Sale under Transfer of Property Act

What is sale under transfer of property act?

Meaning of Sale under Transfer of Property Act: – Sale is defined as the transfer of ownership of a property in exchange for a price paid or promised or partly paid or part promised. Sale simply means the purchase and sale of goods and services, the sale of immovable property is provided under Section 54 of Transfer of Property Act 1882.

Sale under Transfer of Property Act

Section 3 of the Act is the interpretation clause, which provides the meaning: –

  1. Immovable Property: – Immovable property exclude standing timber, growing crops or grass,
  2. Instrument: – It means a non-testamentary instrument. The instrument should be in writing, a formal or legal document in writing, such as a contract, deed, bond or lease or anything reduced to writing.
  3. Registered: – A register is a book contains records of the facts as they are kept by the public authority. If the registration is done in violation of the provisions of the Registration Act, that document cannot be said to be duly registered.
  4. Attached: – It is a term that describes the physical union of two independent structures or objects, which refers to the relationship between two parts of the structure each having its function.

Section 54 of the Transfer of Property Act

Section 54 of the Act defines the meaning of the ‘sale’ and also specifies how the sale of immovable property can be done. Here, sale refers to the sale of immovable property whether tangible or intangible (For example: – easement rights)

A sale under transfer of property act is a transfer of ownership for a money consideration.  It refers to the complete transfer of all rights in the property sold. No rights in the property sold, are left to the transferor.

Section 54: – Sale ownership is transferred in exchange for a price paid or promised or part-paid and part-promised.

What is contract for sale?

Meaning of Contract for Sale: – A contract for the sale of immovable property is a contract which takes place on the settled terms between the parties. In this, the seller agrees to sell or deliver something to the buyer for a fixed price that the buyer has agreed to pay. A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another.

What are the elements of Sale?

The elements of Sale are given as follows: –

  1. Transfer of Ownership: – Ownership is the aggregation of all rights and liabilities in a property. When transfer of ownership occurs, all rights and liabilities in the property is transferred from transferor to transferee.
  2. Money Consideration: – Where the ownership of the property is transferred for money, it amounts to sale, but if it is transferred for something else, it amounts to exchange.
  3. The seller must be a person competent to transfer. The seller should be either the owner of the property or should have the authority to dispose of it.
  4. The buyer must be a person competent to the transferee.
  5. The subject matter must be a transferable immovable property which can be tangible or intangible.
  6. There must be a transfer of ownership
  7. The transfer must be in exchange for a price. ‘Price’ in the ordinary sense connotes money consideration for the sale of the property. The price must be paid or promised or partly paid.

What are the essentials of a Sale under Transfer of Property Act?

The essentials of a sale under transfer of property act are given as follows: –

  • Parties i.e., Seller, Buyer
  • Competency
  • Money consideration
  • Conveyance
  • Registration

Explanation: –

  1. Parties: – In a sale, there must be at least two parties. The person who transfers his property is known as the transferor/seller/vendor and the person to whom the property is transferred is known as the transferee/buyer/vendee.
  1. Seller:
    • The seller must own the property which he is going to sell.
    • The seller should have legal title to it only then he can sell the property.
    • The seller should be competent to contract.
    • He must not be a minor person.
    • He should not be of unsound mind.
    • He must not be statutorily incompetent.
    • The seller may be a natural person / judicial person, for example, a corporation or any other legal person.
  1. Buyer: –
    • The buyer must be competent to get the ownership of the property.
    • The buyer should not be disqualified from purchasing the immovable property under any law at the time of sale, for example: under section 136 of the Act, a judge, a legal practitioner or an officer of the court is incompetent for purchase of actionable claim.
    • The seller may be a natural person / judicial person, for example: a corporation or other legal person.
  1. Subject Matter: – The sale under Transfer of Property Act, 1882 specifically deals with the sale of immovable property. Immovable property includes the benefits from the land and the things attached to the earth and it does not include standing timber, growing crops and grass.
  1. Competency: – A valid sale requires both the parties i.e., the buyer and seller to be competent on the date of sale.
  1. Money Consideration: – The consideration must only be in money to constitute a sale. If it is for exchange or some other items then it is not sale. The consideration for the sale must be paid, partly paid, promised or partly promised. Therefore price is money but not necessarily money immediately paid in notes and coins, it includes money which might be already due or payable at a future date.
  1. Conveyance: – Section 54 provides for two ways for transfer of property: –
    • Where the property transferred is tangible immovable property of value of one hundred rupees and upward transfer can only be made by a registered instrument. Where the property is immovable property of less than one hundred rupees, it can be transferred either by registered instrument or delivery of property. The delivery of tangible immovable property occurs when the seller puts the buyer or such person as the buyer directs in possession of the property.
    • Registration of sale deed: – Where the value of tangible immovable property is Rs. 100 or more, the sale of such property requires registration of the deed. Where the property is intangible immovable property of any valuation, it will require registration to complete the sale.
  2. Registration: – Both section 8 and 54 of the Transfer of property act, 1882 suggests that through execution and registration of a sale deed, the ownership and all interests in the property passes to the transferee, yet this will  be on the  terms and conditions embodied in the deed indicating the intention of the parties. The intention of the parties can be gathered from the averments (formal statement) in the sale deed itself or under other attending circumstances. Where the sale is to be completed only by the registered instrument, the ownership is presumed to pass on the execution of the sale deed, not on the deed’s registration. The sale deed transferring immovable property of the value of 100 or more it will require registration under Indian Registration Act 1908.

Rights and liabilities of Buyer and Seller

The buyer and the seller of the immovable property respectively are subject to the liabilities, and have the rights, mentioned in the rules following: –

  1. The seller is bound: –
    • To disclose to the buyer any material defect in the property 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;
    • 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;
    • To answer to the best of his information all relevant questions put to him by the buyer with respect to the property or the title thereto;
    • 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;
    • 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;
    • To give, on being so required, the buyer, or such person as he directs, such possession of the property as its nature admits;
    • To pay all public charges and rent accrued due in respect of the property up to the date of the sale, the interest on all encumbrances on such property due on such date, and,except where the property is sold subject to encumbrances, to discharge all encumbrances on the property then existing.
  1. The seller is entitled: –
    • To the rents and profits of the property till the ownership thereof passes to the buyer;
    • 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.
  1. The buyer is bound: –
    • To disclose to the seller any fact as to 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;
    • 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;
    • 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;
    • 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 money due on any encumbrances subject to which the property is sold, and the interest thereon afterwards accruing due.
  1. The buyer is entitled: –
    • Where the ownership of the property has passed to him, to the benefit of any improvement in, or increase in the value of, the property, and to the rents and profits thereof;
    • 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 contractor to obtain a decree for its rescission.

Difference between Sale under Transfer of Property Act and Contract for Sale

S.No.SaleContract for sale
1.There is a transfer of ownership of the property.There is an agreement between the parties for the sale of the property with consent.
2.Gives legal title to buyer.Does not generate any interest in the property.
3.Creates a right in rem.Creates a right in personam
4.Registration is mandatory where the sale is of immovable property of Rs. 100 or more.Registration is not required.

Case laws of Sale under Transfer of Property Act

  1. Nahar Lal vs. Brijnath 1928 AC 385

Judgments of the case: – In this case, the court held that if the registration is done in violation of the provisions of the Registration Act, a document cannot be said to be duly registered.

  1. Umakanta Das vs. Pradip Kumar Ray, AIR 1983 Ori 196

Judgments of the case: – In this case, the court held that if the sale deed contains a condition that the price will be paid within one year, provided that possession is obtained within that time, and if possession is not obtained, the payment of the price will be postponed, or in the event of the vendee not getting the property, the price will not be paid. In all the above cases, the deed within the meaning of the section is the sale deed.

  1. Raheja Universal Ltd. vs. NAC Ltd., 2012 4 SCC 148

Judgments of the case: – In this case, the court states that a contract for sale of immovable property or an agreement to sell is a contract that a sale of such property shall be on the terms settled between the parties. This in itself does not create any interest or charge on such property.

  1. Misabul Enterprises vs. Vijaya Srivastava, AIR 2003 Del. 15.

Judgments of the case: – In this case, the court held that a contract of sale should be based on a mutual agreement between seller and buyer.

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