Difference between Agreement of Sale and Sale Deed

In Suraj Lamp and Industries Pvt. Ltd. vs. State of Haryana and Anr.[1], Supreme Court, with reference to its earlier judgments in Narandas Karsondas v. S.A. Kamtam and Anr.[2] and Rambaran Prosad v. Ram Mohit Hazra[3] observed that as per Section 54 of the Transfer of Property Act, a contract of sale or agreement of sale does not, by itself, creates any interest in or charge on the property to be transferred. The Apex Court in Narandas case[4] noted that- “The personal obligation created by a contract of sale is described in Section 40 of the Transfer of Property Act as an obligation arising out of contract and annexed to the ownership of property, but not amounting to an interest or easement therein.” Similarly in Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra[5], Supreme Court held that-

“Protection provided under Section 53A of the Act to the proposed transferee is a shield only against the transferor. It disentitles the transferor from disturbing the possession of the proposed transferee who is put in possession in pursuance to such an agreement. It has nothing to do with the ownership of the proposed transferor who remains full owner of the property till it is legally conveyed by executing a registered sale deed in favour of the transferee. Such a right to protect possession against the proposed vendor cannot be pressed in service against a third party.”

Thus, is a well settled law that a transfer of immoveable property by way of sale can only be by a deed of conveyance, i.e. sale deed. In the absence of a duly stamped and registered sale deed, no right, title or interest in an immoveable property can be transferred.[6] In the aforementioned case of Suraj Lamp & Industries[7], it was further held that-

“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 Transfer of Property Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under Section 53A of Transfer of Property Act). According to Transfer of Property Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of Transfer of Property Act enacts that sale of immoveable 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.”

Whether it is stamp duty on sale consideration or market value of the property?

Andhra Pradesh High Court in Kavitha Goud vs. Nookala Sudarshan Reddy and Ors.[8] had held-

“In case of sale, no doubt, under the Stamp Act the sale deed has to be stamped as per the market value of the property, but not as per the consideration fixed for the sale. If the stamp duty is not paid according to the market value of the property sold, and was paid only on the consideration, which is found to be less than the market value, it is for the authorities under the Stamp Act to take steps as contemplated by the Stamp Act for recovery of the deficit stamp duty from the parties to the transaction, but a third party to the sale transaction cannot question that transaction on the ground that the sale consideration is not adequate.”

[1] (2012)1SCC656

[2] (1977) 3 SCC 247

[3] 19671 SCR 293

[4] supra note 2

[5] 2004 (8) SCC 614

[6] Supra Note 1

[7] Supra Note 1

[8] 2004(5)ALT293

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