November 27, 2020

Sale of Immovable Property under Transfer of Property Act

Transfer Of Property Act

Sale of immovable property has been defined as a transfer of ownership in exchange for a price paid or promised or partly paid and partly promised by the Transfer of Property Act. Section 54 provides essentials for a sale of immovable property and Section 55 deals with rights and duties of buyer and seller (parties to sale).

Section 54 of the Transfer of Property Act, 1882

 Section 54 of the transfer of Property Act (IV of 1982) defines sale of immovable property as under:

“Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.

Sale How Made:

Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. In the case of tangible immovable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property. Section 54 lays down a specific method for the execution of a sale deed with respect to immovable property and completion of sale.

Generally speaking, in a sale of immovable property, the three requirements of law are that transfer of property by sale must take place with the help of a validly executed sale deed, by the transferor in writing, is properly attested, and registered (Munnalal v. Armaram, 2008).

Contract of Sale of Immovable Property:

A contract of sale is different from a sale, as it does not require registration. However, it does not create a charge or an interest in the property. It is merely a document or an agreement that gives a right to obtain another document, i.e., a sale deed. Therefore, it does not require registration (Dave Ramushankar v. Bai Kailasgoure, 1974). However, some equities do arise in favour of the transferee. For instance: where, despite an agreement of sale, the property is transferred to another person, the subsequent transferee with notice of the earlier transaction holds the property in trust for the prior agreement holder (Kondapalli Satyanarayan v. Kondapalli mayullu, 1999).

In the case of Ramesh Chand Ardavatiya v. Anil Pangwani (2003), decided by Supreme Court the owner of a piece of land entered into an agreement for its sale with B. On payment of the advance amount, he handed, over the possession to B but failed to execute a sale deed in his favour. B constructed a boundary wall, but this land was encroached upon by the trespassers on behest of A.B. filed a suit in a court of law for a declaration that he was in peaceful possession of property and sought a permanent injunction from the court restraining the trespassers from interfering with his peaceful possession of the property.

The court held that B is entitled to protect his possession. Directions were issued that A should assert his title through due process of law and was restrained from taking the law his own hands. The court observed that as,

A contract for sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties; it does not of itself create any interest in or charge on such immovable property. However, still if a person who entered into possession over immovable property under a contract for sale and is in peaceful and settled possession of the property with the consent of the person in whom the title vests, he is entitled to protect his possession against the whole world, excepting a person having a title better than what he or his vendor possesses. If he is in possession of the property in part performance of the contract for sale and the requirements of Section 53 A are satisfied, he may protect his possession even against the true owner.”

Mortgage: Justice Mahmood in Gopal v. Parsotam (1883) has defined mortgage as under: Mortgage as understood in this country cannot be defined better than by the definition adopted by the Legislature in section 58 of the Transfer of property Act (IV of l882).

In the case of Santley v Wilde (1899), it was observed that, a mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given. T

he Supreme Court in Kedar Lal v. Hari Lal (1952), has observed that the whole law of mortgage in India, including the law of contribution arising out of a transaction of mortgage, is now statutory and is embodied in the Transfer of Property Act read with the Code of Civil Procedure. The court cannot travel beyond these statutory provisions.

Essential Elements of Sale of Immovable Property

Parties: in a sale there has to be a seller and buyer. The seller has to be competent to transfer the immovable property to the buyer. Both parties i.e. the seller and the buyer have to be competent to contract under the Indian Contract Act. In the case of Misabul Emterprises v. Vijaya Srivastava (2003), it was observed that a contract of sale must be based on a mutual agreement between the seller and the buyer. The transferor should either be the owner of the property or should have an authority to dispose of it.

For example, the karta of a joint family property is authorized to transfer the property under certain specified circumstances (Biswanath Sahu v. Tribeni Mohan, 2003). Similarly, the guardian of the property of a minor is empowered to sell it with the permission of the court, and without such permission the sale would be invalid (Sarup Chand v. Surjit Kaur, 2002). An agent having a power of attorney to sell the property can also sell it without being the owner of the property.

Where the sale is executed after getting a general power of attorney; without obtaining the requisite permission of the court, the sale deed is invalid and would not confer any title on the transferee (Lakhwinder Singh v. Paramjit Kaur, 2004), but if the Power of Attorney executed in favour of the holder expressly authorizes him to transfer the property he would be a competent seller (A Bhagyamma v. Bangalore Development Authority, Bangalore 2010).

Subject Matter of Sale of Immovable Property:

Section 54 only governs the sale of immovable property. Immovable property can be tangible or intangible. Tangible property is one that can be touched, such as a house, a tree etc., while intangible property refers to property that cannot be touched such as a right of fishery, a right of way etc. If there is no sale, there is no need for an agreement to be executed to that effect on the stamp papers.

In Rail Vihar Kalyan Sahkari Awas Samiti v. State of Uttar Pradesh(2005), a cooperative group housing society and its members filed a writ against additional chief-executive officer, Noida, by which the Noida directed the individual members to execute a tripartite agreement with the welfare societies/co-operative society as lessee and NOIDA as lessor for sale of superstructure and sublease deed for respective flats, apartments, residential accommodation allotted by the society to its individual members and restraining them from charging stamp duty on execution of tripartite-deed.

Noida had issued a notice to flat owners to execute the-deed through their respective bodies by a specific date, failing which, the flat owners were to be declared unauthorised occupants, on whom penalty was to be charged. While allowing the writ petition filed by the flat owners, the court held that the societies do not have corpus and the entire consideration for lease was paid by the contributions received from the members.

They constructed these flats/apartments under the self-finance arrangement in which the amount was paid by allotted member in instalments. There was no sale of land or superstructure in their favour and thus, the direction to execute a tripartite transfer deed which includes sale of superstructure and the payment of stamp duty on the said document, was grossly arbitrary and violative of Art 14 of the Constitution.

Transfer of ownership:

there has to be a transfer of ownership by the seller to the buyer.

Price: price is the essence of the contract of sale. It may be paid in a lump sum or in instalments as agreed between the parties. A compromise, a decretal amount, an advance made by one person to another, or an agreement to protect and defend the property at the purchaser‘s cost is a good consideration for sale. Likewise, a family settlement is a valid consideration for an agreement to sell.

Where a son- in-law executed an agreement for sale in favour of his mother-in-law in consideration of a family settlement, it was held that it amounted to a valid consideration for the sale. The ordinary rule governing sale is that payment of consideration is simultaneous with the time when the conveyance is executed by the seller. This rule can be deviated from in case of an agreement to the contrary by the parties (Chandra Shankar v. Abhia, 1952; Prasanta v. IC Ltd., 1955).

For example, A agrees to sell the land to B, and executes a sale deed for the same. Ordinarily, the buyer would pay the consideration on the same day. However, if they agree to pay the entire consideration or part of it at the time of the registration of the document, and partly at the time of the execution or even subsequent to registration, this would be a valid sale.

The term “paid or promised to be paid” also suggests that this promise to pay must be genuine. The buyer cannot escape his primary liability to pay the consideration and if he tries to evade payment by dubious means, no title would pass from the seller to the buyer. For instance, if the buyer pays money through a cheque which is dishonoured, the sale would not take effect (Inder Kaur v. Tara Singh, 1978).The same rule would apply if there is an intention to the contrary expressly incorporated in the contract, that the title would not pass unless the payment has been made in full, or if consideration is paid in advance. This would entitle the purchaser to sue for possession (Vidhyadhar v. Manikro, 1999).

Section 55 of the Transfer of the Property Act, 1882

Section 55 of transfer of property act 1882 describes right and liabilities of buyer and seller. In any property transaction, buyers and sellers are subject to Right and liabilities. In the absence of a contract to the contrary, the buyer and the seller of immovable property respectively are subject to the liabilities, and have the rights, mentioned in the rules next following or such of them as are applicable to the property sold.

Rights, Duties and Liabilities of Seller in case of Sale of Immovable Property:

Duties of Seller:

  • To disclose any material defect: a seller is bound to inform the buyer of any material defect in the property or the title of the property.
  • To produce documents of title: a seller has to provide for the examination of all documents of title that are in his possession.
  • To answer questions about the property or title thereto: a seller is bound to give relevant information and satisfy the buyer on any questions raised by the buyer or his advocate.
  • To execute conveyance: The seller is bound to execute the sale deed after sale price is paid to him
  • To pay outgoings: the seller is bound to pay all public charges, tax and rent that may be due on the property before date of sale.
  • Lis pendens: a seller is bound to inform the buyer of any legal proceedings that are pending on said property and that may come in the way of the sale or transfer on said property.
  • To deliver possession of the property: a seller is bound to hand over the possession of the property at the time of the execution of the sale. Generally before the execution of the sale deed the buyer and seller enter into an agreement of sale either orally or in writing. After entering into this agreement to sell, the buyer would be advised to take all the necessary information that has been listed above.

Rights of Seller:

According to section 55(4) of transfer of property act 1882, it can be stated as follows:

Right to get Rent and Profit: – to the rents and profits of the property till the ownership thereof passes to the buyer.

Right to get Interest on Unpaid buying money:-where the ownership of the property has passed to the buyer before payment of the whole of the purchase-money, to a charge upon the property in the hands of the buyer, any transferee without consideration or any transferee with notice of the non-payment, for the amount of the purchase-money, or any part thereof remaining unpaid, and for interest on such amount or part from the date on which possession has been delivered.

In Subba Rao V/s Vasudev Shastri (1951), the Court decided that the seller is entitled to get interest on selling-money only when the possession of sold property is given to buyer.

Liabilities of Seller:

According to section 55(1) of transfer of property act 1882 can be stated as follows:

Liability to Reveal Fault: – to disclose to the buyer any material defect in the property 1[or in the seller’s title thereto] of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover; In the Case Ganpat Ranglal V/s Mangilal Hiralal (1961), Court held that the seller is not bound to disclose such faults which is really known by buyer or otherwise he is in know of the information.

  • Liability to Submit Document: – to produce to the buyer on his request for examination all documents of title relating to the property which are in the seller’s possession or power;
  • Liability to Submit Document as to Entitlement: – to answer to the best of his information all relevant questions put to him by the buyer in respect to the property or the title thereto; in the case of Laxmidas & Company V/s D.J. Tata (2019) it has been held by the Mumbai high court that if the seller does not answer for such questions then the contract may be rescinded by the buyer.
  • Liability to Execute Conveyance:- on payment or tender of the amount due in respect of the price, to execute a proper conveyance of the property when the buyer tenders it to him for execution at a proper time and place;
  • Liability to Protect Document:- between the date of the contract of sale and the delivery of the property, to take as much care of the property and all documents of title relating thereto which are in his possession as an owner of ordinary prudence would take of such property and documents.
  • Liability to Deliver up Occupation:- to give, on being so required, the buyer, or such person as he directs, such possession of the property as its nature admits; in the case Darpan V/s Kedar Nath(1969), it has been held that if Seller does mistakes in delivering up to possession the buyer can file a suit against seller.

Rights and Duties of Buyer in case of Sale of Immovable Property::

Rights of Buyer:-

According to section 55(6) of transfer of property act 1882, these can be stated as follows:

Right to get Benefits, Rents- where the ownership of the property has passed to him, to the benefit of any improvement in, or increase in value of, the property, and to the rents and profits thereof; in Achtak V/s Parmeshwar it was decided that the buyer is entitled to get benefits of the maintenance done by seller.

Right to get Interest-unless he has improperly declined to accept delivery of the property, to a charge on the property, as against the seller and all persons claiming under him, to the extent of the seller’s interest in the property, for the amount of any purchase-money properly paid by the buyer in anticipation of the delivery and for interest on such amount; and, when he properly declines to accept the delivery, also for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel specific performance of the contract or to obtain a decree for its rescission.

An omission to make such disclosures as are mentioned in this section, paragraph (1), clause (a), and paragraph (5), clause (a), is fraudulent.

Liabilities of buyer:-

According to section 55(5) of transfer of property act 1882, it was stated as follows:

Liability to disclose facts– To disclose to the seller any fact as to the nature or extent of the seller’s interest in the property of which the buyer is aware, but of which he has reason to believe that the seller is not aware, and which materially increases the value of such interest.

In the case of Hazi isha V/s Daya Bhai (1896), it has been held that it is the duty of the buyer that he should provide all information related to ownership which he is in know, to the seller. This arrangement is based on the principle of equity and relations of believe between buyer and seller.

Liability of payment of purchase money- To pay or tender, at the time and place of completing the sale, the purchase-money to the seller or such person as he directs: provided that, where the property is sold free from encumbrances, the buyer may retain out of the purchase-money the amount of any encumbrances on the property existing at the date of the sale, and shall pay the amount so retained to the persons entitled thereto.

Liability to bear damages– where the ownership of the property has passed to the buyer, to bear any loss arising from the destruction, injury or decrease in value of the property not caused by the seller.

Liability to pay due amount- where the ownership of the property has passed to the buyer, as between himself and the seller, to pay all public charges and rent which may become payable in respect of the property, the principal moneys due on any encumbrances subject to which the property is sold, and the interest thereon afterwards accruing due. In the case of Gangi V/s Govinda (1924), it was held that the buyer is liable to pay all the charges after sale. Due amount includes revenue, principal, interest etc.

It is advisable that the buyer’s advocate should investigate the title of the property after entering into an agreement for sale. The title should be traced for at least 30 years. Besides, the title deed search should be also done in the office of the Sub Registrar or relevant revenue authority to investigate whether there is any encumbrance on the property whether there is any defect in the title and whether the property stands in the name of the seller in the land revenue and municipal records. It is also advisable that the buyer’s advocate should enquire from the relevant authorities and gather information on whether a notification has been issued for acquisition of the property.

In major property deals the buyer through his advocate should give a public notice in the newspaper stating his interest in purchasing the property. The sale deed is chargeable with stamp duty under Article 23 of Schedule 1 to the Indian Stamp Act and it has to be executed on stamp paper equal to that of conveyance or else attracts duty penalty of 10 times that of actual stamp duty. The sale deed transferring immovable property of the value of 100 or more requires registration under Indian Registration Act 1908.

REFERENCES:

v Textbook on The Transfer of Property Act, Dr. Avtar Singh, Universal Law Publishing Co. Pvt. Ltd., 2006

v The Transfer of Property Act, Dr. Hari Singh Gour, Delhi Law House, 2004

v Principles of the Law of Transfer, S. M. Shah, N. M. Tripathi Pvt. Ltd., 1969

v The Transfer of Property Act, 1882, Prof. G. P. Tripathi, Central Law Publications, 2005

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Author Details: Vaibhav Goyal (BA LLB Student, Panjab University)

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