how a registered sale deed can be cancelled

 

Where a sale deed is executed and registered and the intention of the parties are clear that title in property would pass upon the paying  of consideration, and if consideration amount is not paid, even though it has been recited in deed that full amount has been paid in that event evidence can be brought before court for contradicting the recital in the deed acknowledging the receipt of consideration.  [1998 (7) SCC 498], 

APEX court considered the question as to when the ownership and title in a property will pass to the purchaser, under a deed of conveyance. Court observed :

"Transfer of Property Act section 8 says.............. that on a transfer of property all the interests which the seller has,  interest capable of passing in the property  will pass on unless a different intention is expressed or necessarily implied. so section 8 and section 54 of the Transfer of Property Act says that when a sale deed is registered, the ownership in the property is conveyed to purchaser, but the transfer of ownership would depend on terms and conditions  given in the sale deed and the wordings of sale deed shows the intention of the parties. meaning thereby that all interest and rights in property after registration of sale deed will go to buyer until and  unless a different intention is either expressed or necessarily implied and if the intention of parties are different than the terms and conditions of sale deed than in order to deny the sale deed the intention has to be proved by the party asserting that title has not passed on registration of the sale deed. Such otherwise intention can be gathered by gathered from evidence,  from the averments in the sale deed or by other attending circumstances but conditions mentioned in section 92 of Indian Evidence Act needs to kept in mind."

[2009 (4) SCC 193],  Honorable apex court has held that paying of entire sale consideration will not complete sale and title would not pass to buyer.  

section 54 of Transfer of Property Act, 1882 defines `sale' as a transfer of ownership in exchange for a price paid or promised or part paid and part promised.

If the parties intended that title should pass on registration, title would pass to the purchaser even if the sale price or part thereof is not paid. 

and in the event of non-payment of price (or balance price as the case may be) thereafter, the remedy of the vendor is only to sue for the balance price. He cannot avoid the sale. He is, however, entitled to a charge upon the property for the unpaid part of the sale price where the ownership of the property has passed to the buyer before payment of the entire price, under Section 55(4)(b) of the Act. Normally, ownership and title to the property will pass to the purchaser on registration of the sale deed with effect from the date of execution of the sale deed. But this is not an invariable rule, as the true test of passing of property is the intention of parties. Though registration is prima facie proof of an intention to transfer the property, it is not proof of operative transfer if payment of consideration (price) is a condition precedent for passing of the property.

The answer to the question whether the parties intended that transfer of the ownership should be merely by execution and registration of the deed or whether they intended the transfer of the property to take place, only after receipt of the entire consideration, would depend on the intention of the parties. Such intention is primarily to be gathered and determined from the recitals of the sale deed. When the recitals are insufficient or' ambiguous the surrounding circumstances and conduct of parties can be looked into for ascertaining the intention, subject to the limitations placed by section 92 of Evidence Act. x x x x There is yet another circumstance to show that title was intended to pass only after payment of full price. Though the sale deed recites that the purchaser is entitled to hold, possess and enjoy the scheduled properties from the date of sale, neither the possession of the properties nor the title deeds were delivered to the purchaser either on the date of sale or thereafter. It is admitted that possession of the suit properties purported to have been sold under the sale deed was never delivered to the appellant and continued to be with the respondents. In fact, the appellant, therefore, sought a decree for possession of the suit properties from the respondents with mesne profits. If really the intention of the parties was that the title to the properties should pass to the appellant on execution of the deed and its registration, the possession of the suit properties would have been delivered to the appellant."

Where the sale deed recites that on receipt of the total consideration by the vendor, the property was conveyed and possession was delivered, the
 clear intention is that title would pass and possession would be delivered only on payment of the entire sale consideration. Therefore, where the sale deed recited that on receipt of entire consideration, the vendor was conveying the property, but the purchaser admits that he has not paid the entire consideration (or if the vendor proves that the entire sale consideration was not paid to him, title in the property would not pass to the purchaser.

At this stage, we may refer to the practice prevalent in Bihar known as `ta khubzul badlain' (that is, title to the property passing to the purchaser only when there is "exchange of equivalents"). As per this practice, where a sale deed recites that entire sale consideration has been paid and possession has been delivered, but the Registration Receipt is retained by the vendor and possession of the property is also retained by the vendor, as the agreed consideration (either full or a part) is not received, irrespective of the recitals in the sale deed, the title would not pass to the purchaser, till payment of the entire consideration to the vendor and the Registration Receipt is obtained by the purchaser in exchange. In such cases, on the sale deed being executed and registered, the registration receipt (which is issued by the Sub-Registrar) authorizing the holder thereof to receive the registered sale deed on completion of the registration formalities, is received and retained by the
 vendor and is not given to the purchaser. The vendor who holds the Registration receipt will either receive the registered document and keep the original sale deed in his custody or may keep the registration receipt without exchanging it for the registered document from the sub-Registrar, till payment of consideration is made. When the purchaser pays the price (that is the whole price or part that is due) on or before the agreed date, he receives in exchange, the registration receipt from the vendor entitling him to receive the original registered sale deed, as also the possession. If the payment is not made as agreed, the vendor could repudiate the sale and refuse to deliver the registration receipt/registered document, as the case may be, which is in his custody, and proceed to deal with the property as he deems fit, by ignoring the rescinded sale. The prevalence of this practice in Bihar is noticed and recognized in several reported decisions - the decision of this Court in Bishundeo Narain Rai (supra) and the decisions of the Patna High Court in Sarjug Saran Singh vs. Ramcharitar Singh (1968 BLJR 74), Shiva Narayan Sah vs. Baidya Nath Prasad Tiwary (AIR 1973 Patna 386), Baldeo Singh vs. Dwarika Singh (AIR 1978 Patna 97), which explain the practice of ta khubzul badlain, after relying upon the principles laid down in the earlier decisions of that court in Md. Murtaza Hussain vs. Abdul Rahman (AIR 1949 Pat. 364), Motilal Sahu vs. Ugrah Narain Sahu (AIR 1950 Patna 288),
 and Panchoo Sahu v. Janki Mandar (AIR 1952 Pat. 263), 11.1) In Bishundeo Narain Rai (supra), this Court held :

"It appears that in the State of Bihar a practice is prevalent that when whole or part of sale consideration is due or any other obligation is undertaken by the vendee, then on execution and registration of the sale deed by the vendor, title to the property, subject matter of sale, does not pass 'ta Khubzul Badlain', that is, until there is 'exchange of equivalent' and in such a case registration receipt is retained by the vendor, which on payment of consideration due or on fulfillment of the obligation by the vendee is endorsed in his favour or if the sale deed has already been received by the vendor then the sale deed is delivered to the vendee. Even so, this only shows that such agreement are common in that part of the country but it is essentially a matter of intention of the parties which has to be gathered from the document itself but if the document is ambiguous then from the attending circumstances, subject to the provisions of Section 92 of the Evidence Act."

(emphasis supplied) 11.2) In Sarjug Saran Singh (supra) after referring to the recitals in a sale deed that the vendor had delivered possession to the vendee as absolute owner, it was observed :

"It was admitted by the plaintiffs themselves that the aforesaid recital is incorrect, both as regards the receipt of the consideration money and as regards putting the vendee in possession of the property. The registration receipt remained with the executants, namely, defendants 1 and 2, and the plaintiffs alleged that on a subsequent date, when they offered to pay the consideration money and to take the registration receipt from defendants 1 and 2 (Ta kalzul badlain exchange of equivalents), they, under the instigation of the other defendants refused to part with the receipt and sold the property to the other defendants."

The Patna High Court in that decision, upheld the decision of the first appellate court that the intention of the parties was that title should pass only
 on payment of the consideration and as admittedly the consideration was not paid, the plaintiffs did not obtain title by virtue of the sale deed, on the following reasoning:

"It is well settled that the intention of the parties should be ascertained on a construction of a document; and where there is any patent ambiguity in any recital, aid may be taken from evidence of surrounding circumstances and the conduct of the parties. Mr. Rai for the appellants urged that the first sentence in the recital (quoted above) was complete in itself and that sentence indicated the clear intention of the parties that title should pass at the time of the registration when the executants admitted execution before the Sub-registrar. He specially relied on the words "without any right of cancellation and revocation" occurring in that sentence. But it is well known that in construing a document due weight should be given to all the recitals. Hence the subsequent recitals as regards payment of consideration at the time of exchange of equivalents and putting the vendee into possession should also be given equal weight. x x x x x The first appellate court was, therefore, justified in observing that, if the intention was that the title should pass at the time of registration, the vendors would have insisted on payment of the consideration money before the Sub- registrar, or immediately thereafter. The very fact that the registration receipt was kept in their custody and not handed over to the vendee and possession also admittedly remained with them lead to an inference that there was no intention to convey title until the payment of the consideration."

(emphasis supplied) 11.3) In Shiva Narayan Sah (supra), the Patna High Court, following its earlier decisions, held that when the sale deed stipulates payment of balance price during the exchange of equivalents (balance sale consideration and registration receipt) and mentions only "putting the buyer in possession"

without actually delivering possession, even if the sale deed does not expressly postpone passing of the title till discharge of the consideration due
 and even if more than three fourth of the total price had been paid to the vendor, the title in the property would not pass to the purchaser on execution and the registration of the sale deed, but will pass only during the exchange of the equivalents.

In Baldeo Singh (supra), the sale deed recited that the consideration money had been paid and nothing was due from the vendee to whom possession had also been delivered. But the plaintiffs admitted that neither the consideration money was paid by them nor possession was delivered by them at the time of execution and registration of the sale deed. After referring to the earlier decisions of that Court the High Court held :

"On the basis of the aforesaid decision it can be said that it is almost settled that the question whether title passes on mere execution and registration of a deed or only on payment of consideration depends upon the intention of the parties, to be gathered from the deed. It has also been held that though the sale deed may recite that the consideration has been paid, but there is nothing to prevent the parties from adducing evidence to show that the recital is untrue and that, in fact, the consideration was not paid; this will not be barred by Section 92 of the Evidence Act. In the present case, there is no dispute so far as the second aspect is concerned. The sale deed in question recites that consideration money has been paid and there is nothing due from the vendee to whom the possession has also been delivered. But, the plaintiffs admit that neither the consideration money was paid nor possession delivered to them at the time of the execution and registration of the aforesaid deed. .... In my opinion, the plaintiffs did not acquire title on mere execution and registration of the sale deed.

"In the instant case, the defendant first set has not taken the stand that he had repudiated the contract even before 10-1-1963 when the deed of cancellation was executed. If the amount is tendered by the defaulter after such repudiation, it is of no, consequence. A vendor cannot be expected to
 wait indefinitely to enable the vendee to perform his part, and he is at liberty in such a situation to sell the property to another person. In my opinion, in cases where the tender or payment of the consideration money is made by the vendee before the vendor repudiates the contract, the vendee will acquire a valid title over the properties covered by the deed in question."

(emphasis supplied)

We have referred to several decisions of the Patna High Court in detail to demonstrate the existence of the established practice of exchanging equivalents (ta khubzul badlain). The effect of such transactions in Bihar is even though the duly executed and registered sale deed may recite that the sale consideration has been paid, title has been transferred and possession has been delivered to the purchaser, the actual transfer of title and delivery of possession is postponed from the time of execution of the sale deed to the time of exchange of the registration receipt for the consideration, that is ta khubzul badlain.

We may now examine the facts of this case with reference to the said principles. As noticed above the first appellate court has recorded a finding of fact that the appellants had not paid the consideration of Rs.22000 at the time of execution and registration of the sale deed. This finding of fact (accepted by the High Court in second appeal) has been recorded after exhaustive consideration of the oral evidence and is not open to challenge.
 The trial court, the first appellate court and the High Court have concurrently found that though the sale deed recited that possession of the property was delivered to the purchasers, the possession was not in fact delivered and continued with the vendor (second respondent) and he had delivered the actual possession of the property to the first respondent when he subsequently, sold the property to the first respondent. Therefore, the recitals in the sale deed dated 22.2.1988, that the vendor had received the entire price of Rs.22000/- from the purchasers (that is Rs.17000 before execution of the sale deed and Rs.5000 at the time of exchange of registration receipt) and had transferred all his rights therein and that on such sale the vendor has not retained any title and that the vendor has relinquished and transferred the possession of the property to the purchasers, will not be of any assistance to the appellants to contend that the title has passed to them or part consideration was paid. It is an admitted fact that the registration receipt was retained by the vendor to be exchanged later in consideration of the sale price. It is also admitted that possession was not delivered though the deed recited that possession was delivered. The sale was categorically repudiated by the second respondent on 18.3.1988 by cancelling the sale deed. There is no evidence that the appellants offered the sale price of Rs.22000/- to the second respondent before the repudiation. The only possible inference is that
 the intention of the parties was that title would not pass until the consideration was not paid; and as the consideration was not paid, the sale in favour of the appellants did not come into effect and the title remained with the vendor and the sale deed dated 22.2.1988 was a dead letter. Consequently, the subsequent sale in favour of the first respondent was valid.

Re: Question (iv)

We are therefore of the view that on execution and registration of the sale deed dated 22.2.1988 in favour of appellants, title did not pass to the purchaser and possession was not delivered. Therefore as a consequence the vendor retained the power of repudiating the sale for non payment of the sale price within a reasonable time. As the finding is that no part of the sale price was paid, the claim of appellants that they offered to pay Rs.5000/-, even if accepted to be true would mean proving their readiness to pay only a part of the price and not the entire sale price. As the appellants have failed to prove that they tendered the price of Rs.22000/- before repudiation and cancellation on 18.3.1988, the sale deed dated 22.2.1988 in favour of appellants did not convey any title to them and after lawful repudiation, they were not entitled to claim performance.

We hasten to add that the practice of ta khubzul badlain (of title passing on exchange of equivalent) is prevalent only in Bihar. Normally, the recitals in a sale deed about transfer of title, receipt of consideration and delivery of possession will be evidence of such acts and events; and on the execution and registration of the sale deed, the sale would be complete even if the sale price was not paid, and it will not be possible to cancel the sale deed unilaterally. The exception to this rule is stated in Kaliaperumal (supra). The practice of `ta khubzul badlain' in Bihar recognizes that a duly executed sale deed will not operate as a transfer in preasenti but postpones the actual transfer of title, from the time of execution and registration of the deed, to the time of exchange of equivalents that is registration receipt and the sale consideration, if the intention of the parties was that title would pass only on payment of entire sale consideration. As a result, until and unless the duly executed and registered sale deed comes to the possession of the purchaser, or until the right to receive the original sale deed is secured by the purchaser by obtaining the registration receipt, the deed of sale merely remains an agreement to be performed and will not be a completed sale. But in States where such a practice is not prevalent, possession of Registration Receipt by the Vendor, may not, in the absence of other clear evidence, lead to an inference that consideration has not been paid or that title has not
 passed to the purchaser as recited in the duly executed deed of conveyance. Where the purchaser is from an outstation, the vendor being entrusted with the Registration Receipt, to collect the original sale deed and deliver it to the purchaser, is common. Be that as it may.