Unregistered ‘Agreement to Sell’ Does Not Bar Asset Transfer in CIRP: NCLAT [Read Order]

The principal bench of the National Company Law Appellate Tribunal (NCLAT), New Delhi, has held that an unregistered Agreement to Sell (A2S) does not prevent recognition of asset transfer in the context of Corporate Insolvency Resolution Process (CIRP).

The appeal was filed by Sunder Lal, legal heir of late Babu Lal, challenging the Chandigarh NCLT’s order directing execution of a Sale Deed in favour of Jasrati Education Solutions Ltd., the Successful Resolution Applicant (SRA).

The appellant argued that the A2S signed between Babu Lal and OSN Infrastructure was unregistered, and under the SupremeCourt’s ruling in Suraj Lamps & Industries Pvt. Ltd. v. State of Haryana (2021), such documents cannot confer title.

He further contended that the subsequent Deed of Assignment transferring rights to Educomp Infrastructure was also unregistered, thereby invalid under Sections 17 and 49 of the Registration Act, 1908. According to him, the NCLT erred in relying on these instruments to compel execution of a Sale Deed.

The SRA countered that while the A2S was unregistered, subsequent registered documents, notably the Power of Attorney dated 08.04.2011 and the Deed of Possession dated 24.04.2011, clearly recorded receipt of full consideration and transfer of possession. These instruments, executed by all sellers, including Babu Lal, acknowledged that the Corporate Debtor had acquired rights and interests in the land.

The SRA emphasised that the land was reflected in the Corporate Debtor’s balance sheet and Information Memorandum during CIRP, evidencing its asset status.

The Tribunal examined the chain of transactions, the MoU dated 25.08.2010 between sellers and OSN Infrastructure, A2S dated 16.03.2011 (unregistered), the Registered POAs appointing Shonu Chandra to execute Sale Deeds, Deed of Possession transferring actual possession to OSN, Deed of Assignment (unregistered) transferring OSN’s rights to Educomp.

NCLAT noted that while the A2S was unregistered, the later registered POA explicitly acknowledged receipt of full consideration. The Deed of Possession further confirmed transfer of possession and divestment of rights. These subsequent instruments, being registered and executed after the A2S, carried greater evidentiary weight.

The Tribunal held that once consideration was paid and possession transferred, the sellers’ rights ended, and the Corporate Debtor acquired enforceable interests.

On the appellant’s reliance on Suraj Lamps, NCLAT distinguished the case, observing that the principle against enforcing unregistered agreements applies in ordinary civil disputes. In insolvency proceedings, however, Section 60(5) of the IBC confers wide jurisdiction on the Adjudicating Authority to resolve matters “arising out of or in relation to” CIRP. Since the resolution plan required perfection of title, directing execution of Sale Deeds fell squarely within IBC jurisdiction.

The Tribunal also rejected the limitation argument. Though the appeal was filed 11 days beyond the 30-day period, it was within the condonable 15-day extension under Section 61(2) IBC. The delay was condoned, but the substantive challenge failed.

Ultimately, NCLAT upheld the NCLT’s order, ruling that the unregistered A2S did not bar recognition of asset transfer. The registered POA and Deed of Possession, coupled with full consideration, established the Corporate Debtor’s rights. The SRA, having paid value under the resolution plan, was entitled to execution of Sale Deeds to perfect title.

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