“Deed of cancellation of a sale unilaterally executed of no effect”

Proper course will be to reconvey property by a deed of conveyance: Bench

The Madras High Court has held that a deed of cancellation of a sale unilaterally executed by the transferor does not create, assign, limit or extinguish any right, title or interest in the property and is of no effect.

A Full Bench comprising the Chief Justice M.Y. Eqbal, and Justices P. Jyothimani and T.S. Sivagnanam, in its judgment on two appeals, said such a document did not create any encumbrance in the property already transferred.

Hence, such a deed of cancellation could not be accepted for registration.

Originally, Syeda Aamina Raheem filed a writ petition challenging the registration of a unilaterally executed cancellation of a sale deed. She said she purchased 2500 sq.feet land at Kakkalur village, Tiruvallur district. A sale deed was registered in November 1996. She claimed that she paid the entire sale consideration and she was in possession of the property. However, Latif Estate Line India Ltd., Kilpauk, unilaterally executed the cancellation deed in August 2007 which was also registered.

The same was the case of Hadeeja Ammal in respect of a property measuring 3010 sq.feet at Thirumullaivoyal near here.

The company denied the allegation. It stated that the writ petitioners were not in possession of the property. It continued to be in possession of the same.

A single Judge in February 2009 held that the cancellation deed had been executed unilaterally by the company without the knowledge and consent of the petitioners and without complying with Section 32-A of the Registration Act. He allowed the writ petitions.

Against this, appeals were filed. A Division Bench doubting the correctness of a judgment in 2008 followed by the single Judge, referred the present appeals to a Full Bench.

The Full Bench concluded that once a title to the property was vested in the transferee by the sale of the property, it could not be divested unto the transferor by a cancellation deed even with the consent of the parties. The proper course would be to reconvey the property by a deed of conveyance by the transferee in favour of the transferor.

Where a transfer was effected by way of sale with the condition that title would pass on payment of consideration, and such intention was clear from the recital in the deed, then such sale could be cancelled with the consent of both the parties on the ground of non-payment of consideration. The reason was that in such a sale deed, admittedly, the title remained with the transferor.

In other cases, a complete and absolute sale could be cancelled at the instance of the transferor only by taking recourse to the civil court by obtaining a decree of cancellation of sale deed on the ground inter alia of fraud or any other valid reason.

The Bench referred the appeals back to the court concerned for deciding the case on merits.