No executed contract can be cancelled unilaterally by one party

No executed contract can be cancelled unilaterally by one party unless the right is reserved in the contract,

A property was sold for Rs 14 lakh and the sale deed was registered in July 2006.

The sale was effected by the Power of Attorney holder on behalf of the owners of the property.

Subsequently, the power holder without the knowledge and consent of the buyer executed a "Cancellation Deed" and nullified the sale. The property was then sold to another person and registered.

The first buyer of the property (who had the sale deed executed in July 2006) approached the court for relief and prayed to quash the sale of the property to a new buyer(G.D.Subramaniam vs.

The Sub Registrar, Office of Konur Sub Registrar, Sidco Nagar, Chennai-49 and others). The power holder contended that since the petitioner did not keep up his promise to pay the sale consideration, the Cancellation Deed was executed.

The Court after hearing the arguments observed that ` complaints, in plenty, flood the police stations in the State of Tamil Nadu very often, in recent times, alleging that, unscrupulous sellers and land grabbers, indulge in nullifying the valid sale made by means of registered sale deeds, by executing cancellation deeds unilaterally and getting the same registered in an ingenious way.

The modus operandi is, this court is informed, that unscrupulous elements like land grabbers approach the former owners of properties, practise a kind of deception by paying paltry amounts, induce them to execute cancellation deeds without the knowledge and consent of the purchasers and then to execute fresh sale deeds in their favour. It is, indeed, a fraud.’

The Court observed that a sale is essentially an executed contract, whereby the seller has transferred his title and declared that by means of the execution of the sale deed for lawful consideration, the purchaser has become the owner . This makes it bilateral. Hence, the Court pronounced, it cannot be cancelled unilaterally by one party, unless such a right has been reserved in the contract itself.

There is no specific provision for cancellation of a sale in the Transfer Of Property Act. The next question the court took up was regarding the registration of such unilateral contract, whether such a cancellation deed, executed unilaterally by one party could be registered by the Registering officer despite the fact that the said document is void or illegal and that the document has not been duly executed as per law.

The court observed that “at the first blush, on going through Sections 34 and Rule 55 [Registration Act], one can have an impression that it is none of the duty of the Registering Officer to find out the validity of the document before proceeding to register the same.

But, indeed, it is not so. Section 34 and Rule 55 speak of the limitations on the powers of the Registering Officer to hold an enquiry, which would only mean that the Registering Officer is not required to hold a roving enquiry to decide the validity of a document presented for registration. On the other hand, if, by simply glancing through the document, without there being any necessity to hold any enquiry, the Registering Officer is satisfied that the document is either void ab initio or illegal, in such a situation, it cannot be said at any stretch of imagination, that the Registering Officer has to blindly register the said document. Such kind of construction of Section 34 and Rule 55 would only defeat the very object of the Act and the public interest.”

In conclusion the court held

(i) Challenging registration of a unilaterally executed deed of cancellation of a sale, a writ petition is maintainable under Article 226 of the Constitution

(ii) A deed of cancellation of a sale executed by mutual consent by all parties to the sale deed, if presented for registration, the registering Officer is bound to register the same provided the other requirements like Section 32-A of the Registration Act have been complied with.

(iii) The Registering Officer is obliged legally to reject and to refuse to register a deed of cancellation of a sale unilaterally executed without the knowledge and consent of other parties to the sale deed and without complying with sec.32A of the Registration Act.

Finally the court allowed the writ petition.

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