The Kerala High Court has delivered a significant judgment in Shaju v. Victory Granite Bricks Pvt. Ltd. & Anr. (RFA Nos. 593/2017 & 75/2019), declaring that an unregistered sale agreement can be admitted as valid evidence in a suit for specific performance. The Division Bench of Justice Sathish Ninan and Justice P. Krishna Kumar emphasized that even though registration of sale contracts is mandatory under Section 17(1)(f) of the Registration Act, the proviso to Section 49 still allows such documents to be used as evidence in specific performance claims.
“...the legislature, in its wisdom, chose not to amend Section 49...presumably intended to preserve...the admissibility of unregistered documents in suits for specific performance,” the Bench noted.
Background of the Case
In 2014, a suit was initiated by Victory Granite Bricks Pvt. Ltd. against Shaju, seeking enforcement of a sale agreement involving 1.26 acres of land. The agreement fixed the price at ₹9,000 per cent, and the plaintiff claimed to have paid the entire consideration through cheques. Despite preparing the sale deed, the defendant failed to execute it, leading to the suit.
The sale agreement was part of a broader compromise involving multiple parties to resolve ongoing disputes, with the defendant’s Power of Attorney holder also signing the agreement. While the plaintiff and others transferred their properties, the defendant did not fulfill his part of the agreement.
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The defendant contended that:
- He was not party to the compromise.
- The sale agreement was unregistered and hence not enforceable.
- The actual agreed rate was ₹61,000 per cent.
- The plaintiff had trespassed and altered the land’s features.
He also filed a counterclaim seeking recovery of possession.
The trial court found the sale agreement valid and genuine, confirming that the plaintiff had paid the full amount. It decreed the suit in favor of the plaintiff and dismissed the counterclaim. This prompted the defendant to file the present appeal.
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The Court analyzed the implications of the Kerala Amendment to Section 17(1)(f), which mandates registration of contracts for sale. However, it stressed that Section 49, which governs the consequences of non-registration, was not amended. The proviso to Section 49 allows unregistered documents to be used:
“...as evidence of a contract in a suit for specific performance...”
The Court referenced the Supreme Court’s ruling in R. Hemalatha v. Kasthuri (AIR 2023 SC 1895), which held that unregistered agreements remain admissible for specific performance despite amendments to Section 17.
“...the High Court has rightly observed and held relying upon proviso to Section 49... that the unregistered agreement... shall be admissible in evidence...”
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The High Court concluded that:
- The execution of the agreement and payment were not disputed.
- The defendant did not present any evidence to counter the plaintiff’s claims.
- The fair value of the land supported the plaintiff’s version.
- Denying enforcement would cause undue hardship.
Accordingly, the Court dismissed the appeal and upheld the trial court’s decree for specific performance, including the rejection of the counterclaim.
“Failure to specifically enforce the contract would result in undue hardship and substantial loss to the plaintiff.”
Case No: RFA Nos. 593/2017 & 75/2019
Case Title: Shaju v. Victory Granite Bricks Pvt. Ltd. & Anr.
