India: Validity Of Sale Deed Executed By Vendor Only

Background

As a matter of general practice in India, documents of transfer of property are executed by all persons who are parties to the same. However, albeit the general presumption, certain types of instruments have historically been executed by a single party only such as a deed of conveyance and a deed of mortgage, typically executed by the vendor and the mortgagor.

To execute means to 'make a legal instrument valid (as, to execute a deed is to give it validity by signing or signing and sealing as required by law)'.¹ The signature can be put simpliciter at the end of the deed or document, but the general practice is to put the signature against the bracketed portion containing the following clause, in case or individual or individuals²:

In 1998, the Hon'ble Supreme Court of India in the matter of Rajendra Prasad Singh vs. Rameshwar Prasad Singh³ has expounded the meaning of the term 'execute' vis-à-vis legal instruments by citing the Words and Phrases (Permanent Edn.) definition of 'execute' which means 'to complete as a legal instrument; to perform what is required to give validity to.'

The Hon'ble Court goes on to explain that an instrument is usually executed through multifarious steps of different sequences. At the first instance, the parties might deliberate upon the terms and reach an agreement. Next the terms so agreed upon would be reduced to writing. Sometimes one party alone would affix the signature on it and deliver it to the other party. Sometimes both parties would affix their signature on the instrument. If the document is required by law to be registered, both parties can be involved in the process without perhaps obtaining the signatures of one of them. In all such instances the instrument can be said to have been executed by both parties thereto. If the instrument is signed by both parties it is presumptive of the fact that both of them have executed it, of course it is only rebuttable presumption. Similarly if an instrument is signed by only one party it does not mean that both parties have not executed it together.

Manner in which Parties proceed detrimental to upholding validity of contract

Based on the above, it can be understood that execution of an instrument does not strictly refer to the act of parties appending signatures to the instrument, rather it symbolises the performance or acts of the parties towards giving validity to the legal instrument.

Vis-à-vis sale deeds/agreements to sell of immovable property, it becomes important to make this distinction from the general presumption that legal instruments are only enforceable when signed by all the parties, as the manner in which vendor and purchaser proceed and act during the course of the transaction will be detrimental in upholding the validity of deed and transaction contemplated therein rather than mere signatures on the deed.

Analysis by Judiciary

In the year 1998, S.M. Gopal Chetty vs. Raman⁴, a learned Single Judge of the High Court of Judicature at Madras held that where the agreement of sale was not signed by the purchaser, but only by the vendor, it cannot be said that there was a contract between the vendor and the purchaser; and as there was no contract, the question of specific performance of an agreement signed only by the vendor did not arise.

On the other hand, in the same year in Md. Mohar Ali vs. Md. Mamud Ali⁵, a learned Single Judge of the High Court of Judicature at Guwahati held that an agreement of sale was a unilateral contract (under which the vendor agreed to sell the immovable property to the purchaser in accordance with the terms contained in the said agreement), that such an agreement for sale did not require the signatures of both the parties, and that therefore, an agreement for sale signed only by the vendor was enforceable by the purchaser.

Recently in the year 2009, both the aforesaid judgments were considered by the Hon'ble Supreme Court of India in the matter of Aloka Bose v. Parmatma Devi⁶ and the Court found that neither of the two decisions have addressed the real issue and cannot be said to be laying down the correct law. The Court explained that (i) the observation in Md. Mohar Ali⁷ stating that an agreement of sale is an unilateral contract is not correct, as an unilateral contract refers to a gratuitous promise where only party makes a promise without a return promise and all agreements of sale are bilateral contracts as promises are made by both - the vendor agreeing to sell and the purchaser agreeing to purchase and on the other hand, (ii) the observation in S.M. Gopal Chetty⁸ that unless agreement is signed both by the vendor and purchaser, it is not a valid contract is also not sound.

Agreement signed by Vendor only considered valid contract in India held by SC

The Supreme Court in Aloka Bose⁹ went on to observe that in any agreement of sale, the terms are always negotiated and thereafter reduced in the form of an agreement of sale and signed by both parties or the vendor alone (unless it is by a series of offers and counter-offers by letters or other modes of recognised communication). In India, an agreement of sale signed by the vendor alone and delivered to the purchaser, and accepted by the purchaser, has always been considered to be a valid contract. In the event of breach by the vendor, it can be specifically enforced by the purchaser. The Court however noted that there is no practice of purchaser alone signing an agreement of sale.

The contentions raised by the Defendant before the Court were that the agreement specifically contemplated execution by both parties; and as it was not so executed, it was incomplete and unenforceable, while pointing out to the Court that (i) the agreement of sale in this case was clearly in a form which required signatures of both the vendor and purchaser, (ii) the agreement begin as: "Agreement for sale between Kanika Bose and Parmatma Devi" and not an "Agreement of sale executed by Kanika Bose in favour of Parmatma Devi" and (iii) The testimonium clause (the provision at the end of the instrument stating when and by whom it was signed) of the agreement, read "In witnesses whereof, the parties hereto have hereunto set and subscribed their respective hands and seals on these presents."

Intention of Parties of importance rather than format of contract

The Supreme Court after examining the agreement, observed that the format obviously contemplated signature by both parties, but it is clear that the intention of the parties was that it should be complete on signature by only the vendor. The Court stated that this is evident from the fact that the document is signed by the vendor and duly witnessed by four witnesses and was delivered to the purchaser and various endorsements were made on the agreement whereby the vendor acknowledged receipt of earnest money advanced by the purchaser. This shows that the purchaser accepted and acted in terms of the agreement which was signed, witnessed and delivered to her as a complete instrument and that she then obtained an endorsement thereon by the vendor. Therefore, even though the draftsman who prepared the agreement might have used a format intended for execution by both vendor and purchaser, the manner in which the parties had proceeded, clearly demonstrated that it was intended to be executed only by the vendor alone. Thus, the Supreme Court held that the agreement of sale signed only by the vendor was valid and enforceable by the purchaser.

The landmark judgment of Supreme Court in Aloka Bose v. Parmatma Devi (supra) has been relied upon by various High Courts in multiple judgments and the Supreme Court itself in some of its recent judgments of Rattan Singh and Ors. vs. Nirmal Gill and Ors¹⁰ and Sudha Gupta vs. DLF Ltd¹¹.

Our Observations

It is clear that merely because the instrument shows only the signature of one of the parties, it is not enough to conclude that the non-signing party has not joined in the execution of the instrument. The manner in which parties act in a transaction is of utmost importance while examining the validity of an instrument. This is of significance especially when verifying old title deeds while conducting title diligence of immovable properties, as the practice of only vendors executing the sale agreements/deeds was prevalent in olden times, and should not form basis for rejection of title of such predecessor in title.

Footnotes

1. P Ramanatha Aiyar Advanced Law Lexicon

2. G.M. Divekar's Practical Guide to Deeds and Documents, Volume I, Eleventh Edition 2016

3. AIR1999SC 37

4. AIR 1998 Mad 169

5. AIR 1998 Gau 92

6. AIR 2009 SC 1527

7. Supra

8. Supra

9. Supra

10. AIR2021SC899

11. (2019)14 SCC 266

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.