Delhi High Court Restores Specific Performance Suit Based on Unregistered Agreement to Sell; Holds Non-Registration No Bar but Orders Deficit Stamp Duty and Tenfold Penalty Payment
Unregistered Agreement to Sell Can Support Specific Performance Suit: Delhi High Court Sets Aside Rejection of Plaint Over Registration and Stamp Defects
Facts
The appellants/plaintiffs, Dharmendra Singh and another, challenged a judgment dated 9 May 2023 of the District Judge, Saket Courts, which had rejected their plaint at the threshold under Order VII Rule 11(d) CPC. The suit sought specific performance of an Agreement to Sell, possession and recovery of money.
The parties had executed an Agreement to Sell dated 10 May 2019 concerning Shop No. 113, measuring 16 sq. yds. at Sabzi Mandi, Okhla, New Delhi, for a total consideration of ₹12 lakh. On the same date, a GPA, Will, Possession Letter and Receipt were also executed. The plaintiffs claimed that the entire sale consideration had been paid and possession delivered.
Since the defendant continued physically occupying the shop, the parties simultaneously executed a rent agreement under which the defendant remained in possession as a tenant at ₹10,000 per month for 11 months.
The defendant initially paid rent, stopped during the COVID-19 lockdown, resumed payment later, but eventually stopped again from December 2021. When the plaintiffs terminated the tenancy, the defendant denied their title and disputed the legal effect of the documents executed in 2019.
The plaintiffs therefore filed a suit seeking:
- specific performance of the Agreement to Sell;
- possession; and
- arrears of rent/use and occupation charges.
Although the defendant admitted his signatures on the documents, he disputed that they conferred any right or title upon the plaintiffs.
Issues
The principal issues before the Delhi High Court were:
- Whether an unregistered Agreement to Sell involving delivery of possession can form the basis of a suit for specific performance.
- Whether Section 17(1A) of the Registration Act read with Section 53A of the Transfer of Property Act bars such a suit.
- Whether the proviso to Section 49 of the Registration Act permits an unregistered agreement to be received in evidence for proving a contract in a specific performance action.
- Whether an insufficiently stamped agreement can justify rejection of the plaint under Order VII Rule 11(d) CPC.
- Whether stamp deficiency is curable before the Court itself or requires the document necessarily to be sent to the Collector.
- What amount of stamp duty and penalty was payable on the Agreement to Sell in the present case.
Appellants / Plaintiffs’ Arguments
The plaintiffs argued that the Trial Court wrongly applied Section 17(1A) of the Registration Act and Section 53A of the Transfer of Property Act.
Their case was that they were not invoking Section 53A defensively to protect possession. Rather, they were seeking specific performance and possession.
They relied upon the proviso to Section 49 of the Registration Act, which expressly permits an unregistered document affecting immovable property to be received as evidence of a contract in a suit for specific performance.
They further argued that insufficient stamping affects admissibility of the document, not maintainability of the suit itself, and therefore could not justify rejection of the plaint under Order VII Rule 11(d).
They also relied on the defendant’s admission of his signatures and argued that his claim that the documents had been signed blank raised a disputed factual question requiring evidence.
Respondent / Defendant’s Arguments
Although counsel for the defendant did not appear at the final hearing, written submissions were on record.
The defendant argued that the plaintiffs had taken inconsistent positions: they claimed ownership and delivery of possession under the Agreement to Sell but simultaneously treated him as a tenant liable to eviction.
He further contended that because the Agreement to Sell contemplated delivery of possession, it was compulsorily registrable under Section 17(1A) and, being unregistered, could not be relied upon.
The defendant also defended the Trial Court’s decision to impound the instrument under the Stamp Act and argued that Section 53A creates no independent right and can only operate defensively.
Analysis of the Law
1. Non-registration does not bar a specific performance suit
The High Court held that the Trial Court had incorrectly treated non-registration as fatal to the suit.
After the 2001 amendments, an agreement involving part performance and possession is indeed compulsorily registrable if a party wants to invoke Section 53A of the Transfer of Property Act.
An unregistered agreement therefore cannot be relied upon to claim the statutory protection of part performance under Section 53A.
However, that does not mean the agreement is unusable for every purpose.
The proviso to Section 49 of the Registration Act expressly permits such an unregistered document to be received as evidence of the underlying contract in a suit for specific performance.
The Court therefore drew an important distinction:
- an unregistered Agreement to Sell cannot support a Section 53A claim of part performance;
- but it can support a suit for specific performance and can be admitted to prove the contract.
Accordingly, the suit could not be rejected merely because the Agreement to Sell was unregistered.
2. Stamp deficiency does not make the suit itself non-maintainable
The High Court also rejected the second basis adopted by the Trial Court.
It held that insufficient stamping, by itself, is not a ground for rejection of the plaint under Order VII Rule 11(d).
The Trial Court had conflated three legally distinct questions:
- admissibility of the instrument;
- curability of deficient stamp duty; and
- maintainability of the suit.
These operate in separate statutory fields and cannot be treated as interchangeable.
Thus, even if the Agreement to Sell could not immediately be admitted because of deficient stamping, the proper course was to cure the deficiency—not terminate the civil action altogether.
Precedent Analysis
Ram Kishan v. Bijendra Mann
The High Court relied substantially upon the Punjab and Haryana High Court’s Division Bench decision in Ram Kishan and Anr. v. Bijendra Mann @ Vijendra Mann and Ors.
That case clarified the effect of the 2001 amendments to Sections 17 and 49 of the Registration Act.
An agreement falling within Section 53A must be registered if a party seeks protection of part performance. However, the same unregistered agreement may nevertheless be admitted to prove the contract in a specific performance suit by virtue of the proviso to Section 49.
The Delhi High Court expressly adopted this distinction.
State of A.P. v. P. Laxmi Devi
The Trial Court had relied upon P. Laxmi Devi in relation to stamping.
The High Court held that the reliance was misplaced because the Supreme Court was dealing with the mandatory nature of impounding an insufficiently stamped document, not holding that every deficiency in stamp duty renders the underlying suit non-maintainable.
Avinash Kumar Chauhan v. Vijay Krishna Mishra and Omprakash v. Laxminarayan
These Supreme Court decisions were relied upon to hold that a court before which an instrument is sought to be admitted can itself accept payment of the deficient stamp duty and statutory penalty.
The High Court therefore held that every insufficiently stamped document need not necessarily be routed through a separate external adjudicatory mechanism before the suit can proceed.
Peteti Subba Rao v. Anumala S. Narendra
This authority became crucial to the quantum of penalty.
The Supreme Court had held that when the Court acts under Section 35 of the Stamp Act, it has no discretion to reduce the statutory penalty.
Consequently, the Delhi High Court imposed a penalty equal to ten times the deficient stamp duty.
H.C. Dhanda Trust v. State of Madhya Pradesh
The Court distinguished the position of the Collector under Section 40(1)(b).
Unlike the Court acting under Section 35, the Collector possesses discretion concerning the penalty, subject to the statutory maximum.
The plaintiffs were therefore permitted, after making the payment ordered by the High Court, to approach the Collector seeking refund of an appropriate part of the penalty.
Stamp Duty Computation
The Agreement to Sell recorded delivery of possession after receipt of the entire ₹12 lakh sale consideration and was accompanied by GPA, Will, Possession Letter and Receipt.
The Court therefore treated it as a conveyance in the nature of part performance attracting Article 23-A of Schedule I to the Stamp Act as applicable to Delhi.
Under Article 23-A, 90% of the stamp duty otherwise payable on a conveyance became payable at the Agreement to Sell stage.
The plaintiffs were one male and one female joint purchaser. Since their respective shares were unspecified, the Court treated them as owning 50% each for computation.
The applicable rates were:
- 3% on the male plaintiff’s 50% share; and
- 2% on the female plaintiff’s 50% share.
The Court calculated the total applicable stamp duty at ₹60,000. Only ₹50 had been paid.
Thus, the deficiency was ₹59,950.
Applying the mandatory ten-times penalty under Section 35, the Court directed payment of:
Deficient stamp duty: ₹59,950
Penalty: ₹5,99,500
Total: ₹6,59,450
Court’s Reasoning
The High Court held that the Trial Court’s reasoning suffered from a fundamental legal error.
The Trial Court had assumed that because the Agreement to Sell was:
- unregistered; and
- insufficiently stamped,
the entire suit itself was barred by law.
The High Court held that neither conclusion followed.
The registration defect prevented the plaintiffs from invoking Section 53A, but the proviso to Section 49 expressly preserved the document for a specific performance action.
The stamp defect similarly affected the document’s immediate admissibility but was capable of being cured through payment of deficient duty and penalty.
Therefore, neither defect justified rejection of the entire plaint at the threshold.
At the same time, the High Court made clear that the plaintiffs could not use the specific-performance exception to escape their full fiscal liability under the Stamp Act. It observed that the cluster of documents—Agreement to Sell, GPA, Will, Possession Letter and Receipt—had been executed instead of a conventional Sale Deed, thereby avoiding the corresponding stamp liability.
The suit was therefore restored, but only subject to curing the stamp deficiency.
Conclusion
The Delhi High Court allowed the appeal and set aside the District Judge’s judgment and decree dated 9 May 2023.
It held that an unregistered Agreement to Sell involving possession can nevertheless form the basis of a suit for specific performance under the proviso to Section 49 of the Registration Act, though it cannot be used to claim Section 53A protection.
The Court further held that deficient stamping did not justify rejection of the plaint under Order VII Rule 11(d).
Instead, it directed the plaintiffs to deposit:
- ₹59,950 as deficient stamp duty; and
- ₹5,99,500 as statutory penalty
before the Trial Court within one month. Upon payment, the Agreement to Sell would stand admitted in evidence and the suit would proceed.
The question of whether any part of the penalty should ultimately be refunded was left to the Competent Collector under Section 40 of the Stamp Act, without delaying the pending civil suit.
The original suit was restored and remanded to the District Judge for adjudication on merits, with all merits contentions expressly left open.
Case Details
Case: Dharmendra Singh & Anr. v. Fazlu Rehman
Court: Delhi High Court
Case Number: RFA (COMM) 134/2023
CNR: DLHC010256322023
Bench: Justice Anil Kshetrapal and Justice Shail Jain
Order Reserved On: 31 August 2026
Pronounced On: 8 September 2026
Property: Shop No. 113, measuring 16 sq. yds., Sabzi Mandi, Okhla, New Delhi
Consideration: ₹12 lakh
Result: Appeal allowed; rejection of plaint set aside; specific performance suit restored; plaintiffs directed to deposit ₹59,950 deficit stamp duty and ₹5,99,500 penalty before proceeding.
