Agreement to Sell Does Not Create Any Right in Property, Hence No Right to Compensation on Acquisition: Allahabad High Court

“An agreement for sale does not, by itself, create any interest in or charge on such property” — Allahabad High Court dismissing the petitioners’ challenge to an order by the Land Acquisition Rehabilitation and Resettlement Authority, Meerut. The case involved land acquired for the Ganga Expressway Project and the competing claims of agreement holders and recorded tenure holders for compensation.

The Court emphatically held that holders of agreements to sell have no legal interest in the land entitling them to claim compensation upon compulsory acquisition under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

Pending Suits for Specific Performance and the Expressway Acquisition

The petitioners had entered into multiple agreements to sell regarding portions of Khasra Nos. 346 and 426 in village Bijauli, Tehsil and District Meerut, with recorded tenure holders between 2013 and 2014. When the sale deeds were not executed, several civil suits for specific performance were filed beginning in 2017, all of which are still pending.

While these suits were sub judice, the U.P. Expressways Industrial Development Authority (UP EIDA) initiated acquisition under the 2013 Land Acquisition Act, culminating in an award passed on 24 August 2022. The compensation was sought by the respondents as the recorded tenure holders, while the petitioners filed objections seeking compensation on the ground of their pending agreements and civil suits.

The A.D.M. (Land Acquisition) referred the dispute to the Land Acquisition Rehabilitation and Resettlement Authority under Section 76 of the 2013 Act. On 5 July 2025, the Authority rejected the petitioners’ claims and allowed the respondents' claim for compensation, leading to the present writ petition.

The core legal issue was whether holders of agreements to sell, who had filed suits for specific performance, but had no registered sale deed, could be treated as “persons interested” under the Land Acquisition Act and claim compensation.
 

They contended that the agreements to sell created equitable interest in the property and that pending suits and interim injunctions restrained alienation, which should entitle them to a share in compensation. They also invoked Section 21 of the Specific Relief Act to claim compensation in substitution of specific performance.
 

The respondents argued that mere agreements to sell do not convey title, and unless the court decrees specific performance, the petitioners remain strangers to the title. They relied on settled law that unregistered agreements do not create any right in property, and that the Land Acquisition Authority cannot decide hypothetical future rights.

Agreements to Sell Create No Title, No Compensation Entitlement

The Court conducted an extensive analysis of the legal nature of agreements to sell under Section 54 of the Transfer of Property Act, reiterating the settled principle:

“An agreement to sell does not create any interest in the proposed vendee in the suit property but only creates an enforceable right in the parties.”

Relying on multiple precedents, including Namdeo v. Collector, East Neemar [(AIR 1996 SC 975)], State of U.P. v. District Judge [(1997) 1 SCC 496], and Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra [(2004) 8 SCC 614], the Court held: “Mere execution of a contract for sale by itself would not create any right or interest in the property.”

“Even if a decree for specific performance is obtained, and no sale deed is executed, it cannot be said that any interest in the property has passed.”

The Court strongly rejected the claim that interim injunctions granted in the civil suits created any rights in the land: “Grant of interim injunction restraining alienation is of no avail, as the same is not binding on the State in case of compulsory acquisition under the 2013 Act.”

On the reliance placed on Section 21 of the Specific Relief Act, the Court acknowledged the decisions in Jagdish Singh v. Natthu Singh [(1992) 1 SCC 647], Urmila Devi v. Chamunda Devi Mandir [(2018) 2 SCC 284], and Sukhbir v. Ajit Singh [(2021) 6 SCC 54], but clarified:

“Such relief of compensation in substitution of specific performance can only be granted by the Civil Court in the suit, not in a proceeding under Section 76 of the 2013 Act.”

The Court added: “No such relief can be granted under Section 76... as the scope of enquiry is very limited... based on rights which have accrued, not rights which may accrue depending on outcome of civil suits.”

Right to Compensation Lies Only with Recorded Owners

In conclusion, the Court upheld the decision of the Land Acquisition Authority and categorically denied the petitioners’ claim to compensation:

“Apportionment presupposes an existing right in a person regarding the land. Apportionment cannot be claimed only on the basis of a right which may accrue... in future.”

It also rejected the request to withhold disbursement of compensation and direct deposit into fixed deposit, reasoning:

“In case the petitioners succeed... the decree will be a money decree which is capable of being executed... There is no likelihood of any irreparable injury to the petitioners.”

“In view of the discussion made above, I am of the view that no illegality has been committed by the Land Acquisition Rehabilitation and Resettlement Authority, Meerut, in passing the order impugned.”

The High Court’s judgment reinforces the legal position that mere agreement holders without title cannot claim compensation in land acquisition proceedings. While such persons may pursue civil remedies for specific performance or damages, they cannot bypass the requirement of title to claim compensation from the State.

Date of Decision: 15 September 2025