Sale Deed Holder With Registered Title Prevails Over Claimant Under Mere Agreement To Sell: Karnataka High Court

"Agreement of Sale Does Not Confer Title – Registered Title Prevails", Karnataka High Court has firmly held that registered title through proper sale deeds takes precedence over claims based on mere agreements to sell, rejecting a decades-long adverse possession claim founded on permissive possession.

Background of the Case

The dispute centered on property bearing Old No.U-22, New No.12, 5th Cross, Old Okalipuram, Bengaluru. The respondent claimed title through a registered sale deed dated 13.12.1958 executed in favor of his father, late B.N.Hanumaiah, by Mrs. B. Peacock. Subsequently, a release deed dated 17.04.2010 was executed by other legal heirs in the respondent's favor, consolidating his title. The appellants, on the other hand, claimed rights through an Agreement to Sell dated 23.11.1949 between their father Sri. Ponnuswamy Mudaliar and Sri. C.B.Oakley, under which only partial consideration of Rs.700 out of Rs.1000 was paid, with possession allegedly delivered.

Legal Issues and Arguments

The appellants contended that their possession commenced in 1949 and ripened into title by adverse possession over more than 40 years. They argued that the suit for possession was barred by limitation under Article 65 of the Limitation Act, as their hostile possession became apparent when they filed suits claiming title in 1979-80, making any suit for possession time-barred after 12 years. They also invoked Article 58, claiming the right to sue accrued when the sale deed was executed in 1958 without delivery of possession.

The respondent maintained that his title flowed from registered instruments, that the appellants' possession was permissive and derivative in nature, and that the cause of action arose only in 2010 when fraudulent gift deeds were executed and construction was attempted on the property.

Court's Observations and Judgment

The Division Bench systematically addressed each contention, beginning with the fundamental principle that an agreement of sale does not create title or interest in immovable property. Citing the Supreme Court's judgment in Achal Reddy v. Ramakrishna Reddiar, the Court emphasized that where parties contemplate execution of a registered sale deed, title passes only upon such execution and registration, and until then, the transferee's possession remains permissive and derivative.

"The purchaser's possession in such cases is of a derivative character and in clear recognition of and in acknowledgement of the title of the vendor," the Court observed, distinguishing between executory contracts and completed transfers.

The Court firmly rejected the adverse possession claim, noting that possession originating under an agreement to sell cannot mature into adverse possession without clear, unequivocal and hostile repudiation of the true owner's title to his knowledge. The appellants failed to establish the essential requirements of adverse possession—namely, possession that is nec vi, nec clam, nec precario (not by force, not secretly, not by permission) and accompanied by hostile animus.

Significantly, the Court found that earlier litigations filed by the appellants' predecessor—including suits in 1973, 1980, and 1993—only sought protection of possession and did not amount to hostile assertion against the true owner's title. "Earlier litigations instituted by their predecessor only sought for protection of possession and thus negate the plea of adverse possession," the judgment stated.

On the limitation question, the Court distinguished between Articles 58, 59, and 65 of the Limitation Act. It held that in the absence of proof of adverse possession, limitation under Article 65 cannot be invoked. The Court agreed with the respondent's contention that the cause of action arose only in 2010 when the appellants executed fraudulent gift deeds dated 22.10.2007 and attempted construction on the property.

Applying the Supreme Court's decision in Mohd. Noorul Hoda v. Bibi Raifunnisa, the Court held that where a plaintiff seeks to avoid an instrument on the ground of fraud, limitation begins from the date of knowledge of such fraud. The respondent's suit, filed after discovering the gift deeds and lodging a police complaint in March-August 2010, was therefore well within the three-year limitation period under Article 59.

The Court also emphasized the legal sanctity of registered documents, observing that registration constitutes notice and confers legal sanctity. The unbroken chain of registered title—from C.B.Oakley to Howard Oakley (executor), to B.H. Peacock, to B.N. Hanumaiah, and finally to the respondent through the release deed—stood in stark contrast to the appellants' claim founded on an unregistered, partially-paid agreement to sell.

Addressing the appellants' reliance on Rajeev Gupta v. Prashant Garg, the Court clarified that the word "first" in Articles 58 and 59 signifies that limitation runs from when the right to sue first accrues, and later acts such as continued possession or repeated assertions do not furnish a fresh cause of action. However, this principle did not assist the appellants because the respondent's right to sue crystallized only when the hostile gift deeds came to light and construction was attempted in 2010.

"Once the appellants started residing in the suit property, what crystallised was the invasion of the plaintiffs' rights. Their right to the suit property, if any, was put to clear jeopardy," the Court noted, applying this test to conclude that the respondent's cause of action arose in 2010, not 1958.

The Court also rejected the appellants' attempt to invoke Section 53A of the Transfer of Property Act as a shield for retention of possession, noting that after the dismissal of the suit for specific performance, no right to retain possession under the agreement survived. Following Mohan Lal v. Mirza Abdul Gaffar, the Court held that Section 53A can be used only as a shield, not as a sword, and only when the transferee remains ready and willing to perform his part of the contract—a plea neither made nor proved by the appellants.

The Karnataka High Court dismissed both appeals, upholding the trial court's decree granting declaration of title, possession and cancellation of gift deeds in favor of the respondent, while rejecting the appellants' suit for declaration of title by adverse possession. The judgment reinforces the primacy of registered title over claims based on unregistered agreements, clarifies the strict requirements for establishing adverse possession, and affirms that permissive possession cannot transform into hostile possession without clear repudiation of the true owner's title.

Date of Decision: 13.03.2026