Supreme Court Emphasizes: Agreement to Sell Does Not Confer Ownership

November 17, 2023

In a recent order, the Supreme Court reinforced a crucial principle in property transactions: an agreement to sell does not confer title or transfer ownership to the intended purchaser. The ruling came in response to a case where the execution of an agreement to sell a property in May 1990 was questioned.

Agreement to Sell vs. Conveyance

The Supreme Court clarified that an agreement to sell is not a conveyance and does not transfer ownership rights or confer title. This distinction is vital, emphasizing that ownership is not transferred until the sale is completed through a conveyance deed.

Background of the Case

The case involved an intended purchaser who agreed to buy a property, paid the full amount, and took possession. However, when the seller refused to execute the agreement, the intended purchaser filed a suit for specific performance in 2001. The trial court dismissed the suit, stating doubts about the execution of the agreement. The appellate court later reversed this decision, and the Karnataka High Court ruled in favor of the intended seller, citing a violation of the Karnataka Prevention of Fragmentation and Consolidation of Holdings Act, 1996.

Supreme Court’s Verdict

The Supreme Court allowed the intended purchaser’s appeal, noting that the issue of the Fragmentation Act was not raised during the trial, and neither party pleaded its violation. The court highlighted that the defense centered on the non-execution of the agreement rather than the act’s violation. The court concluded that the High Court erred in holding the agreement to be in violation of the Fragmentation Act. The Supreme Court emphasized that the respondents had received full consideration and transferred possession of the property, reinforcing the significance of the agreement-to-sell distinction.

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