Sales of Immovable Property

By Amruta kadam

Transfer of property act (hereinafter referredd as TOPA/ Act) one of the most important branch of property law was passed in the year 1882. An act drafted in the easiest and elaborated way help us in understanding transfer of property laws of India.

To carry out a legitimate transfer of property various legislations have been passed concerning the nature of the property, as far as TOPA is concerned it covers dominantly immovable and some of the movable property.

Transfer of property may be a transfer of an absolute interest in the property or transfer of a limited interest in the property. However, these various transfers under the act take place through various means namely sales, mortgages, leases, exchange, gifts. Out of all, article attempts at explaining SALE as the mode of transfer of property. 

KEYWORDS- immovable property, instrument, registered, attached 

Chapter 3 section 54- 57 of the Transfer of Property Act covers all the aspect of SALE right from defining sale, right and liabilities, marshalling by subsequent purchasers and provision by the court.

A sale is a transfer of an absolute interest in property, movable or immovable property from one person to another in consideration for price, paid or promised; or partly paid and partly promised.

Before understanding the true nature of sale it is pertinent to understand its essentials- 

  1. Parties
  2. Subject matter
  3. Transfer or conveyance
  4. Consideration or price

Both the seller and buyer must be competent to contract under section 11 of the Indian Contract Act, 1872. The Transferor should either be the owner or should have an authority to dispose of the property.[1]

On the other hand power of authority must be given expressly to transfer the property and be a competent seller[2].

Order 21 Rule 37 prohibits an officer or anyone having a duty to perform in connection with any sale from acquiring an interest in the sale property. A Judge, legal practitioner or an officer connected with the court of law are forbidden from purchasing any actionable claim under section 136 of the Act. Minors are considered to be incompetent to become buyer but a sale in favour of a minor is valid.

A guardian with the permission of the court could sell minor’s property and without the permission, such a sale shall be invalid [3]. The subject matter of such sale must be transferable immovable property. [4]

It can tangible or intangible such as the right of ferries. In Transfer of ownership, there must be the transportation of absolute interest in the property by the seller in favour of the purchaser in a manner prescribed by the law. 

Price plays very important as far as the sale is concerned. The term price has not been defined in the act but relying on Commissioner of Income Tax V. Motor and General Stores[5] we can say the price in the ordinary sense connotes money consideration for the sale of the property.

Further, the court held that, in a case where there is another valuable consideration kept the transaction is not a sale but can be an exchange or barter. 

Since the same section talks about the sale as well as the contract of sale, therefore one might lead to confusion placing both the concepts on the same platform.

As a contract of sale is a contract regarding the sale that shall take place on the settled terms of the parties. Contract of sale does not create any charge or interest in the respective property, which is the subject matter of the contract, unlike sale.

Under section 54 of the act, a contract for sale does not create itself any interest in or charge on immovable property. Consequently, the contract creates no interest in favour of the vendee and the proprietary title does not validly pass from the vendor to the vendee and until that is completed no right to enforce preemption arises[6].

On the other hand, a sale is the transfer of ownership in the transferee, it vests ownership with immediate effect. The contract for sale like any other contract can be enforced by a suit for specific performance in appropriate cases and case of a breach, damages can be recovered[7].

In both the cases however the idea of contract stands still. Every transfer of property which takes place via sale, lease, gift in present or future is preceded by a contract. 

SECTION 55-

Section 55 of the act is based on modified Latin maxim caveat emptor: qui ignorare non debuit quod jus alienum emit- let a purchaser who ought not to be ignorant of the amount and nature of the interest which he is about to buy, exercise proper caution.

This section deals with various rights and liabilities of the seller and buyer. These right and duties are correlative to each other. Their rights and liabilities can be well distinguished between ‘before completion of the sale and after completion of the sale’.

While the former are contractual the latter are regulated by the rule that property has been passed to the buyer, the transaction cannot be avoided. The seller must disclose known material defects of the property to the buyer and incase on ommission to disclose such defects it would amount to fraud.

In the sale of immovable property, the maxim caveat emptor has a limited application and it extends to patent defects.[8] Latent defects can further be divided into defects in the property and defects in the title.

Besides defects, the seller has a responsibility to produce the title deed and answer the question put by the buyer as to title. On the sell of the property, the seller has to give possession of property and deed to the buyer on a receipt of the price. The seller has a right to claim rents, profits accrued till the completion of the sale.  

Section 55 talks about an interesting term called Vendor’s Lien, which means right to retain till the dues are cleared. The seller can take charge of the property if the purchase money has not been paid completely.

The charge not being possessor in character, the seller cannot retain the possession of the property. The buyer has the right of lien over the property if the seller fails to complete the sale after receiving the purchase money.

After completion of the sale, the buyer has a right to get an increase in the value of the property, also rents and profits. The buyer has to give the price on the execution of the sale and disclose the facts which materially increase the value of the property. After completion of the sale, any accident or incidental loss takes place such shall be borne by the buyer. 

SECTION 56-

Chapter III constitutes within it an important concept of marshalling which in the context of this section means to ‘arrange’.

The requisites of marshalling are ownership and mortgage of two or more properties to any person. Such mortgaged property is then sold to any person besides the one to whom the property is mortgaged to.

The buyer is entitled to have the owner satisfy the mortgage-debt out of the property or the properties not sold to him before he purchases the property. This can be subjected to a contract stating the contrary.

The rule of marshalling should not be so exercised to prejudice the rights of the mortgagee, any persons claiming under the mortgagee, or any person who has acquired an interest with consideration in any of the properties. The Rule of Marshalling provides the buyer with the right to demand from the owner that the property be free from any and all encumbrances before the buyer purchases the property. 

SECTION 57-

Section 57 has not ever been popular in terms of case laws but it holds a very important place in the Transfer of Property Act. It allows parties burdened by an encumbrance to the sale of immovable property, to approach the court for a declaration.

Declaration of the property is free from any kind of encumbrances on deposit of sums to be adjudged by it; and for the issuance of a conveyance order or vesting order, proper for giving effect to the sale.

It intends to assist the party to the sale of property subjected to an encumbrance to fructify the sale for its fair value after receiving in deposit for payment to the encumbrancer the capitalised value of the periodical charge, or capital sum charged on the property, together with required charges.

Hence we can say that such a section lets the party to the case approach the jurisdiction of the court to complete their contracts, notwithstanding the encumbrances on the property.

However such a section cannot be applied when it comes to a charge or encumbrance already adjudicated by the court and which has become part of a decree or even in a case of adjustment of a decree out of court[9]

CONCLUSION-

To conclude we can say a sale occurs between inter-vivos be it artificial or natural. The sale takes place in the case of tangible and immovable property of not value less than of one hundred rupees or the case of a reversion or other intangible thing, can be made only by a registered instrument.

In case of intangible 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 immovable property takes place when the seller places the buyer or such person as he directs, in possession of the property. 

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  1. (Bishwanath Sahu V. Tribeni Mohan AIR 2003 Ori 189)

  2. (A Bhagyamma V. Banglore Development Authority, Banglore AIR 2010 Kar 63).

  3. (Sarup Chand V. Surjit Kaur AIR 2002 P& H 54).

  4. Section 7

  5. Commissioner of Income Tax V. Motor and General Stores (AIR 1967 SC 200)

  6. (Jhandoo V. Ramesh Chandra AIR 1971 AII 189)

  7. (Baldeo Singh v. Dwarika 1988 AIR Pat 97)

  8. (Shaik Buddan Sab V. Nagamma 1977 A.P. 90)

  9. (Mallikarjuna Sastri v. Narasimha Rao, (1901) ILR 24 Mad 412).