A gifts a house property to his sister B, in 1986, through an unregistered but properly stamped Gift deed, with a stipulation that neither he nor his descendants would have any right title and interest over the property. The deed also states that whenever demanded by B or her descendants A or his legal heirs would make good her title.B accepts the gift. Both A and B have passed away. The legal heirs of B with an intention to perfect their title call upon the legal heirs of A to register the property to their name. The legal heirs of A deny the transaction between A and B.
Does an unregistered gift deed confer any title on the Donee B and her legal heirs?
If not, what is the remedy available to the legal heirs of B and what is the value of the unregistered Gift Deed in the eyes of law.
Provisions of Law
Section 122 of the Transfer of Property Act (T.P. Act) defines the term Gift and lists out the ingredients of a valid gift. Section 123 of the same Act makes it mandatory that the transfer of property through gift deed be through a registered instrument signed by or on behalf of the donor and signed by two independent witnesses.
Section 17 of the Registration Act lists out the documents which are compulsorily registrable, of which the Gift deed is the first in the list.
Section 49 of the Registration Act stipulates the effect of non-registration of documents required to be registered. No document required by section 17 [or by any provision of the Transfer of Property Act, 1882 to be registered shall:
(a) affect any immovable property comprised therein, or
(b) confer any power to adopt, or
(c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: [Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance.
It is imperative to delve deep into the meaning of the term collateral purpose, lest it should be misinterpreted to mean and create effects, which are possible only by means of a duly registered document.
In Sailesh Chandra vs. Bireshwar Chatterjee, "An agreement if unregistered will not be admissible as a lease although a statement in it may be admitted as an admission. When such a statement is admitted as an admission, it is only a piece of evidence and it is open to the party who has made the admission to show that it was made in circumstances which did not make the admission binding on him or on her as the case may be.
In Ratan Lal and Ors. vs. Harisankar and Ors. it was observed that collateral purpose has a limited scope and meaning and it cannot be used for the purpose of saying that the deed created or declared or assigned or limited or extinguish the right to immovable property.
In Balakishtaiah vs. B.Ranga Reddi it was said that there is also sufficient authority for the proposition that an unregistered document can be admitted in evidence for the purpose of proving the admission contained therein.
However, in Raghunath and Ors. vs. Kedar Nath it was held that has made it clear that the documents in the supplemental list i.e. the documents of which registration is necessary under the Transfer of Property Act but not under the Registration Act fall within the scope of section 49 of the Registration Act and if not registered are not admissible as evidence of any transaction affecting any immovable property comprised therein, and do not affect any such immovable property.
In Rana Vidya Bhushan Singh vs. Ratiram  it was held that "A document
required by law to be registered, if unregistered, is inadmissible as evidence of a transaction affecting immovable property, but it may be admitted as evidence of collateral facts, or for any collateral purpose, that is for any purpose other than that of creating, declaring, assigning, limiting or extinguishing a right to immovable property.
In Bhaskar Rao vs. T. Gabriel and Ors, it was held that“it is now well settled that there is no prohibition under Section 49 of the Registration Act, to receive an unregistered document in evidence for collateral purpose. But the document so tendered should be duly stamped or should comply with the requirements of Section 35 of the Stamp Act, if not stamped, as a document cannot be received in evidence even for collateral purpose unless it is duly stamped or duty and penalty are paid under Section 35 of the Stamp Act. It is, therefore, clear that an unregistered document which satisfies the requirements of Section 35 of the Stamp Act, can be tendered in evidence for a collateral purpose, namely, for proving possession.
In P.M. Anand Babu And Ors. vs. Mir Akbar Ali Khan And Anr, the A.P. High Court has held that the collateral purpose is to say for any purpose other than that of creating, declaring, assigning limit, or extinguishing a right to immovable property. The expression "collateral purpose" is no doubt a very vague one and the Court must decide in each case whether the purpose for which it is sought to use the unregistered document is really a collateral one or is to establish directly title to the immovable property sought to be conveyed by the document. But by the simple devise of calling it a "collateral purpose", a party cannot use the unregistered document in any legal proceedings to bring about indirectly the effect of which it would have had if reregistered. The expression "collateral transaction" in the proviso to Section 49 of Registration Act is not to be used in the sense of an ancillary or a subsidiary transaction to a main or principal transaction. The transaction as recorded could be a particular or specific transaction, but it would be possible to read in that transaction what may be called the purpose of transaction and what may be called a collateral purpose, the fulfillment of that collateral purpose would bring into existence a collateral transaction, a transaction which may be said to be a part and parcel of a transaction but nonetheless a transaction which runs together with or on parallel lines with the same. In the same case a mention was made of Section 17(1) of the Registration Act that any document by whatever name called not creating, declaring, assigning, limiting or extinguishing any right, title or interest, but merely creating right to obtain another document does not require registration under Section 17(1) of the Registration Act. The same position of law was reiterated in DadiReddi Sivanarayana Reddi v. Kasi Reddy Chinnamma.
In K.B. Saha and Sons Pvt. Ltd. vs. Development Consultant Ltd, it was held by the Hon’ble Supreme Court that “from the principles laid down in the various decisions of this Court and the High Courts, as referred to hereinabove, it is evident that: -
1. A document required to be registered is not admissible into evidence under Section 49 of the Registration Act.
2. Such unregistered document can however be used as an evidence of collateral purpose as provided in the Proviso to Section 49 of the Registration Act.
3. A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.
4. A collateral transaction must be a transaction not itself required to be effected by a registered document, that is, a transaction creating, etc. any right, title or interest in immoveable property of the value of one hundred rupees and upwards.
5. If a document is inadmissible in evidence for want of registration, none of its terms can be admitted in evidence and that to use a document for the purpose of proving an important clause would not be using it as a collateral purpose”.
In T.S. Kaladevi vs. V.R. Somasundaram and Ors,the Hon’ble Supreme Court of India has held that in addition to the principles laid down in K.B.Shah’s case mentioned above “one more principle may be added, namely, that a document required to be registered, if unregistered, can be admitted in evidence as evidence of a contract in a suit for specific performance”.
In SMS Tea Estates Pvt. Ltd. vs. Chandmari Tea Company Pvt. Ltd, the evidentiary value of the unregistered document and the nature of collateral purpose for which it can be put touse was once again reiterated by the Supreme Court.
In M/s Jiwan Industries (P) Ltd. v. Smt. Kamlesh Rani Budhirajait was held that“an unregistered lease deed can be looked into only for collateral purpose and collateral purpose cannot be interpreted to include therein the terms and conditions by which parties are related to each other as landlord and tenant. Collateral purpose basically is to show the nature of possession i.e. tenant has not illegally entered into possession but has legally entered into possession. All other terms and conditions between the landlord and tenant as stated in the registered lease deed whether it be for the period of lease, or the rate of rent or area of tenancy or other terms and conditions, the same cannot be looked into in view of the specific bar of Section 49 of the Registration Act.”
In the wake of the provisions of law and the decisions of the Supreme Court and various High Courts as mentioned above, the deed mentioned in the illustrative case is a Gift deed, which is compulsorily registrable. An unregistered deed doesn’t pass the title to the Donee or his/her legal heirs. Now the next aspect that needs to be taken into account is whether the done was in possession of the property after the execution of the gift deed. If in the affirmative, the unregistered gift deed can be used to prove the factum of the occurrence of the transaction though not the transaction or the ingredients of the transaction itself. In other words, if the Donee or her legal heirs are in possession of the property, in a suit for eviction by the Donor or his legal heirs, the unregistered Gift deed can be used as evidence to prove as to how the legal heirs of B were in the possession of the property. The unregistered Gift deed serves the limited purpose of being of evidentiary value or for collateral purpose but cant be used to prove the contents/validity of the transaction or to vest any right title and interest in an immovable property, which can be vested only through a properly stamped registered deed. Only through a properly stamped and registered deed executed by the legal heirs of A can the house property be validly transferred to the legal heirs of B. The other option available to them is to raise the contention of adverse possession, if they are continuously in possession of the house property.
AIR 1930 Cal 559
AIR 1980 All 180
3AIR 1960 AP 112
4AIR 1969 SC 1316
5[1969 (1) UJ 86 (SC)]
6AIR 1981 AP 175
7AIR 2004 AP 243
8 2001 (1) ALD 349
9 (2008) 8 SCC 564
10(2010) 5 SCC 401
11 (2011) 14 SCC 66