Supreme Court Upholds Eviction Based on Possessory Rights from Agreement to Sell: Ghanshyam vs. Yogendra Rathi (2 June 2023)

Date of the Judgment: 2 June 2023

Citation: 2023 INSC 515

Judges: Dipankar Datta, J. and Pankaj Mithal, J.

Can a person be evicted from a property if they sold it through an agreement to sell but continue to occupy it as a licensee? The Supreme Court of India recently addressed this question in a case concerning eviction and mesne profits. The core issue revolved around whether an agreement to sell, coupled with a possession memo and full payment, grants sufficient possessory rights to the buyer to evict the seller, who was occupying the property as a licensee. The judgment was delivered by a bench comprising Justice Dipankar Datta and Justice Pankaj Mithal, with the opinion authored by Justice Pankaj Mithal.

Case Background

The plaintiff-respondent, Yogendra Rathi, claimed ownership of a property in Delhi based on an agreement to sell dated 10 April 2002, a power of attorney, a memo of possession, a receipt of payment, and a will executed by the defendant-appellant, Ghanshyam. According to the plaintiff-respondent, possession of the property was handed over to him pursuant to the agreement to sell. Subsequently, on the defendant-appellant’s request, the plaintiff-respondent allowed the defendant-appellant to occupy the ground floor and one room on the first floor for a period of three months as a licensee. When the defendant-appellant failed to vacate the premises after the license period expired, the plaintiff-respondent issued a notice of termination on 18 February 2003 and filed a suit for eviction and mesne profits.

Timeline

Course of Proceedings

The trial court ruled in favor of the plaintiff-respondent, finding no evidence of manipulation or fraud in the documents presented. The court held that the plaintiff-respondent had proven his right over the property and was entitled to a decree of eviction and mesne profits. The first appellate court upheld the trial court’s decision. In the second appeal, the High Court held that the defendant-appellant could not raise the issue of whether the documents conferred title, as it was not raised in the lower courts and did not involve a substantial question of law.

Legal Framework

The court considered the following legal provisions:

• Section 54 of the Transfer of Property Act, 1882: This section states that a sale of immovable property can only be made through a registered instrument. The court noted that an agreement to sell does not, by itself, transfer ownership of the property. “No doubt, agreement to sell is not a document of title or a deed of transfer of property by sale and as such, may not confer absolute title upon the plaintiff-respondent over the suit property in view of Section 54 of the Transfer of Property Act, 1882”
• Section 53A of the Transfer of Property Act, 1882: This section protects the possession of a buyer who has performed their part of the contract, even if there is no registered sale deed. The court observed that the plaintiff-respondent had possessory rights under this section. “Legally an agreement to sell may not be regarded as a transaction of sale or a document transferring the proprietary rights in an immovable property but the prospective purchaser having performed his part of the contract and lawfully in possession acquires possessory title which is liable to be protected in view of Section 53A of the Transfer of Property Act, 1882.”
• Section 17 of the Indian Registration Act, 1908: This section mandates the registration of documents that transfer immovable property. The court emphasized that without a registered sale deed, title cannot be transferred.

Arguments

Defendant-Appellant’s Arguments:

• The defendant-appellant contended that the documents, including the agreement to sell, power of attorney, will, and possession memo, were manipulated on blank papers. However, the defendant-appellant did not dispute the execution of these documents or the fact that the sale consideration was paid.
• The defendant-appellant argued that the agreement to sell, along with other documents, did not confer title to the plaintiff-respondent, and therefore, the plaintiff-respondent was not entitled to a decree of eviction.

Plaintiff-Respondent’s Arguments:

• The plaintiff-respondent asserted ownership of the property based on the agreement to sell, possession memo, and receipt of payment.
• The plaintiff-respondent argued that he had been put in possession of the property and that the defendant-appellant was occupying the property as a licensee, whose license had been terminated.
• The plaintiff-respondent relied on the decisions of the Delhi High Court in Veer Bala Gulati Vs. Municipal Corporation of Delhi and Anr. [(2003) 104 DLT 787] and Asha M. Jain Vs. Canara Bank and Ors. [(2001) 94 DLT 841], which held that an agreement to sell with full consideration and possession along with irrevocable power of attorney is a transaction to sell.

Issues Framed by the Supreme Court

The Supreme Court considered the following issue:

1. Whether the agreement to sell, power of attorney, will, possession memo, and receipt of sale consideration confer any title upon the plaintiff-respondent so as to entitle him to a decree of eviction and mesne profits.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

✓ The decisions of the Delhi High Court in Veer Bala Gulati Vs. Municipal Corporation of Delhi and Anr. [(2003) 104 DLT 787] and Asha M. Jain Vs. Canara Bank and Ors. [(2001) 94 DLT 841] were overruled as they were not in consonance with the legal position emanating from Section 54 of the Transfer of Property Act, 1882.

✓ The decisions of the Delhi High Court in Imtiaz Ali Vs. Nasim Ahmed [AIR 1987 DELHI 36] and G. Ram Vs. Delhi Development Authority [AIR 2003 DELHI 120] were followed, which held that an agreement to sell and power of attorney are not documents of transfer.

✓ The Supreme Court’s decision in Suraj Lamp & Industries Pvt. Ltd. Vs. State of Haryana & Anr. [(2009) 7 SCC 363] was followed, which deprecated the transfer of immovable property through sale agreement, general power of attorney, and will.

✓ The Court considered Section 54 of the Transfer of Property Act, 1882, Section 53A of the Transfer of Property Act, 1882, and Section 17 of the Indian Registration Act, 1908 to determine that while an agreement to sell does not transfer ownership, it does provide possessory rights.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Possessory Rights: The Court emphasized that the plaintiff-respondent had acquired possessory rights over the property in part performance of the agreement to sell, which are protected under Section 53A of the Transfer of Property Act, 1882. This possessory title was a crucial factor in the decision.
• Licensee Status: The Court noted that the defendant-appellant was occupying the property as a licensee, and the license had been validly terminated. This meant that the defendant-appellant had no right to remain in possession.
• No Fraud or Manipulation: The Court upheld the lower courts’ finding that there was no evidence of fraud or manipulation in the execution of the documents, which supported the plaintiff-respondent’s claim.
• Statutory Compliance: The Court reiterated that the transfer of immovable property requires a registered sale deed as per Section 54 of the Transfer of Property Act, 1882 and Section 17 of the Indian Registration Act, 1908.

Fact:Law

Logical Reasoning

Key Takeaways

• An agreement to sell, by itself, does not transfer ownership of immovable property. A registered sale deed is required for the transfer of title.
• However, an agreement to sell, coupled with possession and full payment, grants possessory rights to the buyer, which are protected under Section 53A of the Transfer of Property Act, 1882.
• A person who has transferred possession of a property but continues to occupy it as a licensee can be evicted after the license is terminated.
• Practices or traditions that recognize agreements to sell, power of attorney, and wills as documents of title are not in consonance with the law.

Directions

No specific directions were given by the Supreme Court in this judgment.

Development of Law

The ratio decidendi of this case is that while an agreement to sell does not confer title, it does grant possessory rights to the buyer when coupled with possession and full payment. This judgment clarifies that the transferor cannot disturb the possessory rights of the transferee in such cases. The Court overruled the Delhi High Court’s view in Veer Bala Gulati Vs. Municipal Corporation of Delhi and Anr. [(2003) 104 DLT 787] and Asha M. Jain Vs. Canara Bank and Ors. [(2001) 94 DLT 841] that an agreement to sell along with other documents amounts to a sale.

Conclusion

The Supreme Court upheld the eviction of the defendant-appellant, ruling that the plaintiff-respondent had possessory rights based on the agreement to sell, possession memo, and receipt of payment. Although the agreement to sell did not transfer ownership, it did grant the plaintiff-respondent the right to possess the property. The defendant-appellant, having occupied the property as a licensee, was rightly evicted after the termination of the license. This judgment reinforces the significance of registered sale deeds for the transfer of ownership while also protecting the possessory rights of buyers under agreements to sell.