The sale, purchase and transfer of any immovable property is mandated to be done by way of a registered sale deed which is otherwise legally executed by all parties concerned with their consent and for due consideration. A sale deed is a legally binding instrument of transfer recording the transaction between the seller and the purchaser and is a conclusive proof of transfer of title. A sale deed in that sense is different and ought not to be confused with an Agreement to Sell which establishes the intention of two parties to enter into a transaction of sale which would only and ultimately conclude once the Sale Deed has been executed.
Essentially, transfer of title occurs once the Sale Deed has been executed and duly registered with the concerned sub-registrar.
What is Cancellation of Sale Deed?
In cases wherein the parties wish to revoke the transaction of transfer of property, the same may be cancelled, and would in effect reverse the transaction. However, as per the provisions of the Registration Act, there is no power with the Registrar to cancel or annul a registered sale deed and therefore the appropriate remedy lies in approaching the Civil Court seeking cancellation of the sale deed under the provisions of the Specific Relief Act, 1963, inter-alia seeking cancellation of such registered sale deed.
When can Cancellation of Sale Deed be Sought?
- Fraud/Forgery/Misrepresentation
Registered documents are considered to be validly executed, unless challenged and proved. Otherwise, cancellation of a sale deed can be sought only in circumstances wherein a party alleged any vitiating factors under law such as fraud, coercion or undue influence, which strike at the root of the contract.
- By original owner contesting title in a subsequent sale
In addition to the aforesaid, there may also be a circumstance wherein a party claims to hold the original title to a property, however the same has been fraudulently sold by a person to a third party. Under such circumstances, the aggrieved party may approach the civil court and in addition to the cancellation of the subsequent sale deed, may also seek the remedy of restitution of possession in his favour.
- Non-fulfilment of obligations
In cases where either of the parties fail to abide by their obligations under the Sale Deed, such as financial obligations, or otherwise, such as providing a clean and encumbrance-free title but fail to do so, in such cases the aggrieved party may also approach the Civil Court seeking cancellation of the sale deed. However, it must be borne in perspective that the Court cannot be moved on baseless and non-serious grounds, such as change of decision without any material basis or other insignificant reasons.
A suit seeking cancellation or setting aside of any instrument or for that matter, recission of a contract must be preferred within 3 years from the date on which the aggrieved party was made aware of such circumstances entitling them to a relief or from the date of registration, in case the Sale Deed is registered. Therefore, it is imperative that action ought to be taken at the earliest opportunity in order to avoid a circumstance wherein the remedy may be exhausted by operation of law of limitation.
Civil Court Competent to Cancel Sale Deed
While a Registrar is the competent authority for registration of Sale Deeds, in cases wherein a cancellation is sought, the law has been settled that it is only the Civil Court that is competent to set aside any registered instrument, and such power does not vest with the Registrar. It is only once a formal decree has been obtained from the Civil Court and appropriate directions are passed that a Registrar may consequently proceed to act under such directions and make changes in the records.
It has been observed that certain States have proceeded to issue circulars thereby conferring such powers upon the Deputy Commissioner cum Registrar for cancellation and recession of registered sale deeds. However, such position has been clarified by the High Court of Jharkhand as well as the Delhi High Court that the Registrar is not clothed with such powers of cancellation of a registered instrument and the same solely vests within the Civil Court.
Procedure for Seeking Cancellation of Sale Deed
- An aggrieved party must seek to initiate a suit before the Civil Court of Competent Jurisdiction by duly adducing the relevant evidence on record and file the same along with the requisite court fee.
- The Court upon considering the facts of the case shall require the Defendant to lead his defence and after consideration of the facts of the case, may pass an order either granting relief of such cancellation or dismiss the suit.
- It is critical to note that the burden of proof is upon the party seeking the relief of cancellation to satisfy the Court of the reasons why such cancellation should be granted and adequately lead evidence to state that the registration of the Sale Deed is bad under law.
- In addition to passing such order directing cancellation of sale deed, the Court may further pass appropriate directions upon such party to restore any benefit derived out of such transfer or sale which it may have received from the opposite side in pursuance of the transaction.
Effect Of Cancellation of a Sale Deed
Once a Sale Deed has been adjudicated as cancelled by a competent court of law, such order must immediately be issued upon the concerned registrar for further action and to restore the interests of such party and rectify the records.
The effect of cancellation of a sale deed is that the rights and liabilities of the parties stand reversed and the ownership again vests with the original transferor.
Non-Payment of Partial Sale Consideration – Not A Sufficient Ground For Cancellation Of Sale Deed
While the Courts are conscious of the hardships that an aggrieved party may face in cases wherein consent has been obtained by fraud, or misrepresentation or forgery, and consider such matters on merit, they do not allow for such cancellation on account of non-fulfilment of conditions such as receipt of partial payment.
The Supreme Court has recently held that cases wherein the complete payment has not been made towards consideration, the same cannot be ground to seek cancellation of the Sale Deed, and the appropriate remedy is for the aggrieved part to approach the civil courts and seek recovery of the outstanding balance.
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