2026 (3) TMI 1081 - AT - IBC

Unregistered agreements for sale do not create transferable title; such assets remain in the bankruptcy estate for trustee administration and auction.

Unregistered agreements for sale do not create a present transferable title; registration is mandatory for immovable property transfers and an ... Unregistered agreement for sale - Validity of title or admissible evidence of title - immovable property - failure to execute sale deed and institute suit for specific performance within limitation - bankruptcy estate inclusion - delivery to bankruptcy trustee - title transfer. Whether the unregistered agreements for sale constituted a right capable of excluding the specified immovable property from the bankruptcy estate - HELD THAT: - It is settled principle of law which needs no detailed and specific reference, that in the light of the provisions contained under Section 17, to be read with Section 49 of the Registration Act, an unregistered document in relation to an immovable property, the registration of which has been made mandatory under law, will not be conferring any valid title on the Appellant, and furthermore, it cannot be even read in evidence for any purposes whatsoever in any judicial proceedings as there is no fructified transfer of title of the subject asset to the Appellant, who is only a holder of an Agreement for Sale which is only a proposal or a settlement between the two contracting the parties and that too having being executed in 2017, for which, the Sale Deed has not yet been executed. Hence, the presumption under law would be that the said Asset property still continues to be the property of the Bankrupt, as there has been no valid conveyance. The Tribunal found that the two agreements for sale, though admitted to exist and acknowledged by the bankrupt, were unregistered documents in relation to immovable property and therefore did not effectuate a valid transfer of title. Clause 20 of the agreement required institution of a suit for specific performance to obtain enforceable conveyance; no sale deed had been executed and no suit for specific performance had been prosecuted. Applying the principles under Section 17 read with Section 49 of the Registration Act, an unregistered document in respect of property requiring compulsory registration cannot confer title or be relied upon as evidence of a perfected transfer, and hence the property remained vested in the bankrupt and within the bankruptcy estate (paras 15-18). [Paras 15, 16, 17, 18] The unregistered agreements for sale did not confer title and the immovable property continued to form part of the bankrupt's estate. Limitation - No exception could be carved out in the instant Appeal in the light of the Column 3 of Article 54 of the Limitation Act because, the period of limitation for filing of a Suit for specific performance cannot be permitted to be extended for an indefinite period owing to an in-action on part of the Appellant himself. Hence, in the light of the provisions contained under Section 27 of the Limitation Act, “the in-action on part of the Appellant itself extinguishes his right over the property covered by the agreement for sale which has been sought to be excluded from the list of Bankruptcy Estate by filing of the Application being IA (IBC) No. 936 / 2025 which has been rejected by the Ld. Tribunal”. Owing to the fact, that on the basis of the alleged Agreement for Sale there is no valid right has been conferred and conveyed to the Appellant, and that, in the absence of a registered document having been executed in their favour within the prescribed period of limitation under law, the title of the property would be deemed to be continued to be vested with the Bankrupt for which, the proceedings of Bankruptcy has already been drawn, and at this stage, the same cannot be permitted to be excluded from the Bankruptcy Estate. Final Conclusion: The Tribunal dismissed the appeal and upheld the decision that the unregistered agreements did not vest title in the appellant, the contractual claim was time barred, and the assets remained part of the bankrupt's estate subject to the bankruptcy trustee's administration; the interlocutory application was accordingly rejected. Issues: Whether the immovable property and shares subject to unregistered agreements for sale dated 29.12.2017 and 16.06.2017 can be excluded from the bankruptcy estate and from administration/auction by the bankruptcy trustee under Section 60(5) of the Insolvency and Bankruptcy Code, 2016.Analysis: The agreements for sale are admitted to exist but are unregistered and no sale deed has been executed nor has any suit for specific performance been instituted as required by Clause 20 of the agreement for sale. Section 17 of the Registration Act renders registration mandatory for transfer of immovable property and an unregistered document does not confer title or admissible evidence of title. Article 54 of the Limitation Act prescribes a three year limitation for suits for specific performance, and by application of Section 27 of the Limitation Act the claim is extinguished by inaction. Sections 155 and 156 of the Insolvency and Bankruptcy Code, 2016 govern the contents of the bankrupt's estate and delivery of property to the bankruptcy trustee, supporting inclusion of assets that remain vested in the bankrupt at commencement of bankruptcy proceedings. The shares were also subject to third-party pledge and contractual provisions acknowledged the need for release of pledge and demat unfreezing before transfer, further undermining any present proprietary right in the applicant.Conclusion: The immovable property and shares under the unregistered agreements do not confer valid transferable title in favour of the applicant and therefore cannot be excluded from the bankrupt's estate; the appeal seeking exclusion is dismissed and the assets remain within the bankruptcy estate for administration and auction by the bankruptcy trustee.