Author: Kanak Chaudhary, Christ (deemed to be) University, Bangalore

Introduction

Property disputes in India often arise due to unclear transactions, particularly those involving unregistered agreements to sell. The case of Ghanshyam vs. Yogendra Rathi, decided by the Supreme Court of India on June 2, 2023, highlights the complexities surrounding ownership rights, possession, and the validity of property transfer documents. The case primarily dealt with whether an agreement to sell, accompanied by a General Power of Attorney (GPA), a Will, and a possession memo, could be considered a valid transfer of ownership. It also examined whether the buyer, who had taken possession of the property after full payment, could legally protect his possession under Section 53A of the Transfer of Property Act, 1882. The Court’s decision has far-reaching implications for real estate transactions and reinforces the importance of registered sale deeds in property transfers.

Background and Facts of the Case

The dispute began in April 2002 when Ghanshyam, the owner of a property, entered into an agreement to sell the property to Yogendra Rathi for a mutually agreed price. As part of the transaction, Ghanshyam executed a General Power of Attorney (GPA), a possession memo, a receipt confirming full payment, and a Will in favour of Yogendra. Based on these documents, Yogendra took physical possession of the property.

However, soon after the transaction, Ghanshyam requested to continue living in a portion of the property for three months, stating that he needed time to arrange for an alternative residence. Yogendra agreed to this as an act of goodwill. Unfortunately, at the end of the three-month period, Ghanshyam refused to vacate the property. Despite multiple requests and a formal notice issued on February 18, 2003, Ghanshyam continued occupying a part of the premises. This left Yogendra with no option but to file a suit for eviction and mesne profits (compensation for unauthorized occupation).

The plaintiff filed a suit seeking the eviction of the defendants from the disputed property and claimed mesne profits for their unauthorized occupation. According to the plaintiff, he became the rightful owner of the property through an agreement to sell, a General Power of Attorney (GPA), a memo of possession, a receipt confirming full payment of the sale consideration, and a Will executed by the defendant-appellant, which bequeathed the property to him. As per the plaintiff’s claim, he was given possession of the property, but out of goodwill, he permitted the defendant to temporarily occupy a portion of it as a licensee, with the understanding that the arrangement would end on February 18, 2003. However, the defendant refused to vacate after this period, leading to the legal dispute. The appeal before the Court primarily focused on the key legal question: Do these documents, namely, the power of attorney, the Will, the agreement to sell, the possession memo, and the receipt of payment, confer ownership rights upon the plaintiff, thereby entitling him to claim eviction and mesne profits? The case thus presented a crucial opportunity for the Court to examine the legal standing of such property transactions and their enforceability.

Key Legal Issues

The case presented three crucial legal questions:

1. Does an unregistered agreement to sell, along with a GPA and a Will, amount to a valid transfer of ownership?
2. Can the buyer (Yogendra) claim protection of possession under Section 53A of the Transfer of Property Act, 1882?
3. Was Ghanshyam’s continued occupation after the agreed period unlawful, and was Yogendra entitled to seek eviction and mesne profits?
4. Whether the documents namely the power of attorney, the will, the agreement to sell coupled with possession memo and the receipt of payment of sale consideration, would confer any title upon the plaintiff-respondent?

Court’s Legal Reasoning and Analysis

1. Ownership and Validity of the Agreement to Sell

One of the biggest misconceptions in Indian real estate transactions is that an agreement to sell, combined with a General Power of Attorney (GPA) and a Will, amounts to ownership transfer. The Supreme Court firmly rejected this notion, stating that under Section 54 of the Transfer of Property Act, 1882, an agreement to sell does not transfer ownership rights unless it is followed by a registered sale deed. The Court emphasized that ownership of immovable property cannot pass through a mere agreement, even if supported by a GPA and a Will.

The Court referred to the landmark case Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana (2011), which held that GPA-based sales were not legally valid transactions. The practice of transferring property through unregistered documents has led to multiple legal disputes and tax evasion, prompting courts to take a strict stance. Therefore, despite the execution of an agreement to sell, Ghanshyam remained the legal owner of the property in the absence of a registered sale deed.

2. Protection Under Section 53A of the Transfer of Property Act, 1882

While the Court ruled that Yogendra was not the legal owner, it acknowledged that he had paid the full consideration amount and had taken possession of the property in good faith. Under Section 53A of the Transfer of Property Act, if a buyer takes possession under an agreement to sell and fulfils all contractual obligations, the seller cannot dispossess him or claim the property back unfairly.

The doctrine of part performance, as outlined in Section 53A, serves as a shield to protect the rights of the transferee (buyer) when:

• The buyer has acted in reliance on the agreement,
• The buyer has taken possession and fulfilled his part of the contract,
• The seller tries to take back the property unfairly.

Therefore, while Yogendra did not become the legal owner, his possession was protected under Section 53A. This meant that Ghanshyam could not evict Yogendra or reclaim the property unless he executed a proper sale deed in favour of Yogendra.

3. Unlawful Occupation & Right to Mesne Profits

Another crucial aspect of the case was Ghanshyam’s continued occupation of a portion of the property beyond the agreed three-month period. The Court observed that while Ghanshyam was initially staying there as a licensee (with permission), once the three months expired, his occupation became unauthorized.

Since Yogendra had given, him notice to vacate and he refused to leave, Ghanshyam’s possession turned into trespassing. The Court ruled that:

• Ghanshyam had to vacate the property immediately.
• Yogendra was entitled to mesne profits (compensation) for the period of unauthorized occupation.

This decision reinforced that a licensee (temporary occupant) cannot continue to stay indefinitely once the agreed period ends.

Observation

The plaintiff brought a suit against the defendants, seeking their eviction from the disputed property and claiming mesne profits for its unauthorized occupation. He argued that he became the rightful owner through a combination of documents, including an agreement to sell, a General Power of Attorney (GPA), a memo of possession, a receipt confirming full payment of the sale consideration, and a Will executed by the defendant, which bequeathed the property to him. The plaintiff asserted that he was given possession of the property but, as an act of goodwill, allowed the defendant to stay in a portion of it as a licensee, with the understanding that the arrangement would end on February 18, 2003. However, when the defendant refused to vacate after this period, the dispute escalated into a legal battle. The core issue before the Court was whether these documents, individually or collectively, conferred legal ownership upon the plaintiff, entitling him to seek eviction and mesne profits. The case, therefore, raised important questions about the enforceability of such property transactions and the extent to which unregistered agreements and powers of attorney could establish ownership rights.

Conclusion

The Supreme Court’s ruling in Ghanshyam vs. Yogendra Rathi serves as a landmark judgment clarifying property laws in India. The key takeaways from this case are:

1. Ownership in immovable property cannot be transferred through an unregistered agreement to sell, GPA, or Will. A proper registered sale deed is mandatory under Section 54 of the Transfer of Property Act.
2. Buyers who have taken possession under an agreement to sell and fulfilled their obligations can protect their possession under Section 53A. While they may not have legal ownership, they have protectable possessory rights.
3. A seller who overstays beyond an agreed period of occupation loses any right to remain in the property and can be evicted. If they continue to stay unlawfully, they are liable to pay mesne profits for their unauthorized occupation.

This case highlights the importance of proper documentation in real estate transactions. Many buyers and sellers rely on agreements to sell and GPAs, believing them to be sufficient. However, this judgment reiterates that a sale deed is the only legally recognized instrument for ownership transfer.

For future property buyers, this case serves as a cautionary lesson: always insist on a properly registered sale deed and avoid relying solely on agreements to sell and power of attorney documents. Real estate transactions should be conducted with transparency and legal compliance to avoid unnecessary litigation.

This ruling is a strong precedent for property disputes across India and reinforces the principles of fair possession, ownership transfer, and protection of buyer rights under Indian property law.