Can you Cancel a Sale Deed or ATS ?

The registering authority is obliged to get a deed of cancellation registered if two parties involved in a property transaction want to cancel the deal

In many transactions of sale of immovable property, parties execute an sgreement to dell (ATS) as a precursor to the sale deed. Unlike a sale deed, execution of ATS does not pass title of ownership in favour of the buyer. In an ATS, parties set out terms such as advance sale price, total sale price, timelines of payment, time period within which the sale deed is to be executed, obligations of the parties before the sale, etc.

In some cases, the ATS does not materialise into completion of sale of the property and execution of sale deed for various reasons such as breach or default by either party of its obligations contained in the ATS.

Now the question is: Can a registered ATS or sale deed can be cancelled if both the seller and buyer want it?

Cancellation of a previously executed and duly registered ATS can be done if the parties execute a cancellation deed. It is a settled law that a bilateral contract such as an ATS or sale deed may be cancelled only if both buyer and seller agree and execute a separate deed of cancellation. Cancellation deed, being a document relating to transfer of ownership of immovable property, should be registered by the sub-registrar provided the requirements under Proviso to Section 32A of the Registration Act, 1908 (‘Act’), are duly complied with.

Section 32A of the Act provides for compulsory affixation of photograph and fingerprints by persons presenting the document for registration. Proviso to section 32A provides that in case of any document relating to the transfer of ownership of immovable property, the passport size photograph and the fingerprints of each buyer and seller should be affixed to such a document.

In the matter of GD Subramanian v sub registrar, P Shanmugam, B Dillibabu and B. Vasu (2009 (1) CTC 709), the Madras High Court observed that the registering authority is obliged to register any deed of cancellation of sale deed which has been mutually executed by the buyer and seller, provided it is in compliance with the requirements of Section 32A. Further, the court also observed that the registering officer is legally bound to reject and refuse to register a deed of cancellation if it has been executed unilaterally and without the knowledge and consent of the other party, and if it does not fulfil the requirements of Section 32A.

Prospective buyers hesitate to purchase a property which has a history of a cancelled transaction of sale or ATS. However, if cancellation of the ATS has been done in accordance with law and buyers undertake legal due diligence, risk may be minimised. The new buyer may inspect the original cancellation deed executed by the seller with the previous buyer. The clauses of cancellation deed must clearly and unambiguously state that ATS, which was previously executed by the owner and previous buyer now stands cancelled. Also, the new buyer must ensure that the cancellation deed was duly registered at the office of sub-registrar in whose jurisdiction this property is situated.

Hindustan Times, New Delhi, 27-04-2013