Introduction
The Supreme Court, in Indian Overseas Bank vs M.A.S. Subramanian & Ors. (2025 LiveLaw (SC) 77), reaffirmed that mere possession under an agreement to sell does not confer ownership unless a registered sale deed is executed as per the Indian Registration Act, 1908. The bench comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan set aside the National Company Law Appellate Tribunal’s (NCLAT) decision, which held that the sale deed executed by the property owner's legal heirs was not binding on the company holding possession.
Facts
The dispute pertained to a property owned by late Shri M.A. Shanmugam. An agreement to sell was made between the owner and a company, wherein the property was to be transferred against shares of the company. The company claimed possession of the property as part performance of the contract under Section 53A of the Transfer of Property Act, 1882. After the owner's death, his legal heirs sold the property to another person by a registered sale deed. NCLAT held that the sale deed executed by the legal heirs was not binding on the company, as it was in possession of the property.
Issues
1. Does possession under an agreement to sell confer ownership without a registered sale deed?
2. Can the NCLAT, in its limited jurisdiction, hold that a sale deed executed by legal heirs is not binding on a company in possession?
3. Was the company entitled to specific performance of the contract despite not initiating legal proceedings?
You can also read the Blog by visiting [Blog]
For more information, visit [Aashayein Enquiry Section]
Contentions of the Petitioners
The petitioners (legal heirs of the owner) argued that ownership could only pass through a registered sale deed, as mandated by Section 54 of the Transfer of Property Act, 1882. They contended that the company had neither a valid agreement to sell nor sought specific performance, invalidating their claim to ownership.
Contentions of the Respondents
The respondents (the company) argued that possession was transferred as part performance under the agreement, granting them a valid claim over the property. They maintained that the sale deed executed by the legal heirs was invalid as they were already in possession of the property.
Analysis of the Court
The Court emphasized that an agreement to sell does not transfer ownership and does not create an interest in the property unless a registered sale deed is executed. Referring to Section 54 of the Transfer of Property Act, the Court noted that mere possession or part performance under Section 53A does not confer title. The Court held that the NCLAT exceeded its jurisdiction by invalidating the sale deed executed by the legal heirs, as the original owner never executed a registered sale deed in favor of the company. It observed that the company failed to file a suit for specific performance, further weakening its claim.
Conclusion
The Supreme Court allowed the appeal, setting aside the NCLAT’s decision. It held that possession under an agreement to sell does not transfer ownership or create any title in the property. The ruling reinforces the principle that ownership of immovable property requires a registered sale deed under the Indian Registration Act, 1908.
