A very common belief in property transactions is this: if the buyer has not paid the full sale consideration, the seller can get the sale deed cancelled. The Hon'ble Supreme Court has categorically rejected this position. A registered sale deed, once executed, transfers title to the buyer — and the seller's remedy for non-payment of the balance is a suit for money recovery, not cancellation of the deed.
What the Court Held
When a sale deed is registered, even upon part payment of the sale price, title passes to the transferee. The non-payment of the remaining part of the sale consideration does not invalidate the sale deed. The only remedy available to a seller who has not received the full payment is to file a money suit for recovery of the balance consideration — not to seek cancellation of the deed as if the transaction never happened.
The Court set aside a High Court judgment that had interfered with concurrent findings of the trial court and First Appellate Court, both of which had correctly approved execution of a sale deed upon part payment. The High Court had erred in treating non-payment of balance as a ground for invalidating the transfer itself.
Why This Matters for Property Transactions
This ruling has significant implications for both buyers and sellers:
- For sellers: once you execute and register a sale deed, title transfers. Ensure you receive full or sufficient payment before registration — because getting a deed cancelled after registration is not available merely because the buyer hasn't paid.
- For buyers: if a seller attempts to cancel a registered sale deed citing non-payment of balance, this ruling is a complete answer. The deed is valid. The seller must sue for recovery of money, not nullification of the transaction.
- For lenders and banks: a registered sale deed creates clear title in the buyer — and that title cannot be undone by a seller's claim of unpaid consideration. This affects loan security documentation.
It is a well settled principle of law that when a sale deed is registered, even upon part payment of the sale price, title passes to the transferee. Non-payment of the remaining consideration does not invalidate the deed. The remedy is recovery of the balance consideration — not cancellation of the deed.
Practical Guidance
Before registering: ensure you have received adequate payment. Once a sale deed is registered, your rights as seller are limited to recovery of the unpaid amount.
If you are a buyer whose seller is trying to cancel a registered deed: challenge the cancellation. A registered sale deed is not voidable merely because consideration is unpaid.
Sellers who haven't received full payment must file a money recovery suit within the limitation period — three years from when the payment fell due.
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