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Property registration and agreement for sale

(Querist) 29 April 2018 This query is : Resolved 
I had sent a message on the above topic on 27 th April.
Could an expert please advise.
Thank you.
KISHAN DUTT RETD JUDGE (Expert) 29 April 2018
Dear Sir,
The law relating to Sale agreement is as follows:

wherever the agreement holder is not in possession of the property under agreement of sale, even though there is a recital in the agreement as to delivery of possession, he need not pay proper stamp duty as required. It shall be treated as a simple agreement of sale falling outside the scope of Explanation I to Article 47-A of Schedule I of the Indian Stamp Act.
posted 26 Mar 2011, 06:55 by advocatemmmohan Mandagaddi murali mohan
"followed by or evidencing delivery of possession". These
expressions cannot be read in isolation and one has to find the true meaning by
reading the entire Explanation and more so in conjunction with the earlier
expression i.e., "agreement". Even if these two expressions are looked
independently, it means an agreement to sell followed by delivery of possession
and an agreement to sell evidencing delivery of possession. In the first case,
i.e., "followed by delivery", possession cannot be disjuncted from the basic
source i.e., agreement to sell. Therefore, the expression followed by delivery
of possession should have a direct nexus to the agreement and should be read in
juxtaposition to the word 'agreement' and it cannot be independent or outside
the agreement. Therefore, the delivery of possession should follow the agreement
i.e., through the agreement. It takes in its sweep the recital in the agreement
itself that delivery of possession is being handed over. It will also cover
cases of delivery of possession contemporaneous with the execution of agreement,
even if there is no specific recital in the agreement. In other words, the
delivery of possession should be intimately and inextricably connected with the
agreement. And in the second type, i.e., agreements evidencing delivery of
possession, if the document contains evidence of delivery of possession by a
recital in that behalf, that is sufficient. Such delivery of possession can be
prior to the date of agreement and need not be under the agreement. If the
Agreement records the fact that the possession was delivered earlier and such
recital serves as evidence of delivery of possession, though prior to the
Agreement, it falls under the second limb. Therefore, on a proper interpretation
of the said expressions, it would follow that an agreement containing specific
recital of delivery of possession or indicating delivery of possession even in
the past is liable for stamp duty as a 'sale' under the said Explanation.
wherever the agreement holder is not
in possession of the property under agreement of sale, even though there is a
recital in the agreement as to delivery of possession, he need not pay proper
stamp duty as required. It shall be treated as a simple agreement of sale
falling outside the scope of Explanation I to Article 47-A of Schedule I of the
Indian Stamp Act. Various situations may arise for consideration on this aspect.
The purpose of the Act is to see that a person, who is in physical possession
and enjoyment shall not avoid to pay proper stamp duty as required under
Explanation I to Article 47-A of the Stamp Act. Otherwise, the document shall
not be admissible in evidence as required under Section 35 of the Stamp Act.
For the above reasons, impugned order dated 14.6.2007 passed by the trial Court
is liable to be set aside and is accordingly set aside and the document -
agreement of sale - is ordered to be admitted in evidence.

Civil Revision Petition No. 3337 of 2007


B. Bhaskar Reddy

Bommireddy Pattabhi Rami Reddy (died)
Per L.Rs., and others.

Counsel for petitioner: Sri M. Ravindranath Reddy

Counsel for Respondents: Sri M.V. Suresh Kumar


Sale Agreement – Flat/Apartment– ESSENTIAL CLAUSES
Property Sale Agreement is most important document. It is different from Sale Deed though in some cases Sale Agreement is registered as Sale Deed. Sale agreement contain agreed upon Terms & Conditions between Seller & Buyer for the sale of property. It is legally binding on both the parties. It also specifies the date by which the transaction will be completed. In laymen terms, Sale agreement is a road map how the property transaction will be completed. On the other hand Sale deed is executed at the time of actual transfer of property i.e. transfer of ownership from seller to buyer.
In any property transaction, maximum risk is carried by the borrower. Even experts will agree that all property transactions carry certain degree of risk. From buyers perspective, It is very critical to safeguard your interests before signing below the dotted line. I am listing down 5 most critical clause, which should be incorporated in Property Sale Agreement to safeguard the Buyer’s Interest.
Indemnity Clause in Sale Agreement
Due to sudden rise in property/land prices specially in metro cities, lot of properties are under legal litigation. These legal cases go on for decades. Some of the most common reasons for legal disputes are
(a) Property was transferred under force/influence/coercion
(b) Legal heirs of Seller claim their right on property.
Almost 40% properties in bangalore are under legal dispute. The indemnity clause in Sale Agreement indemnifies the buyer against any legal dispute / legal defect in the property. Also mention that in case of any legal dispute in future, the seller will compensate the buyer for any loss incurred by the buyer at the then prevailing market rate. This clause should be drafted carefully & should include all possible scenarios.
Penalty Clause
At the time of signing Sale Agreement, Buyer pay X amount as token money. Standard clause is put in agreement that if buyer will back out from the deal then entire token amount will be forfeited by seller. I would suggest to add another line in this clause that in case seller will back out from deal then Seller will return the token amount paid by buyer along with equivalent amount as penalty. If this clause is not put then seller will keep searching for new buyer who can pay extra. He will call off the deal, if he gets new buyer at higher rate before execution of Sale Deed.
Right to Call off the deal
As a buyer you should reserve the right to call off the deal under certain circumstances without being penalized financially. Some of these circumstances are as follows
(a) If Seller fails to provide legal/statuatory property documents required by the Buyer
(b) If the Buyer find out any legal defect in property before execution of sale deed
(c) If Buyer’s home loan is rejected by bank due to some legal/statutory issue in property/property documents
(d) If the seller fail to provide all original documents at the time of execution of sale deed. You may check my post on List of Documents required for Property Purchase
(e) If the seller fail to provide vacant possession of property at the time of execution of sale deed.
Outstanding Dues
It is critical to mention in Sale Agreement that Seller will clear all the dues accrued in respect of the property prior to the date of registration.
Transfer of Deposits / Membership of Owner’s Association
The clause should clearly mention that scope of agreement also include transfer of all deposits paid by seller for Electricity connection, Water connection, to apartment owners association, Club house membership, Gym Membership, contribution towards sinking fund of association etc . In the absence of this clause, the seller might demand extra money at the time of sale deed against all the deposits paid by him.
I have listed down 5 important clause which must be included in sale agreement. These are over and above the standard Sale Agreement clauses. It is always advisable to hire good property lawyer to draft Sale Agreement & Absolute Sale Deed. If you need any specific input from my end on these clauses then you may post your query through following comments section.

N.Balasubramanyam (Querist) 29 April 2018
Dear Judge Kishan Dutt,
Thank you for your very elaborate answer to my query and appreciate your guidance on the issue.

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