The Supreme Court on September 2, 2019, in the case of Prakash Sahu v. Saulal & Ors. has upheld a Trial Court order holding that an unregistered agreement of sale can be seen for collateral purposes under the proviso to Section 49 of the Registration Act, 1908.
The Bench comprising of Justice Navin Sinha and Justice B.R. Gavai passed the order while hearing an appeal against the Madhya Pradesh High Court decision that had set aside the Trial Court order, referring to the judgment in Avinash Kumar Chauhan v. Vijay Krishna Mishra.
The court noted that the Trial Court had allowed the plaintiff to lead evidence on insufficiently stamped unregistered agreement of sale by referring to the judgment in S. Kaladevi v. V.R. Somasundaram. In the said judgment it was held as follows:
- “A document required to be registered, if unregistered is not admissible into evidence under Section 49 of the Registration Act.
- 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.
- A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.
- 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 immovable property of the value of one hundred rupees and upwards.
- 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.
- A document required to be registered, if unregistered, can be admitted in evidence as evidence of a contract in a suit for specific performance.”
The Bench observed that the High Court failed to consider the aforesaid while holding that the unregistered document could not be taken into consideration for collateral purposes.
Thus, the court allowed the appeal to set aside the order passed by the High Court and to restore the decision of the Trial Court.