• Cancellation of Sale Deed

Hello Sir -

Recently I bought a villa from a Construction firm (Vendor/Developer). During the registration of sale deed and while signing the documents, I have observed a statement in my sale deed document that "Vendor earlier executed a Sale Deed vide Doc.No. 0000/15, dated 03.06.2015 in favour of Mr. XXXX ... Subsequently, of Mr. XXXX due to his personal reasons requested the Developer to cancel his allotment and return the amounts paid towards the said Plot. The Developer agreed for the said request of Mr. XXXX and returned the amounts paid by his and both the Developer and of Mr. XXXX executed a Cancellation Deed vide Doc.No. 00000/15 dated 20/07/2015 cancelling the said Sale Deed." (Document numbers are quoted as 0000 for confidentiality)

Then I questioned the Vendor but he convinced me that plot was registered as a collateral security and now they are cancelling the earlier registered sale deed to make it a clear title. Please note, before we went for registration, HDFC bank has approved the loan. So I thought bank has verified the legality and it is safe to proceed further. In fact said investor has come to the registrar office and he was one of the witnesses in my sale deed registration too. Then I agreed for it and continued with registration process. My sale deed has references to the said Cancellation of Sale Deed Doc. No. too. However, Vendor has not informed the same (cancellation of sale deed) to the bank when my loan request was submitted. During cheque disbursement, branch manger saw the linked documents and Cancellation Deed and said they cannot disburse the cheque until the documents are re-verified. Now Vendor promising me that he will take care of the issue and there won't be any problem. 

I have gone through various reviews in internet and observed that as per 'The Specific Relief Act, 1963', cancellation of Sale Deed should be ordered by Court and Registrar cannot cancel the sale deed. 

1) Is my understanding correct on 'The Specific Relief Act, 1963'?
2) Does said Investor or his legal heirs will have any legal rights on the property? 
3) Can you confirm whether the Cancellation of Sale Deed is valid? As we didn't go through the process of appearing before the court?
4) Am I in safe situation or do I have to take any preventive steps at this moment?
Asked 3 years ago in Property Law from Hyderabad, Telangana
Religion: Hindu
An execution of a deed is with the consent of two parties, the cancellation if done with the participation of the very same parties is valid in law and not governed by the The Specific Relief Act as is being interpreted by you.
The sale executed in favour of a third party has been duly and validly cancelled by the developer, subsequently this purchaser has consented and confirmed the sale in your favour at the time of registration of your sale deed, which is the correct procedure, having done this the builder is legally right.
Now if the bank has not reviewed or verified these documents earlier and if they require some additional time to review this situation they must be given that time, thereafter the builder will convince them about the legalities and the bank will fall in line.
The investor nor his legal heirs have any manner of right, title or interest in the said property. you are absolutely safe.
Kiran N. Murthy
Advocate, Bangalore
1019 Answers
91 Consultations

5.0 on 5.0

1. No, your understanding is not correct on the said issue.Both the parties may agree to cancel the agreement/deed and register a deed of cancellation in connection with the registration of the earlier deed,

2.After the registration of the deed of cancellation, the investor will have no right on the aid property,

3. Yes, it is very much valid. The cancellation of he deed is not by virtue of any court order by by executing and registering a deed of cancellation mutually agreed by both the parties of the earlier registered deed,

4. On the particular issue reported by you there is nothing illegal in to he matter.
Krishna Kishore Ganguly
Advocate, Kolkata
18772 Answers
453 Consultations

5.0 on 5.0

Hi, once the document has been registered it can't be cancelled unless through the process of the court in your case the Cancellation deed is not valid as the property is already transferred to them so question of cancellation does not arise.

2. So  vendor has no right to sell the property which is already sold to some one.
Pradeep Bharathipura
Advocate, Bangalore
4561 Answers
204 Consultations

4.5 on 5.0

1) your understanding is correct 

2) cancellation of sale deed is not valid 

3) sale deed cannot be cancelled with mutual consent of parties as once sale deed has been executed title passes on to the purchaser 

4) sale deed ought to have been executed by transferee in favour of transferor 
Ajay Sethi
Advocate, Mumbai
46788 Answers
2768 Consultations

5.0 on 5.0

M/S.Latif Estate Line India Ltd vs Mrs. Hadeeja Ammal on 11 February, 2011 – AIR 2011 Mad 66 (F.B.) 

56. A Full Bench of the Madras High Court in the case of Muppudathi Pillai Vs. Krishnaswami Pillai, AIR 1960 Madras 1 elaborately discussed the provision of Section 39 (New Section 31) and held:- 
12. The principle is that such document though not necessary to be set aside may, if left outstanding, be a source of potential mischief. The jurisdiction under Section 39 is, therefore, a protective or a preventive one. It is not confined to a case of fraud, mistake, undue influence, etc. and as it has been stated it was to prevent a document to remain as a menace and danger to the party against whom under different circumstances it might have operated. A party against whom a claim under a document might be made is not bound to wait till the document is used against him. If that were so he might be in a disadvantageous position if the impugned document is sought to be used after the evidence attending its execution has disappeared. Section 39 embodies the principle by which he is allowed to anticipate the danger and institute a suit to cancel the document and to deliver it up to him
59. After giving our anxious consideration on the questions raised in the instant case, we come to the following conclusion: –
(i) A deed of cancellation of a sale unilaterally executed by the transferor does not create, assign, limit or extinguish any right, title or interest in the property and is of no effect. Such a document does not create any encumbrance in the property already transferred. Hence such a deed of cancellation cannot be accepted for registration. (ii) Once title to the property is vested in the transferee by the sale of the property, it cannot be divested unto the transferor by execution and registration of a deed of cancellation even with the consent of the parties. The proper course would be to re-convey the property by a deed of conveyance by the transferee in favour of the transferor. (iii) Where a transfer is effected by way of sale with the condition that title will pass on payment of consideration, and such intention is clear from the recital in the deed, then such instrument or sale can be cancelled by a deed of cancellation with the consent of both the parties on the ground of non-payment of consideration. The reason is that in such a sale deed, admittedly, the title remained with the transferor. (iv) In other cases, a complete and absolute sale can be cancelled at the instance of the transferor only by taking recourse to the Civil Court by obtaining a decree of cancellation of sale deed on the ground inter alia of fraud or any other valid reasons. 
60. Having regard to the conclusions arrived at as aforesaid, the questions referred are answered accordingly. The appeals are referred back to the concerned Court for deciding the case on merits
Ajay Sethi
Advocate, Mumbai
46788 Answers
2768 Consultations

5.0 on 5.0

In the present statutory dispensation, namely transfer of property Act, Contract Act, Specific Relief Act and Registration Act, the court does not see any prohibition operating on the exercise of the inherent power by the registering authority to cancel the sale deed earlier registered which is likely to cause prejudice to the true owner.  This is not a unilateral cancellation  by one party alone, hence there is no inference drawn to the provisions of Specific Relief Act for a court to intervene in the subject matter. 
The cancellation deed is very much valid in the eyes of law.
You are in a very much safe situation and do not have o take any step in this regard.  
The HDFC bank wanted to doubly confirmed about the title due to the new document which went missing during previous scrutinisation. 
T Kalaiselvan
Advocate, Vellore
36925 Answers
403 Consultations

5.0 on 5.0

1. The cancellation of sale deed can be done bilaterally by the seller and purchaser if there is an agreement to this effect. The doors of a court of law are to be knocked only if one party demands cancellation and the other refuses to accede to it. 

2. The registrar is bound to register the cancellation deed when presented both by the seller and purchaser.

3. After the execution of cancellation the buyer ceases to have any rights in the property. So none of the rights can be claimed by his legal heirs.

4. Whether the cancellation deed has been validly executed or not can be confirmed only after a threadbare perusal of it.

5. Get the cancellation deed vetted by a lawyer.
Ashish Davessar
Advocate, Jaipur
23140 Answers
640 Consultations

5.0 on 5.0

A sale deed is a document which transfers ownership in the property. The transfer is complete and effective upon the completion of registration of the sale deed. Once the vendor has divested himself of his ownership over the property then he retains no control or right over the said property and he cannot purport to create any document in regard to the same.

There is no provision in the Transfer of Property Act or in the Registration Act, which deals with the cancellation of deed of sale.  Registration Act confers no power with the Registrar to cancel a document which had validly been registered as per the Act.

Section 62 of the Indian Contract Act, 1872 which provides that contract which need not be performed. By that provision, any novation, rescission and alteration of a contract can be made only bilaterally. A deed of cancellation will amount to rescission of contract and if the issue in question is viewed from the application of Section 62 of the Indian Contract Act, any rescission must be only bilaterally.such cancellation deeds which are executed bilaterally by both the parties to the earlier document can be registered by the Registering Officer, provided, the other requirements of the Indian Registration Act are satisfied. 

In your case a bilateral deed is executed so it may be valid .The better things is Mr. XXXX has only the power to create a relinquishment deed in favour of Builder if he wish to cancel the earlier sale deed .
Ajay N S
Advocate, Ernakulam
2823 Answers
47 Consultations

5.0 on 5.0

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