Unregistered JDA & Exchange Agreements Are 'Void Ab Initio', Cannot Convey Property Title: Karnataka High Court - 2025-09-25

Unregistered Development Agreements Inadmissible for Conveying Title, Holds Karnataka High Court

Court orders return of title deeds to original owners, dismissing Official Liquidator's claim based on unstamped and unregistered agreements.

Bengaluru: The Karnataka High Court, in a significant ruling on property law, has held that unregistered and unstamped documents like Joint Development Agreements (JDAs) and Exchange Agreements are "void ab initio" and cannot be used to convey any right, title, or interest in an immovable property. Justice E.S. Indiresh allowed a plea by the legal heirs of a property owner, directing the Official Liquidator of a company in liquidation to return the original title deeds of a prime property in Mysuru.

The court underscored that merely marking such legally inadmissible documents as exhibits during a trial does not cure their inherent defects or grant them legal validity.

Background of the Dispute

The case involved two competing applications concerning a property on Temple Road, Mysuru. The first (CA No.326/2021) was filed by the children of late P.M. Channabasavanna, the original property owner. They sought the return of their property's title deeds from the Official Liquidator (OL) of M/s. Kirloskar Investment and Finance Ltd. (KIFL).

The second application (CA No.419/2022) was filed by the OL, requesting the court to direct the heirs to cooperate in changing the revenue records to reflect KIFL as the owner, to enable the sale of the property to pay off the company's creditors.

The dispute originated from a Joint Development Agreement signed in 1997 between the applicants' parents and KIFL. The company failed to complete the project, leading the owners to issue a termination notice in 1999. Subsequently, an unregistered "Exchange Agreement" was executed in 2001, wherein the heirs received a payment of ₹74.33 lakhs and were offered flats in an alternate location. KIFL was later ordered to be wound up by the court in 2010.

Key Arguments

Arguments of the Heirs (Applicants): Senior Advocate Sri. B.K. Sampath Kumar, representing the heirs, argued that: * The JDA and the Exchange Agreement were compulsorily registrable under Section 17 of the Registration Act as they purported to transfer an interest in immovable property. * Since both documents were unregistered and unstamped, they were inadmissible in evidence under Section 49 of the Registration Act. * The original JDA was terminated due to non-performance by KIFL, and the subsequent arrangements never legally transferred title. * Mere marking of these documents as exhibits in court does not override the statutory bar on their admissibility. The heirs also undertook to refund the ₹74.33 lakhs received by them.

Arguments of the Official Liquidator: Miss. Krutika Raghavan, counsel for the OL, contended that: * The heirs had benefited from the Exchange Agreement by receiving monetary consideration and an offer of alternate flats, thereby relinquishing their rights to the Mysuru property. * Having accepted the benefits, the heirs were now estopped from challenging the validity of the agreements. * The property was an asset of the company in liquidation, and its sale was necessary to settle the dues of over 43,000 deposit holders amounting to more than ₹60 Crores.

Court's Analysis and Legal Precedents

Justice E.S. Indiresh conducted a thorough examination of the legal status of the unregistered documents, which formed the entire basis of the Official Liquidator's claim. The court noted that both the JDA and the Exchange Agreement involved the conveyance of a portion of the property and sharing of constructed areas, which mandated their registration.

The judgment extensively relied on landmark Supreme Court rulings to reinforce its reasoning:

• Compulsory Registration: Citing Suraj Lamps And Industries Limited vs. State of Haryana and Vinod Infra Developers Ltd vs. Mahaveer Lunia , the court reiterated that immovable property can only be lawfully transferred through a registered deed of conveyance.
• Admissibility in Evidence: The court referred to G.M. Shahul Hamid vs. Jayanthi R Hegde , holding that even if an unregistered document is marked as an exhibit without objection, its inadmissibility is not cured. The court has a duty to judicially determine admissibility, and a failure to do so does not validate the document.
• Collateral Purpose: Quoting K.B. Saha and Sons Private Limited vs. Development Consultant Limited , the court clarified that while an unregistered document can be used for a "collateral purpose," that purpose cannot be to prove any clause that itself creates or extinguishes a right in the property.

The court observed, "Following the declaration of law referred to above, I am of the opinion that, though the Joint Development Agreement and Exchange Agreement, were marked despite being unregistered and not duly stamped, do not confer any right or interest to the parties in those documents."

Addressing the OL's argument of estoppel, the court held that no estoppel can operate against a statute. Since the documents were contrary to the provisions of the Registration Act, they were unenforceable, and no estoppel could be claimed based on them.

Final Decision

Finding compelling merit in the arguments of the property owners' heirs, the High Court allowed their application and dismissed the one filed by the Official Liquidator.

The court directed the Official Liquidator to hand over the original title deeds of the Mysuru property to the applicants within four weeks. The ruling serves as a stark reminder of the critical importance of registering property transaction documents as mandated by law, failing which such agreements hold no legal value in establishing title.