Cancelling a sale agreement can be stressful, especially when it involves NRIs, cross-border documentation, and large sums of money. Let me share a recent experience from my real estate practice in Bangalore where we successfully cancelled an unregistered sale agreement without much hassle.
THE BACKGROUND
One of my NRI clients owned a 4BHK duplex house in Bangalore. We found a buyer, and the agreed selling price was Rs.5.5 Crore.
Ideally, we wanted to register the Sale Agreement. However, since the seller was living in the USA, he could not be physically present in India for registration at the sub-registrar’s office. He was also unwilling to grant a Power of Attorney to anyone in India. Instead, he assured us that he would come to India at the time of the Sale Deed registration.
Meanwhile, the buyer was eager to freeze the deal and proceed with home loan processing.
EXECUTING THE UNREGISTERED SALE AGREEMENT
To satisfy the bank’s requirement, we executed an unregistered Agreement of Sale on a Rs.500 non-judicial e-stamp paper.
Note: The actual stamp duty for a Sale Agreement (without possession) is 0.5% of the selling price or guidance value (whichever is higher). In this case, the buyer’s bank suggested proceeding with a Rs.500 e-stamp paper, possibly because the buyer had a strong credit score. We followed their instruction.
The buyer paid an advance of Rs.50 lakh via online transfer. Immediately, the Agreement of Sale was drafted, executed on the Rs.500 e-stamp paper, and couriered to the USA for the seller’s signature. The seller signed and sent it back to India for the buyer’s signature and bank loan processing.
ALTERNATIVE: ADJUDICATION METHOD
We could have saved the two-way courier cost (Rs.8,400 from India–USA–India) if we had opted for adjudication at the sub-registrar’s office instead of using e-stamp paper. Here’s how it works:
- Draft the Agreement of Sale and send it to the seller by email.
- Seller prints, signs all pages, and couriers it to the buyer.
- Buyer signs and submits it at the sub-registrar’s office for adjudication of stamp duty.
- This requires only one-way couriering, reducing both cost and time.
However, since the buyer insisted on e-stamp paper and was willing to bear the courier charges, we proceeded accordingly.
DEAL CALLED OFF
A few days later, the buyer and seller renegotiated the price but could not reach an agreement. Mutually, they decided to cancel the deal.
HOW WE CANCELLED THE AGREEMENT
The cancellation process was simple and straightforward:
- On the original Agreement of Sale, we marked “CANCELLED” in red ink.
- A Cancellation Agreement was executed on Rs.500 e-stamp paper.
- The buyer and two witnesses signed the document in India.
- The seller refunded the Rs.50 lakh advance via online transfer.
- The Cancellation Agreement was couriered to the seller in the USA for his signature.
The seller retained the original copy for record purposes.
FINAL THOUGHTS
Even though this was a Rs.5.5 Crore transaction, the cancellation process went smoothly because both parties acted in good faith. The refund and cancellation signing happened simultaneously, and the matter was closed amicably.
If you are dealing with a similar situation and need professional guidance, connect with us.
- Email: pgnproperties@gmail.com
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FREQUENTLY ASKED QUESTIONS (FAQ) ON CANCELLING AN UNREGISTERED SALE AGREEMENT
1. Is an unregistered Sale Agreement legally valid?
Yes, an unregistered Sale Agreement is legally valid as a contract between the buyer and seller. It serves as evidence of the agreed terms, payment of advance, and mutual intent to complete the transaction. However, it does not transfer ownership rights in the property. Ownership is transferred only through a registered Sale Deed executed at the sub-registrar’s office.
2. Can an unregistered Sale Agreement be cancelled?
Yes, it can be cancelled. Both parties can mutually execute a Cancellation Agreement on a non-judicial stamp paper. The advance paid should be refunded as per the agreed terms.
3. What happens to the advance money if the Sale Agreement is cancelled?
The refund of advance money depends on the terms and conditions of the Agreement. If there is a cancellation clause, it must be followed. In mutual cancellations, the seller usually refunds the advance amount to the buyer.
4. Do I need to register a Cancellation Agreement?
In most cases, if the original Sale Agreement was unregistered, the cancellation agreement need not be registered. However, it should be executed on non-judicial stamp paper with proper signatures and witnesses for legal validity.
5. Is stamping required for a Cancellation Agreement?
Yes, cancellation should be executed on a non-judicial stamp paper (commonly ₹500) to avoid disputes and establish clear documentation.
6. What if one party refuses to cancel the Sale Agreement?
If one party refuses, the other party may approach the civil court for cancellation and settlement. Having a registered agreement provides stronger legal grounds in such disputes.
7. Can NRIs cancel an unregistered Sale Agreement from abroad?
Yes, NRIs can sign the Cancellation Agreement abroad and courier it back. Alternatively, they can authorize someone in India through a registered Power of Attorney to execute the cancellation on their behalf.