Unregistered Agreement To Sell With Delivery Of Possession Is Admissible In A Suit For Specific Performance: Delhi High Court

"The proviso to Section 49 of the Act of 1908 expressly permits an unregistered document to be received in evidence as proof of a contract in a suit for specific performance." Delhi High Court, in a judgment dated 08 September 2026, has clarified that an unregistered Agreement to Sell (ATS), even when accompanied by delivery of possession, does not bar the institution or maintenance of a suit for specific performance.

A division bench comprising Justice Anil Kshetarpal and Justice Shail Jain observed that while such an agreement cannot be used to claim the protection of part performance under Section 53-A of the Transfer of Property Act, 1882 (TPA), it remains admissible in evidence to prove the existence of the contract itself, pursuant to the proviso to Section 49 of the Registration Act, 1908.

The appellants (plaintiffs) had entered into an ATS for a shop in Okhla, New Delhi, in May 2019, paying the full consideration and taking possession. Subsequently, the defendant was inducted as a tenant. When the defendant stopped paying rent and denied the plaintiffs’ title, the plaintiffs filed a suit for specific performance and recovery of possession. The District Judge rejected the plaint under Order VII Rule 11(d) of the Code of Civil Procedure (CPC), holding the ATS inadmissible for want of registration and insufficient stamping.

The primary questions before the court were whether an unregistered ATS accompanied by possession is barred from being looked into for the purposes of a specific performance suit, and whether insufficient stamp duty on such an instrument warrants the rejection of a plaint under Order VII Rule 11(d) CPC.

Court Rejects Bar On Admissibility

The bench held that the lower court’s reliance on Section 17(1-A) of the Registration Act read with Section 53-A of the TPA was misplaced. While the 2001 Amendment Act made agreements falling under Section 53-A compulsorily registrable, it did not preclude their use in suits for specific performance. Citing Ram Kishan v. Bijendra Mann, the court reiterated that an unregistered document can be received in evidence for collateral purposes or as proof of a contract.

"The proviso to Section 49 of the Act of 1908 expressly permits an unregistered document to be received in evidence as proof of a contract in a suit for specific performance."

Insufficiency Of Stamp Duty Is Curable

Addressing the second limb of the lower court’s order, the bench clarified that insufficient stamping is not a ground for the outright rejection of a plaint. The court distinguished between the admissibility of an instrument and the maintainability of a suit. Under proviso (a) to Section 35 of the Indian Stamp Act, 1899, a court is an authority competent to receive an instrument in evidence once the deficit duty and penalties are paid.

"The insufficiency of stamping, by itself, cannot furnish a ground for rejection of plaint under Order VII Rule 11(d) of the CPC."

No Need To Relegate To Collector

The court criticized the practice of directing parties to the Collector of Stamps for impounding when the court itself possesses the jurisdiction to collect the deficit duty. To ensure judicial efficiency, the bench directed the plaintiffs to deposit the deficit stamp duty of Rs. 59,950 along with a penalty of Rs. 5,99,500 within one month. The court noted that while the penalty is mandatory, the plaintiffs retain the right to seek a refund from the Collector under Section 40 of the Stamp Act, in light of the principles laid down by the Supreme Court in H.C. Dhanda Trust v. State of Madhya Pradesh.

"The appropriate course of action to be adopted by the LDJ was to direct payment of the deficit stamp duty and penalty as a condition for admissibility, rather than embarking upon the separate impounding procedure contemplated under Section 33(1) of the Act of 1899."

The High Court allowed the appeal, set aside the order of the District Judge, and remanded the matter back for trial on merits, emphasizing that the suit should proceed once the stamp deficiency is cured.

Date of Decision: 08 September 2026