Transfer of immovable property takes effect from registration and not from payment...

Transfer of immovable property takes effect from registration and not from payment of consideration [read order]

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The transfer of any tangible immovable property of the value of Rupees hundred and upwards comes into effect and becomes valid and effective only by a registered instrument. The transfer does not take effect when the conveyance deed is executed on which date the entire consideration stands paid by the transferee and is credited to the account of the transferor. The transfer of such immovable property will still be valid only from the date of registration. This has been held by a two-judge bench of the Supreme Court comprising Justices Anil R. Dave and Uday Umesh Lalit, in the case of Ghanshyam Sarda v. Sashikant Jha, Director, M/s JK Jute Mills Co. Ltd. & Ors. [Contempt Petition (Civil) No.338 Of 2014 In Civil Appeal No.10221 Of 2014] which was decided on 18 November, 2016.

In this case, the Supreme Court by its Order of 08.05.2014 had directed “….capital assets of the company shall not be disposed of without taking permission of this Court”. However, in the contempt petitions, it was alleged that in violation of the Order of 08.05.2014, the assets owned by the Company, namely, J.K. Jute Mills Company Ltd. at Saifganj, Katihar, Bihar spread across 1.6 acres of land were sold vide Conveyance Deed dated 02.07.2014 and consequently the persons arrayed as contemnors interfered with due administration of justice.

In reply, the company took a stand that the above Katihar property was sold and transferred to alleged Contemnor No.14 on 04.04.2013 for consideration of Rs.3.55 crores, long before the filing of the matter in the Supreme Court and passing of the Order of 08.05.2014. It was submitted that the entire consideration was received by the Company on 04.04.2013 by cheques and constructive possession was also handed over to the purchaser on 16.04.2013.

It was further submitted by the contemnors that the conveyance deed was presented for registration before the Registrar on 16.04.2014. As per the Revenue Department, the stamp duty payable was higher than affixed and accordingly, the matter was pending adjudication. It is only thereafter, that the Supreme Court had passed the interim Order dated 08.05.2014 restraining the Company from disposing off capital assets of the Company without taking permission from the Court. It was submitted that by this time, the property in question had for all practical purposes already been transferred. Only, the ministerial act of actual registration by the Authority concerned was remaining. The company contended that this registration of the said deed was done on 02.07.2014.

The Supreme Court observed that the first question that arises is whether any alienation or transfer was effected after the Order of 08.05.2014. The submission of the alleged contemnors was that the conveyance deed was executed on 04.04.2013 on which date the entire consideration stood paid by the transferee and was credited to the account of the Company and as such the title passed in favour of the transferee well before the Order of 08.05.2014 and what was done on 02.07.2014 was a mere ministerial act. According to the alleged contemnors, the documents presented for registration in April 2013 were not accepted for want of adequate stamp and registration fees. This infirmity was removed and the documents were then presented for registration. In such circumstances the order of 08.05.2014 was not in any way violated by them.

However, the Supreme Court held that the Order of 08.05.2014 had directed “….capital assets of the company shall not be disposed of without taking permission of this Court”. The expression “shall not be disposed” in the context connotes action or process of sale of assets. Going by Section 54 of the Transfer of Property Act, 1882, transfer of any tangible immovable property of the value of Rupees hundred and upwards can be made only by a registered instrument. The expression ‘only’ in the Section is significant. The transfer comes into effect and becomes valid and effective only by a registered instrument. The court held that it is true that the document was sought to be registered in April, 2013 but the registration in question was duly effected only on 02.07.2014. In the eyes of law, it is this document registered on 02.07.2014 which alone effectuates transfer of interest in the said Katihar property in favour of the transferee. The transfer was thus effected on 02.07.2014 i.e. well after the Order of 08.05.2014.

The Supreme Court referred to the decision in the case of Suraj Lamp & Industries Pvt. Ltd. v State of Haryana, 2012 1 SCC 656, wherein it had been observed as under:

“Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of Sections 54 and 55 of the TP Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under Section 53-A of the TP Act). According to the TP Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of the TP Act enacts that sale of immovable property can be made only by a registered instrument and an agreement of sale does not create any interest or charge on its subject-matter.”

Accordingly, in the present case, the Supreme Court held as under:

“The document dated 04.04.2013 did not by itself create any interest nor did the title pass upon execution of such document on 04.04.2013 but it was only after the registration on 02.07.2014 that the title in Katihar property passed from the Company in favour of the transferee. The submission of the contemnors however, is that by virtue of Section 47 of the Registration Act, the document in question would operate from 04.04.2013. In our view, the principle embodied in Section 47 of the Registration Act is completely for different purposes. In so far as the issue of transfer is concerned, Section 54 of the Transfer of Property Act is the governing principle, which is quite clear. It is the date of registration of document which is crucial inasmuch as the transfer is effected and the title passes only upon registration. Viewed thus, it is clear that Katihar property was transferred in the teeth of the Order of 08.05.2014 and ex facie there has been violation of the Order passed by this Court. …”.

For the sake of ready reference, following provisions of law referred to in above decision are reproduced below:

Section 54 of the Transfer of Property Act, 1882:

54. “Sale” defined.— ”Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.

Sale how made.—Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.

In the case of tangible immovable property, of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.

Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.

Contract for sale.—A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties.

It does not, of itself, create any interest in or charge on such property.”

Section 47 of the Registration Act, 1908:

47. Time from which registered document operates.—A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration.”

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