LEGALITY OF CONTRACTS WHEN NOT REGISTERED


Question
If an agreement that needs to be stamped and registered in law is not even executed, can a party rely on e-mail exchange of draft of such agreement to prove the intention of the transaction?

Introduction
Under the provisions of the Information Technology Act, 2000 particularly Section 10-A, an electronic contract is valid and enforceable.

The only essential requirement to validate an electronic contract is in compliance with the necessary pre-requisites provided under the Indian Contract Act, 1872.
Also, the courts in India give due regard to electronic contracts under the provisions of the Indian Evidence Act, 1872.

The provisions of the Information Technology Act, 2000 (IT Act) give legal recognition to an electronic (E -Contract) particularly section 10-A of the IT Act which states:

"Section 10-A: Validity of contracts formed through electronic means. -
Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose."

The above provision was introduced by the Information Technology (Amendment Act), 2008 after recognizing the growing dependence on electronic means to reach commercial agreements. This applies where contract formation, communication of the proposal and acceptance is carried out electronically.

Evidentiary Value of Electronic Records:
The courts in India recognize electronic documents under Section 65-A of Indian Evidence Act, 1872. The procedure for furnishing electronic documents as evidence is provided under Section 65-B of the Indian Evidence Act, 1872.

As per Section 65-B of the Indian Evidence Act, 1872 any information contained in an electronic record produced by a computer in printed, stored or copied form shall be deemed to be a document and it can be admissible as evidence in any proceeding without further proof of the original. But, admissibility of the same is subject to various conditions prescribed under section 65-B of the said act. It is required that the document or e-mail sought to be produced from a computer, was in regular use by a person having lawful control over the system at the time of producing it; the document or the e-mail was stored or received during the ordinary course of activities; the information was fed into the system on a regular basis; the output computer was in a proper operating condition and has not affected the accuracy of the data entered. 

M. Kantha v. P. Valmurthy
Section 10 of the Contract Act provides that all agreements are contracts if they are made by the free consent by the parties competent to contract, for a lawful consideration and with a lawful object, and are not expressly declared to be void under the provisions of the Contract Act. The proviso to Section 10 of the Act makes it clear that the section will not apply to contracts which are required to be made in writing or in the presence of witnesses or any law relating to registration of documents. Our attention has not been drawn to any law applicable in Bihar at the relevant time, which requires an agreement of sale to be made in writing or in the presence of witnesses or to be registered. Therefore, even an oral agreement to sell is valid. If so, a written agreement signed by one of the parties, if it evidences such an oral agreement will also be valid."

Ajit Singh v. Vinod Kumar & Ors
The proviso of Section 49, which was an unregistered document, could be received as evidence of a contract in a suit for specific performance. 

Vinod Kumar & Anr. v. Ajit Singh
Section 49 of the Registration Act held by the Learned Single Judge where the unregistered agreement to sell could be received as a piece of evidence in the case

Birham Pal & Ors. v. Niranjan Singh & Ors
The Court held that on the basis of section 49 of the Registration Act, such an agreement can form the basis of a suit for specific performance.

Ram Kishan and Another v. Bijender Mann Alias Vijender Mann
The Hon’ble Court held that a suit for specific performance, based upon an unregistered contract/agreement to sell that contains a clause recording a part performance of the contract by delivery of possession or has been executed with a person, who is already in possession shall not be dismissed for want of registration of the contract/agreement;

the proviso to Section 49 of the Registration Act, legitimizes such a contract to the extent that, even though unregistered, it can form the basis of a suit for specific performance and be led into evidence as proof of the agreement or part performance of a contract.

Maneka Goudan v. Elumalai Goudan
In this latest Madras case, the view that a party to an agreement has no right whatever in any circumstances to seek specific performance of the agreement if a document has been executed but is not registered has not been subscribed to. The learned Judges also did not accept the proposition that a party to an agreement is entitled to compel the other party who has duly executed a document in pursuance of the agreement to go on executing fresh documents by resorting to a suit or suits for specific performance so long as no document has been registered. 

C.J. Smith v. A. Kinney, Official Trustee
From that decision, the plaintiff has appealed and contends that the present suit is not one for compensation for breach of an unregistered contract but is one either for enforcement of the terms of a decree, in which case he contends it is governed by, or for enforcement of a registered document.

Rajah of Venkatagiri v. Narayana Reddi
where a suit was brought to recover damages for breach of the contract to grant a lease, the unregistered qabuliat was admissible in evidence to prove the contract. By a more recent decision of the same Court, reported in the case of Kondari Srinivara v. Gothumulkala 17 M.L.J. 218 it has been decided, that the unregistered qabuliat is admissible for proving the contract, in a case where the suit is one for specific performance of the contract.

Ajitkumar Basu Thakur v. Chairman Of The Commissioners
 It is either Article 115 or Article 116 that, in our opinion, applies to the case, accordingly as the contract, the breach of which is the foundation of the claim, is unregistered or registered

Rattan Chand And Anr. v. Bhagirath Ram And Ors
In the Privy Council case also the agreement had been admitted as in the present case, and the question was of damages for breach of a contract. In view of all this, where the unregistered document does not affect, in any way, the immovable property comprised in it, there is no bar to founding a claim for damages on such an admitted document.

Inderdeo v. Ram Lal
it was held that a party desiring registration of a document which contained a personal covenant was entitled to obtain registration wherever he pleased, provided that the document did not affect immovable property, but that, if he desired to obtain registration of a document containing a personal covenant which also affected immoveable property, he was bound by the provisions of Section 28 Registration Act,  for the whole of the document from the beginning to the end, & that those provisions applied to the whole of the document.

Raj Bahadur v. Suraj Baksh,
The Avadh Chief Court also took a similar view on the point. The question there was considered with reference to a simple money decree being passed on foot of a mtge bond, the registration of which was found to be invalid. The claim was held to be governed by the three years' rule of limitation.

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