The Supreme Court recently upheld a Trial Court order allowing the plaintiff to lead evidence on insufficiently stamped unregistered agreement of sale in his suit for recovery of earnest money said to be paid by him at the time executing the agreement for sale.

The issue before the Apex Court was whether an unregistered agreement of sale can be seen for collateral purposes under the proviso to Section 49 of the Registration Act, 1908. The bench was considering the appeal against the Madhya Pradesh High Court order that had set aside the Trial Court order, referring to the judgment in Avinash Kumar Chauhan v. Vijay Krishna Mishra.

The bench comprising Justice Navin Sinha and Justice BR Gavai, in Prakash Sahu vs. Saulal, noted that the Trial Court had referred to the judgment in S. Kaladevi vs. V.R. Somasundaram to allow the plaintiff to lead evidence on insufficiently stamped document. 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. 

While setting aside the High Court order, the bench observed: The High Court failed to consider the aforesaid while holding that the unregistered document could not be taken into consideration for collateral purposes.

Click here to Read/Download Order