Introduction
In the first part of this series, I discussed the foundational aspects of a suit for specific performance, including the nature of the contractual obligation and the statutory framework governing the remedy. In this second part, I turn to what, in my view, is the first and foremost fact that a plaintiff must establish in a suit for specific performance—the valid execution of the agreement sought to be specifically enforced. A decree for specific performance cannot rest merely on the assertion that an agreement was entered into; its execution must be duly established in accordance with law. This seemingly straightforward requirement often gives rise to a range of evidentiary questions at the trial stage. What happens when the defendant denies execution? Upon whom does the burden of proving the agreement lie, and in what manner is such proof to be adduced? What is the effect of objections that the agreement is insufficiently stamped or compulsorily registrable but remains unregistered? Can an unregistered agreement to sell be received in evidence, and if so, for what limited purpose? In this part, I attempt to examine these recurring questions surrounding the proof and admissibility of an agreement to sell, which often constitute the first significant evidentiary hurdle in a suit for specific performance.
Essentials required to be proved to claim the remedy of specific performance
- Execution of a valid agreement
During the course of a trial of Suit relating to specific performance of agreement/contract, the first issue that court needs to frame is whether there was a validly executed agreement between the plaintiff and the defendant. The burden to prove this issue lies on the plaintiff and so he has to produce evidence relating to it that goes on to show that he and defendant entered into a valid contract. The contract must satisfy all the essentials provided under Indian Contract Act and discussed under previous part of the blog. Then the executants of the document have to prove their signature or thumb impressions on the document and if needed attesting witnesses can also be called to testify. When the document is tendered in evidence various kinds of objections are generally raised, that are discussed below:
Mere marking exhibit doesn’t prove it
It has to be noted that mere marking of exhibit and admitting document in evidence alone would not suffice where the defendant has pleaded fraud and fabrication. In the Judgment of Madras High Court reported in 2018 (1) CTC 701, M.Jayaprakash Narayanan Vs. Santhammal and Ors., the learned Judge taking into consideration the fact that the defendant had denied the execution of the agreement observed as follows:
“Therefore, merely because PW 1 and PW 2 have stated above the execution of the document, taking into consideration the totality of the circumstances as discussed above, we are constrained to hold that the evidence of PW 1 and PW 2 does not satisfy the conscious of this Court to believe their evidence to presume the execution of Ex. A1 agreement, particularly the alleged consideration of Rs.40,00,000/- on the date of agreement is not been established at all. Therefore, mere signature of the parties were established on the basis of some interested witnesses of the parties, who wants to enforce the so called contract, in respect of the huge property, the execution cannot be inferred merely on the basis of such witnesses, there must be evidence to show that Ex.A1 is made out of free consent of parties and there is a lawful consideration in the above agreement. Only when the plaintiff established that there was a consensus ad idem between the parties and a valuable consideration, then the above contract can be termed as a valid contract capable of enforcing before the Court of law. When the two elements namely, the free consent and lawful consideration are absent in the document. Such document cannot be considered for lawful consideration in the eye of law. Therefore, we are constrained to hold that Ex.A.1 is not established as a true document. Accordingly, this point is answered.”
Initial Burden to prove execution always lies on plaintiff
Moreover the Hon’ble Supreme Court in the Judgement reported in 2008 (4) SCC 530, Thiruvengadam Pillai Vs. Navaneethammal and Another was considering a more or less similar case where the agreement of sale was denied by the defendant and they had contended that it had been concocted and forged document. The agreement of sale in that case was also an unregistered one. The Hon’ble Judge is ultimately observed as follows:
“Its observation that when the execution of an unregistered document put forth by the plaintiff was denied by the defendants, it was for the defendants to establish that the document was forged or concocted, is not sound proposition. The first appellate Court proceeded on the basis that it is for the party who asserts something to prove that thing; and as the defendants alleged that the agreement was forged, it was for them to prove it. But the first appellate court lost sight of the fact that the party who propounds the document will have to prove it. In this case the plaintiff came to court alleging that the first defendant had executed an agreement of sale in his favour. The first defendant having denied it, the burden was on the plaintiff to prove that the first defendant had executed the agreement and not on the first defendant to prove the negative.”
Kinds of Objection relating to Documents
Ordinarily an objection to the admissibility of evidence should be taken when it is tendered and not subsequently. The objections as to admissibility of documents in evidence may be classified into two classes:-
- an objection that the document which is sought to be proved is itself inadmissible in evidence; and
- where the objection does not dispute the admissibility of the document in evidence but is directed towards the mode of proof alleging the same to be irregular or insufficient.
In the first case, merely because a document has been marked as ‘an exhibit’, an objection as to its admissibility is not excluded and is available to be raised even at a later stage or even in appeal or revision. In the latter case, the objection should be taken before the evidence is tendered and once the document has been admitted in evidence and marked as an exhibit, the objection that it should not have been admitted in evidence or that the mode adopted for proving the document is irregular cannot be allowed to be raised at any stage subsequent to the marking of the document as an exhibit.
Objection relating to mode of proof of Agreement- Objection that Document is Unstamped or not adequately stamped
Stamp duty is paid as per the provisions of Section 3 of the Indian Stamp Act, 1899. Stamp duty is levied to boost revenue for local governments besides lending legality to a document. Stamp duty is a government indirect tax, which is levied on all legal property transactions. Stamp duty is, therefore, a tax which is evidence, as it were, of any purchase or sale of a property between two or more parties.
Physically transferring property is not considered valid in the eyes of the law. To make such a property transaction valid, the buyer must pay stamp duty, as proof of the purchase has occurred. This duty is computed as a function of the property’s value and is usually some percentage of the total payable amount. While the rate for stamp duty varies from state to state, the general underlying principle behind the duty remains the same. Stamp duty works as a legal tax which must be paid in full during the completion of a transaction. While the buyer usually pays the stamp duty, there are cases, when the buyer and seller decide to split the stamp duty as per an earlier signed agreement.
As per Section 13 of the Indian Stamp Act, 1899, an individual executing a given instrument has to cancel the stamp (adhesive) by writing his initials or name across it. If a stamp is not cancelled in the aforementioned method, the document is considered unstamped. In other words, the stamp should be visible on the face of an instrument and therefore, cannot be applied to another instrument.
What is the right time to raise the objection relating to document being unstamped or insufficiently stamped
Supreme Court in Javer Chand & Ors vs Pukhraj Surana, while dealing with a question raised as to the admissibility of document on the ground that it has not been stamped or has not been properly stamped and the impact of Section 36 of Stamp Act. It was observed:
“….Where a question as to the admissibility of a document is raised on the ground that it has not been stamped, or has not been properly stamped it has to be decided then and there when the document is tendered in evidence. Once the Court rightly or wrongly, decides to admit the document in evidence, so far as the parties are concerned the matter is closed. Section 35 is in the nature of a penal provision and has far-reaching effects. Parties to a litigation, where such a controversy is raised, have to be circumspect and the party challenging the admissibility of the document has to be alert to see that the document is not admitted in evidence by the Court. The Court has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as an exhibit in the case….. It is not, therefore, one of those cases where a document has been advertently admitted, without the Court applying its mind to the question of its admissibility. Once a document has been marked as an exhibit in the case and the trial has proceeded all along on the footing that the document was an exhibit in the case and has been used by the parties in examination and cross-examination of their witnesses, Section 36 of the Stamp Act comes into operation. Once a document has been admitted in evidence, as aforesaid, it is not open either to the Trial Court itself or to a Court of Appeal or revision to go behind that order. Such an order is not one of those judicial orders which are liable to be reviewed or revised by the same Court or a Court of superior jurisdiction.”
In the case of Kanhaiya Lal v ADJ No. 1, Sri Ganganagar & Anr, Hon’ble Rajasthan High Court dealt with a case where trial court marked exhibit on a document while reserving the objection relating to document being insufficiently stamped to be decided at the time of judgment. It was held by the High Court that according to Section 35 Indian Stamp Act, 1899, once the objection about admissibility of document on account of it being insufficient stamped is raised during the examination of a witness or otherwise, it is imperative for the court to decide the said objection first and thereafter take proceedings in accordance with law.
Whether objection relating to Document being Unstamped or Insufficiently Stamped can be raised after it has been Admitted and Exhibited in evidence
In Javer Chand & Ors v Pukhraj Surana, it was held that:
“Once a document has been admitted in evidence, as aforesaid, it is not open either to the trial court itself or to a court of appeal or revision to go behind that order. Such an order is not one of those judicial orders which are liable to be reviewed or revised by the same court or a court of superior jurisdiction.”
“That section (Section 36) is categorical in terms that when a document has been admitted in evidence, such admission cannot be called in question at any stage of the suit or the proceeding on the ground that the instrument had not been duly stamped. The only exception recognised by the section is the class of cases contemplated by Section 61, which is not material to the present controversy. Section 36 does not admit of the exceptions. Where a question as to the admissibility of a document is raised on the ground that it has not been stamped, or has not been properly stamped, it has to be decided then and there when the document is tendered in evidence. Once the court, rightly or wrongly, decides to admit the document in evidence, so far as the parties are concerned, the matter is closed. Section 35 is in the nature of a penal provision and has far reaching effects. Parties to a litigation, where such a controversy is raised, have to be circumspect and the party challenging admissibility of the document has to be alert to see that the document is not admitted in evidence by the court. The court has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as an exhibit in the case. The record in this cases discloses the fact that the hundis were marked as Exs P.1 and P.2 and bore the endorsement ‘admitted in evidence’ under the signature of the court. It is not, therefore, one of those cases where a document has been inadvertently admitted, without the court applying its mind to the question of its admissibility. Once a document has been marked as an exhibit in the case and the trial has proceeded all along on the footing that the document was an exhibit in the case and has been used by the parties in examination and cross examination of their witnesses, s 36 of Stamp Act comes into operation. Once a document has been admitted in evidence, as aforesaid, it is not open either to the trial court itself or to a court
of appeal or revision to go behind that order. Such an order is not one of those judicial orders which are liable to be reviewed or revised by the same court or a court of superior jurisdiction.”
Further in Barium Chemicals Ltd v Vishwa Bharti Mining Corporation & Anr, it was opined that:
“The order of the High Court does not conform to the requirements of Sections 35 and 36 of Indian Stamp Act, 1899. A document which is not duly stamped and is also not registered though required to be registered can be admitted in evidence for collateral purposes under proviso to Section 49 of the Registration Act but so far as the stamp duty is concerned, if the document is not fully stamped it has to be dealt with under Section 35 of the Stamp Act before it is admitted in evidence failing which by virtue of Section 36, admission of document in evidence cannot be questioned at any later stage.”
In Sanjeev Bharadwaj v Yogeshwar Swaroop Bhatnagar, where the issue was order of Trial Court assigning an exhibit to an unregistered and unstamped agreement of sale could be removed, recalled or reviewed. It was held that an unregistered document can be taken into consideration for collateral purpose but an unstamped document cannot be admissible in evidence in view of the words “for any purpose whatsoever” in Sec. 35 of the Stamp Act. So once a document has been marked as an exhibit in the case and the trial has proceeded all along this footing Section 36 of Stamp Act comes into operation and it is not open either to the trial Court itself or to the Appellate or revisional Court to go behind that order. Such an order is not of those judicial orders which are liable to be reviewed or revised by the same Court or a Court of superior jurisdiction.
Objection that document being unregistered-Agreement to sell warrants compulsory registration in Rajasthan
The Registration (Rajasthan Amendment) Act, 2021 has brought significant changes in property transactions in Rajasthan. With the objective of reducing property fraud and ensuring transparency, the amendment has made registration of Agreement to Sell (ATS) and Power of Attorney (POA) authorizing transfer of immovable property compulsory.
Agreement to Sell (ATS) – Registration Is Mandatory
Under the Rajasthan Amendment Act, any Agreement to Sell related to immovable property must be registered. Unregistered Agreements to Sell are no longer legally enforceable and may be rejected by courts, banks, and registration authorities.
Section 17 (1) of the Registration Act, 1908 is amended as below:
Documents of which registration is compulsory:
(d) leases of immovable property for any term;
(f) agreement to sell immovable property whether possession whereof has been or is handed over or not to the purported purchaser.
Power of Attorney (POA) – Registration Now Compulsory
Any Power of Attorney authorizing transfer of immovable property, whether with or without consideration, must be registered. An unregistered POA cannot be used for sale, mortgage, or transfer of property.
Unstamped/Insufficiently stamped documents and Unregistered documents that require registration can’t be taken in evidence
A Two-Judge bench judgement of the Supreme Court in S.Kaladevi vs V.R.Somasundaram & Ors.-(2010) 5 SCC 401, has clarified the position as to the scope within which the proviso to Section 49 of the Registration Act would operate. The Supreme Court noted that Section 17 of the Registration Act 1908 is a disabling section. The documents defined in clauses (a) to (e) therein require registration compulsorily. Accordingly, sale of immovable property of the value of Rs. 100/- and more requires compulsory registration. Part X of the 1908 Act deals with the effects of registration and non- registration.
Section 49 gives teeth to Section 17 by providing effect of non-registration of documents required to be registered. It provides that no document required by Section 17 or by any provision of the Transfer of Property Act, 1882 to be registered shall
(a) affect any immovable property comprised therein, or
(b) confer any power to adopt, or
(c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered.
Proviso to Section 49 however limits the exception to that restriction and stipulates that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 to be registered, may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877, or as evidence of any collateral transaction not required to be effected by registered instrument.
The law with regard to scope of applicability of proviso to Section 49 was succinctly stated by the Supreme Court in para 12 of the report in the following terms:
What is the exact meaning of the phraseology “collateral purpose” in proviso to Section 49 of the Registration Act, 1908, has been a matter of debate for long. There is enough case law available on this issue for the guidance of the Courts. We shall presently refer to some of them.
Analysis of the law made above commends to hold that collateral purpose cannot be used as a camouflage to circumvent the statutory prohibition under Section 49 of the Registration Act, 1908 of the inadmissibility of the instrument relating to immovable property unless proviso thereto was not actually attracted. The phraseology “collateral purpose” in the context of the proviso to Section 49 of the Registration Act has to be construed as connoting a purpose unrelated to the purpose of the execution of the instrument, which otherwise requires registration. It is the real nature of the transaction and apparent tenor of the instrument which will determine whether it is mandatorily required to be registered and if so how much is stamp duty payable.
Unstamped or insufficiently stamped document cant be used at all until the duty is paid
The document being totally unstamped, the same cannot be exhibited in terms of Section 35 of the Act. However, once, the finding is recorded that a document is unstamped or insufficiently stamped the duty of the trial court is to act under the provisions of Section 33 of the Act, whereby it can either itself determine the deficient stamp duty and penalty and /or impound the document and sent the same to the Collector for determination of proper stamp duty and on payment of stamp duty and penalty the document become admissible in evidence. Section 39 of the Rajasthan Stamp Act is corresponding to Section 35 of the Indian Stamp Act, 1899, which mandates that no instrument chargeable with duty under the Act, shall be admitted in evidence for any purpose by any person having by law or consent of parties, authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped. Significantly, neither Section 37 of the Rajasthan Stamp Act (Section 33 of the Stamp Act, 1899), nor Section 39 of the (23 of 30) Rajasthan Stamp Act (Section 35 of the Stamp Act, 1899) contain a proviso like Section 49 of the Registration Act enabling the Court to use an instrument for collateral purpose, which though is chargeable to stamp duty, but is unstamped or insufficiently stamped. Language of both these provisions is peremptory in nature and mandates that the Court cannot use such document for any purpose whatsoever. The Stamp Act casts a duty upon every Court i.e. a person having by law, authority to receive evidence, to examine the instrument in order to ascertain whether it is duly stamped and if the Court comes to the conclusion that the instrument is not duly stamped, it has to mandatorily impound the same and deal with it as provided under the Act. The mandatory nature of the Act is evident from the use of the word “shall’ both in Section 37 and 39 of the Rajasthan Stamp Act, which are analogous to Section 33 and 35 of the Stamps Act, 1899.
Period prescribed for Registration
A question arises whether there is any time-limit for registering a document which is required to be compulsorily registered. In said regard, Section 23 of the Registration Act expressly provides that subject to provisions contained in Sections 24, 25 and 26, no document other than will shall be accepted for registration unless presented for that purpose for registration within four months from the date of execution. Section 25 however, provides that if, owing to urgent necessity or unavoidable accident any document executed in India is not presented for registration within four months, the authority concerned, in cases where delay in presentation does not exceed four months, may direct that on payment of a fine not exceeding ten times of the proper registration fee, such document shall be accepted for registration.
The cumulative effect of Sections 23 and 25 is that total period of eight months is available for registration, subject to fulfilment of condition that if the document is presented after four months of execution, the delay should be on account of urgent necessity or unavoidable accident.
Unregistered agreement to sale- For what purpose it can be used- As an evidence of contract in a suit for specific performance and for collateral purpose, Registration provides the presumption of genuiness as well
In a recent judgment of R. Hemlatha v. Kashthuri (2023 INSC 336) (Hemlatha Case), the Supreme Court of India has shed light on an important exception to the rule of mandatory registration. The Supreme Court has held that an unregistered agreement to sell can still be admitted as evidence where the suit is for a relief to be granted by a court against a person to fulfill his / her contractual obligations (specific performance).
Facts of the case
In 2013, Kashthuri and Hemlatha entered into an agreement to sell (Agreement) for the purchase of a property by Kashthuri. As per Section 17 of the Registration Act, registering the Agreement was mandatory since it concerned immovable property. Notably, Hemlatha willingly accepted the responsibility of registering the Agreement after receiving the agreed-upon payment. Despite receiving the payment, Hemlatha did not sell the property and she did not register the Agreement.
Aggrieved, Kashthuri filed a suit before the District Court seeking specific performance of the Agreement.
At the outset, the Supreme Court noted that although the State of Tamil Nadu had introduced Section 17(1)(g) to the Registration Act, no corresponding amendment had been made to Section 49. The Court emphasized that Section 49 was inserted in 1929 and stands unamended. Taking this into consideration, the Supreme Court concluded that the unregistered document at hand, namely the unregistered Agreement, would be admissible as evidence in a suit for specific performance. As a result, the Supreme Court dismissed the appeal and upheld the order passed by the Madras High Court.
The Supreme Court also discussed Section 17(1A) of the Registration Act, which deals with contracts for transferring immovable property as per Section 53-A of the Transfer of Property Act, 1882. It states that such documents must be registered if executed after the commencement of the Registration and Other Related Laws (Amendment) Act, 2001. If not registered, they won’t be effective for the purposes of Section 53-A. In context, Section 53-A of the Transfer of Property Act, 1882 prevents one party from ousting another party who is in possession of a property when there’s a contract in place. This applies if the party in possession is willing to carry out the contract or has already started doing so.
The Supreme Court pointed out that Section 17(1A) is the only exception to the proviso in Section 49 of the Registration Act. For all other documents not covered by Section 17(1A), the proviso in Section 49 applies.
The judgment by the Supreme Court in Hemlatha Case clarifies a significant aspect regarding the admissibility of unregistered agreements in suits seeking specific performance. The Supreme Court has established a broader proposition that unregistered agreements for the sale of immovable property may indeed be admitted as evidence in suits for specific performance under the Specific Relief Act, 1877. While it is important to recognize that, as per the Transfer of Property Act, 1882, an agreement to sell alone cannot legally effect transfer of property, the Court has emphasized on the significance of the proviso to Section 49 of the Registration Act. This provision allows the admission of unregistered agreements for sale as evidence, recognizing the equitable nature of specific relief.
The Supreme Court’s decision is in line with the principles of equity and ensures that registration alone would not be an insurmountable barrier for those seeking specific performance.
More to follow in the next parts