Rule of Part Performance

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Rule of Part Performance | Overview

• The Essentials of Section 53A are
• Transfer
• Written Contract
• Possession by the transferee
• Act done in furtherance of the contract
• Willingness on the part of the transferee to fulfill his part of the contract
• Rights of a bona fide transferee no affected
• Equity is followed under the doctrine
• Difference between the Doctrine of part performance followed in Common Law and Indian Law

This article discusses the rule of part performance. Let’s consider a situation where X is the tenant on the property that Y owns. Y agrees to sell the property on which X is staying to X only. X in furtherance of it, pays the consideration of amount 1 Lac to Y. the tenancy was to end on 10^th, but even after that X stayed in the possession of the property in furtherance of that agreement. Y, later on, sells the same property to C. C now becomes the owner of the property and asks X to leave the possession of the property.

In this case, the questions as to what remedy does X have and is C entitled to evict X would be determined by the Rule of Part performance.

The title ‘part performance’ itself suggests that a part of a contract has been performed by a party. And the rule focuses upon saving the interest of the party who has performed some part of his contract. The Doctrine of Part Performance has been adopted in Indian Law from the Common Law. Section 53A of Transfer of Property Act, 1882 embodies the Rule of Part Performance.

The Essentials of Section 53A are:

1. A person enters into a contract to transfer an immovable property

• For consideration
• In writing and it must be signed by him or on his behalf
• The terms of the contract must be certain.

2. The transferee

• Either take the possession of the property or any part of the property or if already in possession, continues the same
• The act of taking possession is done in the part performance of the contract.
• And the transferee who already was in possession prior to the contract does some act in furtherance of the contract.

3. The transferee is willing to perform or has already performed his part of the contract

4. The transferor or any person claiming under him cannot enforce any right in the property that the transferee is in or continues to remain in possession of, against the transferee, unless the right has been expressly provided by the terms of the contract.

5. Also, the instrument of transfer has not been completed in the manner prescribed by law.

The proviso to the Section provides that: the Section will not affect the rights of a bona fide transferee. Where:

1. The transfer was for consideration and
2. The transferee had no notice of the previous contract or it’s part performance

The section will not affect the rights of such transferee.

The objective behind the rule of part performance

The Section is based upon the maxim ‘which ought to have been done’.

In execution of a transfer, the law imposes a duty on both, the transferor and the transferee. Generally, the transferee’s duty is to pay the consideration according to the terms of the contract and the duty of the transferor is to execute the transfer deed in a manner prescribed by the law.

The section 53A focuses upon protecting the right of the transferee to retain the possession of the property where there is no fault on his part, as the transferee should not suffer because of the fault on the part of the transferor to complete the instrument of transfer in a manner prescribed by law.

Transfer:

The transfer can be of an immovable property absolutely such as sale, and it can also be of a right in immovable property. Hence, the rule of part performance applies to lease, mortgage, etc.

Written Contract:

The situation in Indian Law is different from Common Law.

• In India, the contract has to be in writing in order to attract the rule of part performance. As there is no particular format provided for the contract, it does not have to be formal. The rule is not attracted in cases of oral contracts where there is a complete absence of any written agreement.
• Just the contract in writing is not sufficient but it should also be signed by the transferor or by someone else on the transferor’s behalf. If the contract is not signed, it would not be considered as a valid contract under this section.
• Also for the purpose of attracting this section, the contract of sale has to be registered (after the Amendment). If the contract of sale is not registered then too the section does not have any application.
• The reading of the deed should make the nature of the transaction clear and also what rights are being transferred to the transferee should be clear.

Dhannalal Ahirwar V. Satyanarayan[1]

The parties entered into an oral contract for sale. No efforts were made to get the sale deed executed. It was held that the requisite condition for attracting Section 53A was not fulfilled. Hence, no benefit under the same section can be provided.

Possession by the transferee:

One of the main essentials of this section is that the transferee at the time of moving under this section should have possession of the property. The possession can be taken by the transferee after entering into the contract or the possession can be a continuing one.

But for attracting this section, the possession of the property should’ve been taken place in part performance of the contract and for no other purpose.

In case of continuing possession, it has to be shown by the transferee that he has done something in furtherance of the contract. Mere continuation of possession by the person who was already in possession prior to the contract is not sufficient.

Example: X agrees to sell his property A to Y after 2 months. But at the moment of the agreement Y had no other place to stay, so X allows Y to stay at his property A. If the contract fails to take place, Y cannot ask for retention of possession on the basis of the Doctrine of part performance. As the possession was taken by Y here is not done in furtherance of the contract, but that was the permission provided by X to Y for a specific purpose.

Act done in furtherance of the contract:

When the transferee was already in possession of the property prior to the contract, it has to be shown by the transferee that he has done something in furtherance of the contract. The act is done and the contract must have some reasonable real nexus.

1. Kukaji v. Basantilal[2]

A mortgaged his house to B and delivered the possession of the same. Later on, A sold the house to B but didn’t get the deed registered. The consideration for the sale was mortgage debt. An after some time sold the Property to C and got that deed registered. C sued B for the redemption of the mortgage. B moved under Section 53A of TPA claiming retention of possession under part performance.

It was held that: B was already in possession of the property as mortgagee. Mere continuance of possession doesn’t constitute a part performance.  B has to show that he did something else in furtherance of the contract.

• Payment of consideration Or Purchase of stamp doesn’t amount to act done in furtherance of a contract.

2. Sardar Govindrao Mahadik v. Devi Sahai[3]

A mortgaged his properties to B and delivered the possession of the same. Subsequently, there was an agreement between A and B to sell the properties mortgaged. For the same, the mortgagee advanced Rs. 1000 for the purchase of stamp to be affixed on the deed. But the sale deed was never registered.

Later on, A sold the property to C. A and C then filed a suit against B for the redemption of the property. B claimed the benefit of the doctrine of part performance on the ground that: a sale deed was executed in his favour, he retained the possession and also provided Rs. 1000 for the purchase of stamp which should be considered as an act done in furtherance of the contract.

Court held that: the money provided for the purchase of stamp is antecedent to contract and not an act is done in furtherance of it. B was not entitled to the benefit of the Doctrine of Part Performance.

Willingness on the part of the transferee to fulfill his part of the contract:

A failure on the part of the transferee to show his willingness to fulfill his part of the contract would disentitle him to the protection provided under Section 53A or the doctrine.

Rights of a bona fide transferee no affected:

Where there is any subsequent transfer and the transfer is for a consideration, the transfer would be valid if the transferee had no notice of the pre-existing contract. The notice would include the actual as well as the constructive notice.

The transferee must have taken reasonable care before entering the transaction. In a case where the transferee is unaware of the contract but if by taking reasonable care he would’ve become aware of it, it would be considered as the transferee had the constructive notice.

Equity is followed under the doctrine:

 The doctrine doesn’t confer any title on the transferee but it only imposes a ban on the transferor. Also, the only protection afforded to the transferee is to retain the possession that he has acquired in furtherance of the partly performed contract.

The right under the doctrine which has been provided to the transferee can be used only as a defense and hence, it cannot be used as an independent remedy.

Difference between the Doctrine of part performance followed in Common Law and Indian Law:

1. Under English Law, there is no need for a written agreement to attract the doctrine. An oral agreement can also invoke the doctrine of part performance. Whereas in Indian Law, the contract or the agreement has to be in writing.
2. In India, the protection provided under the doctrine can only be used to defend and it cannot be used as an independent remedy. Whereas in English Law, the doctrine can be used as both: a defense and an attack. Hence, it can be used to enforce a right of possession and not merely to protect it.

[1] Dhannalal Ahirwar v. Satyanarayan AIR 2014 (NOC) 497 (MP)

[2] Kukaji v. Basantilal AIR 1955 MB 93

[3] Sardar Govindrao Mahadik v. Devi Sahai AIR 1982 SC 989

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