plots in GIDC Bharuch, and mesne profits.

The plaintiffs initially claimed they never signed the agreement or received the ₹5,00,000/- token money.

However, during cross-examination, Plaintiff No. 1 admitted to signing the agreement, receiving the token money, and handing over possession to Defendant No. 1.

The Agreement stipulated that even if the balance was unpaid, the vendors could only recover the money with interest and could not reclaim possession.

The Trial Court decreed the suit in favor of the plaintiffs, cancelling the agreement and awarding mesne profits of ₹10,000/month, primarily because the agreement was unregistered.

The defendant appealed.

Whether the Trial Court was justified in decreeing the suit and granting mesne profits solely on the ground that the Agreement to Sell was unregistered.

The Court applied Section 17(1) of the Registration Act, 1908, which mandates the registration of instruments affecting immovable property valued above ₹100, and Section 17(1A), which requires registration for contracts used for part-performance under Section 53A of the Transfer of Property Act.

It further applied Section 49 of the Registration Act, which stipulates that unregistered documents shall not be received as evidence of transactions affecting property, subject to a proviso allowing such documents to be used as evidence of "collateral transactions" not requiring registration.

The Court relied on R. Hemalatha v. Kashthuri (2023) to affirm that unregistered agreements remain admissible for collateral purposes.

The Court relied on Ameer Minhaj v. Dierdre Elizabeth (Wright) Issar (2018) regarding the limited evidentiary value of unregistered sale deeds.

The Court reasoned that while an unregistered document cannot create title or be the sole basis for protecting possession under Section 53A, it is admissible for collateral purposes under the proviso to Section 49.

The Court found that the Plaintiff, having admitted in cross-examination to the voluntary execution of the contract, receipt of consideration, and delivery of possession, was bound by the principle of estoppel.

The Court determined that the Plaintiff could not "take advantage of her own wrong" by using the lack of registration—a document she helped execute—to claim mesne profits or rent for a possession she voluntarily surrendered as part of a contract she admitted was still "in operation".

Thus, while the lack of registration might prevent the perfection of title, it did not entitle the vendor to profits arising from a possession they legally transferred.

It held that while the cancellation of the unregistered agreement and the order for possession stood (as possession cannot be claimed solely on an unregistered deed), the Trial Court erred in awarding mesne profits.

The Court set aside the directions for the payment of rent and mesne profits, invoking the principle of estoppel against the plaintiffs.

The remainder of the Trial Court’s judgment was upheld.