No Protection Under Unregistered Sale Agreement, But Claim Must be Admitted under IBC Liquidation Process: NCLAT [Read Order]
The tribunal observed that even where a party has paid a substantial sum and taken possession, the absence of a registered sale deed forecloses protection under Section 53A and any preferential treatment in liquidation
![No Protection Under Unregistered Sale Agreement, But Claim Must be Admitted under IBC Liquidation Process: NCLAT [Read Order]](https://images.taxscan.in/h-upload/2025/07/30/2070753-unregistered-sale-agreement-taxscan.webp "No Protection Under Unregistered Sale Agreement, But Claim Must be Admitted under IBC Liquidation Process: NCLAT [Read Order]")
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, has held that a buyer of immovable property under an unregistered agreement to sell is not entitled to possession under Section 53A of the Transfer of Property Act, 1882, nor can such a party seek direct refund outside the waterfall mechanism provided under Section 53 of the Insolvency and Bankruptcy Code, 2016...
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, has held that a buyer of immovable property under an unregistered agreement to sell is not entitled to possession under Section 53A of the Transfer of Property Act, 1882, nor can such a party seek direct refund outside the waterfall mechanism provided under Section 53 of the Insolvency and Bankruptcy Code, 2016 (IBC). However, the Tribunal directed the liquidator to admit the buyer’s claim for refund in the liquidation process.
The corporate debtor, RG Infra Build Pvt. Ltd., had entered into an agreement to sell a commercial unit to Atul Paper Pvt. Ltd. on 24.04.2018 for a total consideration of ₹2.70 crore. Atul Paper claimed to have paid ₹2.01 crore and took possession of the unit. However, the sale deed was never executed or registered.
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CIRP was initiated against the corporate debtor on 25.09.2019. Atul Paper filed a claim of ₹2.51 crore before the resolution professional, which was rejected. When the company proceeded into liquidation, the liquidator similarly rejected a delayed claim filed by Atul Paper on 27.04.2023.
Meanwhile, the liquidator continued with an application originally filed by the RP seeking directions to evict Atul Paper from the premises. The NCLT, while directing the eviction, also ordered that ₹2.01 crore be paid to Atul Paper in the event the asset was sold.
Aggrieved by this, Atul Papers filed appeals challenging the eviction and rejection of its claim. The liquidator and Punjab National Bank, a financial creditor, also challenged the direction to refund ₹2.01 crore.
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The Bench comprising Justice Ashok Bhushan (Chairperson) and Mr. Arun Baroka (Technical Member) dismissed Atul Paper’s claim to possession. It held that since the agreement to sell was unregistered, Section 53A of the Transfer of Property Act could not be invoked. Citing Section 17(1A) of the Registration Act, 1908, the Tribunal observed that the Agreement to Sell, admittedly being an unregistered document, Atul Paper Pvt. Ltd. cannot claim any right under Section 53A of the Property Act.
The Tribunal also refused to recognize any equitable ownership over the property, citing Section 54 of the Transfer of Property Act, which clarifies that a contract for sale does not by itself create any interest or charge on the property.
The Tribunal found merit in the company’s claim for a refund. It noted that the company had earlier filed a claim during CIRP and that the liquidator had rejected the same only on grounds of delay. The tribunal observed that the claim submitted by Atul Paper Pvt. Ltd. was required to be admitted by the Liquidator.
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It set aside the NCLT’s order dismissing the appeal against rejection of claim as infructuous and directed the liquidator to admit Atul Paper’s claim of ₹2.51 crore in the appropriate category for distribution under Section 53 of the IBC. The appellate tribunal also directed the NCLT to refund ₹2.01 crore outside the waterfall mechanism that was struck down. The Tribunal observed that the Adjudicating Authority could not have issued any direction to make any payment to any stakeholder, the distribution as contemplated by the IBC.
During the pendency of the appeal, Atul Paper had deposited ₹69 lakhs (the balance sale consideration) with the liquidator in compliance with an interim order dated 30.05.2024. The Tribunal directed the liquidator to refund this amount along with interest, if any, earned on it within 30 days.
As a result, the Tribunal dismissed the appeal against the eviction order, allowed the appeal for admission of claim, and set aside the portion of the NCLT’s order granting direct refund, thereby partially allowing all the appeals.
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