By: Arryan Mohanty
Published on: April 1, 2022 at 10:00 IST
Introduction
It is a well-established legal principle that an agreement of sale exists when the vendor agrees to sell and the buyer agrees to buy for a predetermined price and on predetermined terms.Oral communication is an option.
It could be done through the exchange of unsigned communications. It could be accomplished by a single document signed by both parties.
It can also be done with a two-part contract, with each party signing one copy and then exchanging the signed copies, resulting in the purchaser having the seller’s copy and the vendor having the purchaser’s copy.
It can also be done by the vendor signing and handing the document to the buyer, who accepts it.
A selling and purchase agreement A simpliciter is a reciprocal agreement that imposes obligations and advantages on both parties and that can be enforced at either party’s request.
The laws of contract governing the fulfilment of reciprocal promises would regulate the interpretation of such a contract.
Also read: Explained: Succession of property via Testament
When a vendor is given the option to repurchase the property he sold under the terms of an agreement, the option is in the nature of a concession or privilege, and it can only be exercised if all of the criteria on which it is made exercisable are met.
It is important to note that, unlike a gift deed, which requires at least two attesting witnesses at the time of execution as per Section 123 of the Transfer of Property Act, 1882, the sale deed does not require any attesting witnesses; and, Section 68 of the Indian Evidence Act, 1872, which deals with the examination of attesting witnesses to prove the execution of a document, does not apply to the sale deed, which is governed by Section 54 of the Transfer of Property Act.
Transfer of Property Act, 1882
Property laws in the pre-independence era were based on British governance and customs.
As a result, the need for a proper civil codified law was felt necessary, and the first law commission was established in 1870, followed by the second law commission in 1879, both headed by Whitely Stokes, with the goal of creating property laws that are easily understandable and apprehendable by local judges and advocates, as well as being well suited to the Indian population.
The Transfer of Property Act was finally enacted into law on February 17, 1882. The ‘Law of Conveyancing and Property Act, 1881’ was previously changed in England, and our law has been taken from this act. There were still a lot of inconsistencies in this statute, therefore it went through a lot of changes.
In 1927, a Special Committee was constituted, and its draught, with minor revisions, was enacted in 1929, Act No. 20, with section 53 A added to give formal recognition to the old English Equity of Part Performance, i.e., Doctrine of Part Performance.
The fundamental reason why the privy council did not institute this theory earlier was that the lease can be offered by way of an oral agreement, as this Act and the Indian Contract Act 1872 both say that agreements can be made orally.
However, this was necessary to defend the transferee’s interests and his custody of the property.
Section 53A of Transfer of Property Act
Section 53A of the Transfer of Property Act of 1882 defines part performance, with the primary goal of protecting the transferee from fraud.
Its goal was to prevent buyer fraud or misbehaviour so that he could enjoy his right to property.
This Doctrine is defined by Section 53A of the Transfer of Property Act of 1882, which states:
‘When a transferor or someone acting on his behalf transfers his immovable property for some consideration in a written manner signed by him to the transferee or someone acting on his behalf on some terms with reasonable certitude.’
And he had used his right of part performance to exercise possession over the property or be in partial use of it in furtherance of such contract, and he had acted on such contract.
This includes his willingness to perform his half of the deal, as well as whether he has actually done so.
As a result, if the transferor’s rights are not enforced against the transferee because the procedure for transferring property is not registered or completed properly as required by law, but an agreement was reached, the transferor cannot enforce his rights against the transferee if the transferee has taken possession or continues to be in possession.
Also read: What is Illegal possession and action against the Illegal owner?
Only the transferor has the authority to do so if the Contract’s terms specify such an exception. Furthermore, even if the transferee is unaware of the contract or this doctrine, his rights are unaffected.
For example, ‘A’ had made a contract under which he will sell his immovable property to ‘B’ and give ‘B’ ownership of the property before a legal Sale-Deed is executed.
If ‘A’ later refuses to execute a conventional instrument of sale and launches an eviction suit against ‘B’, regarding ‘B’ as a trespasser, the contract is said to be partially executed.
Then ‘B’ can argue that ‘A’’s claim is unjustified because the transfer contract in his favour has only been partially fulfilled and that ‘A’ should not be permitted to go back on his promise.
In India, it is mandatory to have a written contract whereas there an oral agreement can also be accounted for the same. This notion can only be applied in India as a right to defence, that is, to safeguard one’s own interests, and not as a right to take action.
The Supreme Court stated this in the landmark case of Delhi Motor Company and Others against U.A. Basrurkar[1]. Because it may be utilised for both defence and offence in England, they have both passive and active equity.
In India, it is also necessary to take possession or demonstrate a willingness to take possession in order to fulfil the contract, whereas in the United States, any act performed in accordance with the contract is sufficient.
Also read: What is Right to Property under Indian Constitution?
Ingredients of Section 53-A
The components of Section 53-A have been highlighted by the Bombay High Court in Kamalabai Laxman Pathak v. Onkar Parsharam Patil[2]:
Contract for Transfer of Immovable Property
The first prerequisite for applying this section is that there must be a contract, and that the contract must be for the transfer of immovable property for value.
Written Contract
The contract must be written. If the transfer contract is oral, Section 53 “A” does not apply. The advantage of section 53-A is not available to a person who is in possession of property based on an oral agreement of sale, according to V.R. Sudhakara Rao v. T.V. Kameswari[3]. It’s not enough to just write.
In addition, the contract must be properly completed. That is to say, the transferor or someone acting on his behalf should sign it.
Valid Contract
It should be noted that Section 53-A only applies if the transfer contract is complete and legal. It must be a legally binding contract under the Indian Contract Act of 1872.
Immovable Property
Only the transfer of immovable property is covered by this section. Even if supported by consideration, it does not applicable to a contract for the transfer of moveable property. In the case of possession of movables, the Part Performance defence is not available.[4]
Transfer for consideration
The written contract must be for the consideration of the transfer of an immovable property. The written contract under which the property was possessed must expressly state that the property was transferred.
This section cannot be applied if the document is vague or confusing. The terms of a written contract must be ascertainable with reasonable certainty, which is one of the requirements of section 53-A.[5]
Possession in furtherance of Contract
The Transferee has taken or is continuing to take possession of the property in part fulfilment of the contract, or has performed some act in furtherance of the transaction.[6]
Some Act in furtherance of the contract
Taking possession isn’t just a way of performing a contract in part. If the transferee already has possession of the property, he must execute some additional act in part performance of the contract after the transfer contract is signed.[7]
Transferee is willing to perform his part of contract
The notion of equity is at the heart of Section 53-A. Equity dictates that a person seeking equity must also do equity.
As a result, if a person claims protection of his land possession under section 53-A, he must act in a fair and just manner. The transferee’s willingness to perform his side of the contract is a necessary requirement for this provision to apply.[8]
Also read: When a Contract considered to be performed? & Analyzing the Validity E-Contracts
Cases related to Doctrine of Part Performance
Sheth Maneklal Mansukh Bhai v. Messrs. Hormusji Jamshedji[9]
In this case, A Talukdari estate, consisting of 12 villages in the Viramgam taluka of Ahmedabad District, was owned by many talukdars. Rampura was one of the localities where the estate was taken over by the government under section 28 of the Gujarat Talukdars Act.
Maneklal Mansukhbhai, the complainant, applied to Talukdari settlement officer in 1916 for a permanent lease.
So, on the 12th of July 1917, he granted permission to the petitioner because he was in desperate need of a place to set up his ginning factory, and he sent a letter to the government requesting their approval, which was signed by both the proposer and the officer, indicating that he accepted the petitioner’s proposal and agreed to lease the land after the government approved it.
It was also agreed that the lessee would take possession of the land after the private settlements between him and the existing tenants were completed.
In addition, if no settlement is made, the settlement officer stated that he would make arrangements to evict the renter. Finally, on July 20, 1917, the government gave its approval.
Although a draught had been developed, a formal registration was yet to be completed. The plaintiff then built up the factory and bungalow, and he continued to pay the rent for nearly two years, even though the management was moved to that of the talukdars, as per the deed.
In 1924, the plaintiff gave the defendant, Hormusji Jamshedji, a mortgage or ijaradar on the property and buildings on it, making them the mortgagee.
In 1933, when they were unable to pay the rent, the mortgagee acquired control of the mortgaged property using equity of redemption. All of Manilal Maganlal’s rights were transferred to the defendant as a result of this.
The plaintiff now claims that because the defendants do not have a permanent lease in their name, they are unable to take ownership of the land and has filed a lawsuit to evict them.
So, the defendants claimed the land, claiming that because the plaintiff did not have a registered lease document, they were never the lessees in the first place and were only trespassers, and that the Talukdar Settlement Officer’s lease was also contested.
As a result, the defendants argued that they were the long-term tenants and that the plaintiff should be evicted.
So, the Trial Court determined that the lease agreement was invalid and that the equitable part performance theory did not apply in this case, implying that defendants were the rightful tenants.
Furthermore, the Assistant Judicial Magistrate stated that Section 53 A is a complete answer in this case, and that because there was a written agreement with the government by annexure Ex.181 it can be taken as evidence for the same, even though no registered deed is available.
Plaintiffs had a lease agreement and thus had the doctrine of estoppel, so the defendants filed an appeal.
However, the Bombay high court overturned this decision, stating that the defendants treated the plaintiffs as landlords because they were paying their rentals, but that they would not be permanent lessees.
Because there was no primary proof of a registered lease deed, the high court dismissed the plaintiff’s claim, ruling that the defendants lacked legal standing. As a result, both parties were harmed.
The Supreme Court discussed Section 53A of the Transfer of Property Act 1882 in detail, with the clause stating that any written agreement, i.e., a signed contract by both parties, must be present, and some work must be done in line with the part performance.
As a result, Ex. 181 was considered secondary evidence in this case, and it was said that there was a written contract in the government files that was signed by both T.S.O. and Manilal.
As a result, this was deemed sufficient evidence for the same.
It is also stated that the equity of part performance, which is drawn from English law, is actively implemented in the laws of lease termination. Hence, there was no need to execute a registered lease deed.
As a result, there existed a lease agreement, and the defendant can lease it again once the deed is registered and the plaintiff relinquishes all rights.
As a result, the Court decided that a formal deed isn’t required if both parties sign a written agreement that can be proven by proof.
Thus, the High Court’s ruling was overturned, and the Assistant Judge’s decision was reinstated.
What are the Types of Agreements Under Indian Contract Act,1872
Moolchand Bakhru & Anr v. Rohan & Others[10]
In this matter, Mr. Moolchand had written many letters to Mr. Bhagwan Das, requesting that he sell his half-share interest in the property because he needed money.
Respondents, on the other hand, took possession of the property, claiming that the letters were a contract to give the property away, and that Bhagwan Das now has adverse possession of the entire property.
Therefore, the aggrieved plaintiff went to Court, where the High Court stated that the defendants could not be given possession because of adverse possession, but rather because of letters written by Moolchand to Bhagwan Das stating that the property should be sold, but that they would continue to be in joint possession with no mesne profits to be paid to the plaintiff.
As a result, the case was taken to the Supreme Court.
The Supreme Court noted that the letters written by Moolchand to Bhagwan Das stating that he would give his half share of the property in exchange for some money could not be considered a written agreement between the parties, and that it could only be considered an oral agreement.
Furthermore, the term of the agreement must be seen and its reasonableness must be determined before deciding whether it is an oral or written agreement. In this situation, he has written about selling his part of land, but the other essentials of a sale agreement have not been met.
As a result, the requisite terms cannot be determined from the letters, and they will not be covered by Section 53A as letters construed only as an oral agreement.
This was also important because, under Section 53A, the transferee must be provided possession in order to protect his interest in part performance, and Bhagwan Das was never given possession, even after a written agreement was established.
Hence, the respondents in this case were required to pay mesne profits to the plaintiffs because they were not in possession of the property, as stated by the Supreme Court in overturning the High Court’s decision.
Union of India v. M/s K.C. Sharma & Co.& Ors
Here, Gaon Sabha Luhar Heri, Delhi, owned 36 bighas and 11 bhiswas of land.
The Government (Appellants) acquired this land under sections 4(1) and 6 of the Land Acquisition Act of 1894.
So, in this case, the respondents (K.C. Sharma) claimed that the land was given to them on lease by Gaon Sabha, i.e., the Gram Panchayat, and that because the government now owns it, they must compensate the respondents under the award proceeding instituted by the respondents in the Civil Court under sections 30 and 31 of the Land Acquisition Act, 1894.
The land had been allocated by the gramme sabha to be cleared of’ shora’ and made cultivable. As a result, they had been farming the land and removing all ‘shora’ in accordance with this.
As a result, the case was taken to the city Civil Court in 1989, where the extra District Judge Delhi ruled that the government is obligated to compensate the respondents for 87 percent of the loss experienced as a result of the acquisition, and the gram panchayat for 13 percent.
The government claimed in 1992, in support of this order, that the respondents were not the lessees of the Goan Sabha, and even several locals agreed.
As a result, a Writ of Habeas Corpus was filed in the Delhi High Court.
The High Court dismissed the writ in 1997, asking the Additional District Magistrate to intervene under section 18 of the Land Acquisition Act of 1894, and deciding whether or not a separate action was required.
At this point in the proceedings, Gram Sabha has submitted an application under Order 1 Rule 10 to add a person as a party to the investigation.
Then, in 2005, Union of India filed a separate litigation in the Delhi High Court, which was then transferred to the Additional District Judge because of the pecuniary jurisdiction.
They argued that the Court’s 1989 order was founded on fraudulent facts.
They further claimed that the ex-Pradhan worked with the respondents and that the land was only supplied for a five-year term.
In 2006, the Delhi High Court ruled that the Union of India had failed to prove the fraud due to a lack of evidence.
At the time of the land transfer, an acceptable agreement was reached and signed by all parties.
Furthermore, the land auction at the time was conducted through fair bidding and was regulated. As a result, there is no evidence of cooperation.
The Respondent’s Appeal was granted, and the Trial Court’s decision was reversed.
Further, the case went to the Supreme Court, where the ASG on behalf of the appellant claimed that the respondents were not entitled to 87 percent of the compensation and that the Trial Court’s Judgement and decree were proper, but the High Court reversed it without considering that the judgement was obtained through fraud.
They claimed that the compensation award was gained through fraud, and that because there was no lease document, it could only be interpreted as a permission to labour on the land, there was no reason to compensate them. T
he respondent claim that the evidence on record shows that Goan Sabha intended to lease the land, and that the land was pleased with the agreement of the Dy. Director Panchayat.
And because the respondents have owned land for over 30 years, there was no need to discuss a licence.
Even though no lease deed was executed or recorded, the learned Senior Counsel stated that the respondents are entitled to such possession of land and benefit under section 53 A of the Transfer of Property Act, 1882, based on the doctrine of part performance.
The High Court’s ruling on fraud was maintained by a three-judge bench consisting of J. Ashok Bhushan, J. R. Subhash Reddy, and J. M.R. Shah on August 14, 2020, because there were insufficient evidences.
The Trial Court’s ruling for compensation from 1989 was upheld.
According to section 53 A of the Transfer of Property Act, the respondents were placed in possession of the land by way of lease, and it makes no difference whether there was a lease deed or not because there was an agreement and the partie’s intents were apparent, as the facts clearly establish Dy.
The lease was also approved by the board of directors.
As a result, the court stated that those who have acted on a legitimate sale of contract but do not have a valid registered deed in their favour will have their right of possession safeguarded.
As a result, regardless of whether there is a registered or documented sale deed or not, the transferee has the right to safeguard his ownership from the transferor under Section 53A of the Transfer of Property Act, 1882.
Scope of Doctrine of Part Performance
Only written and valid contracts are covered by the Part Performance Doctrine. It does not apply to invalid or oral agreements. The transferor must sign the contract and it must be in writing.
The transferee has taken ownership of the property as part of a contract, and he or she must be ready and willing to fulfil his or her half of the bargain.
This part applies not only to sales contracts, but also to all other types of transfer for consideration contracts.
The doctrine is designed to be employed as a shield, not a sword, according to the ruling in Jacobs Private Limited vs. Thomas Jacob[11].
Legal Effect of the Amending Act (48 of 2001) in Section 53-A
The phrases the contract, though needed to be registered, has not been registered have been removed from paragraph four of Section 53-A of the T.P. Act.
This could imply that the non-registration of any contract to transfer for consideration is not a relevant factor (i.e., not required) for the application of part performance under this clause, and that the defence of part performance can be used even if the document is unregistered.
This, however, is not the case. Sections 17 and 49 of the Registration Act were both altered by the same Amending Act (48 of 2001).
Hence, section 53-A should be interpreted in conjunction with sections 17 and 49 of the Registration Act.
In a sense, the revisions to Sections 17 and 49 of the Registration Act have now included the statute that accomplishes the true goal of altering Section 53-A of the T.P. Act.
The underlying goal of these modifications (Amending Act 48 of 2001) is to ensure that there is no everlasting possession of an immovable property that is not registered.
So, section 53-A of the T.P. Act now requires documentation of certain acts performed in furtherance of contract.
Conclusion
This Doctrine is crucial in safeguarding the transferee’s interests.
When any type of transfer deed is created, it is apparent that the transferee is responsible for paying the payment in exchange for the property.
However, the transferee’s possession should be protected, which is where this doctrine comes into play.
Many times, there is just a mutual agreement or a contract signed on a piece of paper or by any other informal means, and in furtherance of that, the buyer does something so that the transferor cannot encroach or ask for eviction at a later stage.
Such protection, or defence, must be available to the transferee.
Also read: Use of Indian Contract Act in Small Businesses during Pandemic
Edited By: Advocate Komal Sharma, Publishing Editor at Law Insider
References
The Doctrine of Part Performance, Shefali Tejas, Legal Service India
Doctrine of Part Performance & Specific Performance of Contract, Shivam Goel, iPleaders
Comprehending Doctrine of Part Performance, Varnika Singh, iPleaders
- 1968 AIR 794 ↑
- AIR 1995 Bom 113 ↑
- (2007) 6 SCC 650 ↑
- Hameed v. Jayabharat Credit & Investment Co. Ltd and Ors., AIR 1986 Ker 206 ↑
- Smt. Hamida vs Smt. Humer & Ors, AIR 1992 All 346 ↑
- A.M.A Sultan (deceased by LRs) and Ors. v. Seydu Zohra Beevi, AIR 1990 Ker 186 ↑
- Nathulal vs Phoolchand, 1970 AIR 546 ↑
- Sardar Govindrao Mahadik & Anr vs Devi Sahai & Ors, 1982 AIR 989 ↑
- 1 1950 SCR 75 ↑
- AIR 2002 SC 812 ↑
- AIR 1995 Ker 249 ↑