Sale of Immovable Property: Explained As Under TPA, 1882
Contract of sale is merely a document signifying the willingness to sell, and sale is the actual transaction that takes place.
The article seeks to explain the sale of immovable property under the Transfer of Property Act, 1882. The Act specifically deals with sale of immovable property, under the act sale is one of the modes of transfer. The Article contains keywords for understanding the relevant section, the meaning of transfer under the Act.
The article explains sale under the Act, by explaining the two elements of the sale and the five essential ingredients for sale, further the article differentiates between sale and contract for sale.
Sale of Immovable Property: Explained as Under Transfer Of Property Act, 1882
Sale simply means buying and selling of goods and services, under Transfer of Property Act, 1882 the Sale is of immovable property. Before jumping into further details regarding the sale of immovable property.
Let us first understand the meaning of a few keywords which are necessary in order to understand and interpret the Transfer of Property Act.
Section 3 of the Act is the Interpretation-clause, which provides for the meaning of key terminologies –
- Immovable property – does not include standing timber, growing crops or grass,
- Instrument – means a non-testamentary instrument. The instrument is a written document, a formal or legal document in writing, such as a contract, deed, bond or lease or anything reduced to writing.
- Registered – register is a book containing a record of facts as they occur, kept by public authority. A document cannot be said to have been duly registered if the registration has been made in contravention of the provisions of the Registration Act.[i]
- Attached – is a term describing the physical union of two otherwise independent structures or objects, o the relation between two parts of a single structure, each having its function.[ii]
Section 5 – Transfer of property defined
“transfer of property” means an act by which a living person conveys property, in present or future, to one or more other living persons, or to himself and one or more other living persons; and “to transfer property” is to perform such act.
Some of the means of transfer of property from one person to another are – by sale, or by exchange, or by gift, or by adverse possession, and in some cases, even by a decree of the Court.
Section 54 of the Act defines ‘sale’ and specifies how a sale of immovable property may be made. Herein, sale refers to the sale of immovable property whether tangible or intangible (example – easement rights)
Sale is a transfer of ownership for a money consideration. It implies an absolute transfer of all rights in the property sold. No rights in the property sold are left in the transferor.[iii]
‘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.
Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.
Contract for sale. – A contract for the 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 property.
I. Elements of Sale
- Transfer of ownership – ownership is the aggregation of all the rights and liabilities in a property. When there is the transfer of ownership, the aggregation or total of all rights and liabilities in a property are transferred from transferor to the transferee.
- Money consideration – the ‘price’ that is referred to in section connotes to money consideration. Where the ownership of property is transferred in consideration for money it amounts to sale but if it is transferred for anything else it amounts to exchange.
Section 54 Provides that contract for sale of itself does not create any interest in or charge on such property.[iv]
II. Essentials of a sale
In a sale, there must be in the least two parties. The person who transfers his/her property is known as the transferor/seller/vendor and the person to whom the property is transferred is known as the transferee/buyer/vendee.
For a valid sale both the buyer and seller have to be competent on the date of the sale.
- The seller must have the ownership of the property which he is going to sell.[v]
- The seller must have a legal title to it only then he can sell the property.[vi]
- The seller must be competent to contract.[vii]
- He must not be a minor
- He must not be of unsound mind.
- He must not be statutorily incompetent – This refers to incompetency under the law for example when a person is declared insolvent his property bestowed on the person who recovers he is indebted to in this case the property is legally reserved for the recovery of debt.
- The seller may be a natural person/juristic person, for example, corporations or another legal person.[viii]
- The buyer must be competent to receive the ownership of the property.
- The buyer should not be disqualified from buying the immovable property by any law in force at the time of the sale – for example under section 136 of the Act, a judge, e legal practitioner or an official of the court is incompetent to purchase actionable claims.
- The seller may be a natural person/juristic person, for example, corporations or other legal person.[ix]
c. Subject – matter
Sale under Transfer of Property Act, 1882 specifically deals with sale of immovable property. Immovable property includes the benefits arising out of the land and the things attached to the earth except for standing timber, growing crops and grass.
The right to catch and carry away fish is a ‘profit pendre’ and construed as immovable property.
3. Money consideration
Price is an essential element of the sale.
Where, by the transfer, the vendor is getting rid of the liability to pay a certain sum, it cannot be said that there is no consideration for the sale.[x]
An agreement between the parties cannot be rendered nugatory on the ground that the consideration was not adequate.[xi]
The price paid and price promised to stand on equal footing as regards the transaction of a sale. There is nothing illegal, or contrary to public policy if the parties agree that the payment of the consideration shall be postponed in certain events, or that it shall not be paid at all if the property is lost.
Therefore, a stipulation in a sale-deed that the price will be paid within one year, provided that possession is obtained within that time, and that if possession is not so obtained then the payment of the price will be postponed, or that in the event of the vendee not getting the property, the price will not be paid at all. In all the above cases, the deed is a sale-deed within the meaning of the section.[xii]
If from the recitals in the sale deed it appears that title would pass after payment of full consideration, the inference would be that until the consideration is paid, there is no transfer.
Section 54 provides for two modes for transfer of property –
- Delivery of possession – Where the property us the tangible immobile property of the value of one hundred rupees and upwards transfer can be made only by a registered instrument. Where the property is tangible immovable property of a value of less than one hundred rupees, its transfer may be made either by a registered instrument or by delivery of property. Delivery of tangible immovable property takes place 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 the 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 for completion of sale.
A combined reading of 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 pass to the transferee, yet that would be on terms and conditions embodied in the deed indicating the intention of the parties. The intention of the parties can be gathered from the averments in the sale deed itself or by other attending circumstances.
Registration is the prima facie proof of the intention of the seller that he wanted to transfer the ownership on the date of the execution.
Where the sale is to be completed only by the registered instrument, the ownership is deemed to pass on the execution of the sale deed, not on the registration of the deed. The sale deed transferring immovable property of the value of 100 or more requires registration under Indian Registration Act 1908.
III. Contract for Sale
A contract of sale must be based on a mutual agreement between the seller and the buyer.[xiii]
Section 54 states that a contract for sale of immovable property or an agreement to sell 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 property.[xiv]
This is different in English law, wherein a contract for sale transfers an equitable estate to the purchaser, but this rule is not applicable in India. A contract for sale does not confer any title in immovable property.
IV. Sale and Contract for Sale – Differences
|Sale||Contract for sale|
|There is a transfer of ownership||There is merely an agreement for the sale of property in terms agreed between parties.|
|Conveys a legal title to the buyer.||Does not create any interest in the property.|
|Creates a right in rem||Creates a right in personam|
|Mandates registration where sale is of immovable property of Rs. 100 or more.||Does not require registration.|
A sale occurs between two living persons be it natural or artificial. Under the Act, Sale connotes to that of immovable property which encompasses tangible and intangible property, as well as rights arising out of the land. For the sale, the parties must be competent. If the sale is of immovable property of more than Rs. 100, it has to be registered.
The transfer of ownership is the transfer of all the rights and liabilities surrounding the property, this transfer along with price paid results in a sale. Sale and contract for sale are two very distinct documents. Contract of sale is merely a document signifying the willingness to sell, and sale is the actual transaction that takes place.
[i] Nahar Lal v. Brijnath 1928 AC 385
[ii] National Brake & Electric Co. v. Christensen, CCA Wis. 229 F 564, 570
[iii] Dr. Avatar Singh, Prof. (Dr.) Harpreet Kaur, Textbook on the transfer of property Act, 6th Edn. Lexis Nexis, pg, 183
[iv] Bhabani Sarma v. Narayan Sarma, AIR 2003 Gau 171.
[v] Gangotri Bai v. Jeevarkhan Lal, AIR 2006 Chh. 88
[vi] Arjuna Subramanya Reddy v. Arjuna China Thangavelu AIR 2006 AP 362
[vii] N. Ramchandran v. M. Nayanamalai, (2007) 3 MLJ 910
[viii] Dr. Avatar Singh, Prof. (Dr.) Harpreet Kaur, Textbook on the transfer of property Act, 6th Edn. Lexis Nexis, pg, 185
[x] Alama Chand v. Chhajju, AIR 1923 All 530, 531, Col. 2 : ILR 45 All 559 : 74 IC 339.
[xi] Sheo Shankar Kr. Khetan v. Widow of Late A. Prasad, (2007) 3 BLJR 2936 (Pat).
[xii] Umakanta Das v. Pradip Kumar Ray, AIR 1983 Ori 196
[xiii] Misabul Enterprises v. Vijaya Srivastava, AIR 2003 Del. 15.
[xiv] Raheja Universal Ltd. v. NAC Ltd., 2012 4 SCC 148
Originally Published on: Mar 31, 2020