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Gaurav Aggarwal Vs. Richa Gupta
FAO(OS) 136/2025
Introduction
- In a significant judgment that notably impacts real estate transactions and arbitration involving immovable property in Uttar Pradesh, the Delhi High Court upheld an arbitral award terminating proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996. The crux of the ruling lies in the finding that an unregistered and unstamped Agreement to Sell (ATS) relating to immovable property in Uttar Pradesh is legally unenforceable, incapable of being acted upon, and inadmissible even for limited purposes such as maintaining arbitral proceedings.
- This decision is rooted in the unique statutory architecture created by the U.P. Civil Laws (Reforms and Amendment) Act, 1976, which fundamentally departs from the central regime by making registration a mandatory condition for the very existence of a contract for sale. The Court reaffirmed that in Uttar Pradesh, no enforceable contractual relationship arises from an unregistered ATS, and therefore, an arbitral tribunal cannot continue proceedings based on such an instrument.
Background facts
- The Respondent held sub-leasehold rights in a residential flat in Jaypee Greens, Noida, under a SubLease Deed executed in 2021. On 05.01.2024, the parties executed an ATS for transfer of these subleasehold rights for a consideration of ₹5 crores, of which the Appellant paid ₹50,000 as token money. The ATS required the Respondent to obtain prior permission from Jaypee Infratech Limited [JIL] and Yamuna Expressway Industrial Development Authority [YEIDA]; a mandatory step under local regulations.
- Shortly thereafter, the Respondent issued a termination notice alleging that the Appellant had breached the terms by failing to cooperate in obtaining the required permissions. The Appellant disputed this allegation and invoked arbitration seeking specific performance of the ATS.
- During arbitration, the Respondent raised a threshold objection: the ATS was neither registered nor stamped, as mandated under UP law. This objection went to the root of the contract's existence. The Sole Arbitrator upheld this challenge and terminated the proceedings under Section 32(2)(c), holding that the ATS was legally unenforceable.
- The Appellant's petition under Section 34 was dismissed by the Single Judge, leading to the present intra-court appeal before the Division Bench.
Issue(s) at hand
- Whether the ATS dated 05.01.2024, being unregistered and unstamped, could constitute a valid and enforceable contract for sale under the UP legal framework?
- Whether an arbitral tribunal has power under Section 32(2)(c) to terminate proceedings when the foundational contract is legally inadmissible?
- Whether the Single Judge correctly applied the statutory amendments and upheld the arbitral award?
Findings of the Court
- Compulsory Registration Under UP Amendments
- The Court held that the UP-Amendment Act of 1976 fundamentally alters the legal landscape. Under the amended Section 54 of the Transfer of Property Act, all contracts for sale of immovable property in UP must be registered. Corresponding amendments to Sections 17 and 49 of the Registration Act expand the mandatory registration requirement and bar unregistered contracts from being admitted in evidence or used to enforce any right including specific performance or arbitral relief.
- Unregistered ATS Creates No Enforceable Contract
- The ATS, being neither registered nor stamped, never became a legally enforceable contract. Registration was not a procedural formality but an essential condition of validity. Consequently, the ATS was inadmissible for any purpose, including sustaining arbitration. The Appellant's argument that the ATS involved only sub-leasehold rights was rejected, as the UP amendments apply to all forms of immovable property interests.
- Termination Under Section 32(2)(c) Was Justified
- Since the foundational contract itself was legally non-existent, it had become impossible for the Tribunal to continue proceedings. Section 32(2)(c) of the Arbitration Act empowers termination in such circumstances. The defect was not merely inadequate stamping - a curable defect but non-registration, which is incurable and renders the document void for legal purposes.
- The Court found no error or perversity in the Arbitrator's reasoning. Given the narrow scope of interference under Section 34, the Single Judge rightly upheld the termination of proceedings.
HSA Viewpoint
The Delhi High Court's decision in Gaurav Aggarwal v. Richa Gupta reinforces that Uttar Pradesh has a strict statutory requirement that every Agreement to Sell (ATS) relating to immovable property must be registered. Unlike other states, where an unregistered ATS may still be used for limited purposes, the UP amendments make registration a condition for the contract itself to be valid. Therefore, an unregistered ATS creates no enforceable rights and cannot be relied upon in arbitration or court proceedings.
The Court emphasized that parties dealing with UP property must ensure proper registration at the outset, because an unregistered agreement, whether for freehold, leasehold, or sub-leasehold rights has no legal effect. This places a higher burden of due diligence on buyers, sellers, and real estate practitioners, who must verify compliance with the UPspecific statutory framework before acting on any ATS.
The ruling also clarifies the position for arbitration. Although the arbitration clause survives on its own, the tribunal cannot continue if the underlying contract is legally inadmissible. Since the ATS in this case was both unregistered and unstamped, it could not be considered for granting any relief. As a result, the arbitral tribunal correctly terminated the proceedings under Section 32(2)(c), as it had become impossible to adjudicate the claim.
Lastly, the Court drew a clear line between stamping issues and registration requirements. While insufficient stamping may be cured, non-registration under UP law is not curable, making the contract void for any legal purpose. The decision ultimately promotes cleaner, compliant real estate transactions and prevents parties from using arbitration to enforce agreements that are invalid from the start.
M/s Duphar Interfran Ltd. Vs. The State of Maharashtra
2025:BHC-OS:21861-DB
Background facts
- Duphar Interfran Ltd., a Mumbai based pharmaceutical company, owned the registered trademark "Crocin" under the Trade Marks Act. By a Brand Acquisition Agreement, dated 18 Jan 1996, executed in London, Duphar sold the Crocin trademark to SKB Plc i.e. a UK entity. SKB applied to the Indian Registrar of Trademarks on 19 Jan 1996 to record the transfer of ownership.
- The Maharashtra Sales Tax authorities treated this assignment as a "local sale" within Maharashtra. On 31 Aug 1998 the Commissioner of Sales Tax issued a ruling holding the trademark transfer to be a taxable sale liable to 4% under Schedule C‐I‐26 of the Bombay Sales Tax Act, 1959. Subsequently, an assessment imposed a tax demand of Rs.99.68 lakh on Duphar on this basis.
- Duphar appealed through the statutory channels, but the Deputy Commissioner and later the Maharashtra Sales Tax Tribunal upheld the tax levy. In the Tribunal's Impugned Judgment, the sale of the Crocin trademark was held to be a sale within Maharashtra, and thus taxable under the Bombay Sales Tax Act. Against this, Duphar filed the present Sales Tax Reference before the Bombay High Court.
Issue(s) at hand?
- Whether the sale of the said trademark has taken place within the State of Maharashtra or is deemed to have taken place during export outside India, under the canopy of Section 5(1) of the Central Sales Tax Act, 1956 ("CST").
Findings of the Court
- The Bombay High Court held that the trademark assignment constituted an export of goods and not a local sale. The Court reasoned that the agreement was a true transfer of ownership as it gave SKB full rights in the trademark and left Duphar with no remaining interest in the same.
- The Court explicitly applied the principle of mobilia sequuntur personam as applied in Mahyco Monsanto v. Union of India1. It noted that once an intangible asset like a trademark is assigned, the transferee acquires the complete right title and interest in the property i.e. the trademark in this case, and the transferor has no subsisting rights.
- Since SKB is a foreign entity, the High Court treated the trademark's situs as moving outside India upon assignment. The Court distinguished this from mere licensing, emphasizing that this was a full sale of the trademark as goods.
- The Revenue contended that because the trademark was registered in India, the sale remained within the State. The Court rejected this. It observed that the place of registration is not decisive once ownership of the asset passes abroad. The Agreement's assignment clause made the UK entity the owner, and subsequent mutation of the Indian registration was procedural.
- The High Court answered the reference in favour of Duphar. It held that the Brand Acquisition Agreement is an Agreement to Sale and such sale is not a sale within the State of Maharashtra, but shall be deemed to have taken place in the course of export of the said trademark outside India, as contemplated under Section 5(1) of the CST Act. In short, the transfer was an export sale of an intangible good, precluding any Maharashtra tax.
HSA Viewpoint
The ruling reaffirms the principle of mobilia sequuntur personam, applying it to intellectual property. The Court's analysis ensures that contractual assignments of intangibles to overseas parties are treated as export of goods, maintaining consistency with prior jurisprudence on the subject matter.
The case clarifies that Section 5(1) CST can apply even if the "goods" are intangible and do not physically cross the border. Since the export is effectively affected by the assignment and the change of ownership, the technical requirements such as transfer of title documents, etc. are satisfied. Thus, the sellers of the Indian trademarks or other IP rights to foreign assignees can regard such transactions as export of goods for CST purposes.
The judgment aligns with modern interpretations of IP law and reinforces the constitutional bar under Article 286(1)(b) on State taxation of export sales.
Footnote
1 2016 SCC OnLine Bom 5274
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