Sale

Section 54-55, Transfer of Property Act, 1882

 TRANSFER OF IMMOVABLE PROPERTY BY SALE
Sale : Definition – S. 54, TPA
Sale how made?
Essential of Sale
Contract of Sale
Rights and Duties of Buyer ad the seller. – S. 55, TPA
 SALE – S. 54, TPA
“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 immoveable 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 immoveable 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.
 Sale - Definition
Sale is defined in Section 54 of Transfer of Property Act, 1882.
First para of S. 54 defines Sale:

◦ ‘SALE’ is a ‘transfer of ownership’

◦ In exchange for a ‘price’
◦ “Price paid or promised”, or
◦ “Partly paid and partly promised”.
 Sale how Made?
Second para provide- how sale is to be effected.
Sale of “tangible immovable property” (e.g. Land) having value “more than Rupees 100 or above”, or
“Intangible Immovable property” (of any value) - can be transferred by way of a Registered Sale
Deed only. (example: Right to catch fishes)
Tangible Immovable property – having value “less than Rupees 100”
◦ By a registered sale deed (registration is optional)., or
◦ By delivery of property.
Question: How delivery of tangible immovable property shall take place?
◦ When seller places the buyer or his agent – in the possession of property.
◦ NOTE: A STATE MAY REQUIRE THE REGISTRATION OF A PROPERTY BELOW RS. 100 ALSO. For example: In Uttar
Pradesh- it is mandatory to have a registered sale deed for sale of property having value below Rs. 100
 Contract for Sale?
Agreement to Sell (ATS)

Defined in last para of S. 54-

◦ A Contract for Sale of immovable property is a contract that a sale of such property shall take place on
terms settled between the parties.
◦ ATS/CFS- does not create any right or title in favour of the intending buyer.

◦ Only a valid Sale Deed can create a title in favour of the buyer.

◦ Suraj Lamp Industries v. State of Haryana (SC, 2012)- Held: A valid title in property cannot be conveyed by
an agreement to sell or by a power of attorney. A valid title in property can only be conveyed by way of a
valid Conveyance deed (Sale Deed).
◦ Contract for Sale is not required by law to be registered under TPA or the Registration Act, 1908.
 Essentials of Sale
Two parties: Seller and buyer (also called Vendor and Vendee)
◦ Seller must be competent to contract-
◦ major (18 or above)
◦ of sound mind
◦ Buyer can be minor or person of unsound mind. (capacity to contract not required).
◦ Seller must be qualified to sell the property- not prohibited by any law to sell the property.
(Property attached under a court decree- owner cannot sell).

Subject matter of Sale: Immovable property –

◦ tangible or intangible immovable property
 Transfer of Ownership in exchange for Price-Money
consideration
◦ ‘Transfer of ownership’ in ‘exchange for price.’
◦ Transfer of Ownership - An absolute transfer (All rights
transferred-to buyer- bundle of rights - ownership-
possession-alienation).
◦ Different from Lease/Mortgage – these are limited
transfers.

◦
 In Exchange for Price
◦ What is price? – Not defined in TPA- Sale of Goods Act defines- Price as Money
consideration.
◦ Under TPA also- price refers to money consideration only. Can be currency, coins,
cheques, bank drafts etc.
◦ If any other thing other than money- not a sale but it will be an exchange.
◦ Reference to money consideration is enough. Price may be paid or promised to be paid in
future but must be fixed in the sale deed.
◦ Sale Deed must refer to Price – if no price no sale even if the sale deed is registered.
◦ Inadequacy of price is immaterial. (If lower than the market value). Owner free to sale on
any price.
◦ If grossly inadequate or illusory- the suspicion of undue influence or coercion can arise.
◦ Can be paid on date of transfer or can be promised to be paid on
a future date.
◦ Can be partly paid and partly promised to be paid on a future date.
◦ A part paid at the ‘time of Execution’ of the sale deed
◦ A part paid at the ‘time of Registration’ of the sale deed
◦ A part promised to be paid on a future date after registration of the deed.
◦ Non-Payment of Price:-
◦ Payment of Price is not sine qua non for completion of sale. Ownership may pass if no
condition is placed in the sale deed regarding the passing of title.
◦ But if a condition is placed e.g. that the title would not pass until full and final payment if
made then title/ownership would pass only on the payment of price.
◦ Since s. 54 allows – price can be “paid or promised” – passing of title would not be
prevented by non-payment of price.
◦ After passing of the title if the buyer does not pay- remedy for seller- can claim the
money by filing a suit for recovery and for a declaration that the sale is void due to non-
payment of price.
◦ Court has the power to cancel the sale deed under S. 31 of the Specific relief Act, 1963.
◦ Question: when does a sale gets completed? –
◦ Where registration mandatory – On registration of sale deed sale would
become complete and , the property is considered as passed from the
date of execution of sale deed. The passing of title would relate back to
the date of execution of the sale deed.
◦ S. 47 Registration Act, 1908- provides- “A registered instrument operates
from the time from which it would have commenced to operate if no
registration thereof had been made.”
◦ But parties may agree otherwise- e.g. that the title in the property would
pass only after making final payment. If the deed lays down any
condition- title would pass according to that.
◦ True Test- Intention of the executant of the sale deed (Seller). Registration prima
facie proof that seller wanted to transfer the ownership on date of execution. But if
a condition is laid down in the deed, the title would pass on the fulfilment of that
condition.
◦ The deed may also provide- if the if the price is not paid by a specified date- the
transfer shall be void.

◦ Where registration is not mandatory- the sale can be completed by delivery of

possession of property by the seller to the buyer. The moment buyer takes the
possession – sale becomes complete.

◦ S. 8, TPA provides for passing of property – what all passes on transfer of property.
(All the interests in the property passes which the transferor is capable of possessing
unless a different intention appears.)
 Rights and Duties of Seller and Buyer
Section 55 of the Transfer of Property Act, 1882 provides for Rights and Duties of Seller and Buyer.
(Rights and Duties of the buyer and the seller Inter se)

Rights/Duties before the sale (before passing of the title) and after the sale (after passing of the
title.)
◦ Right of buyer is duty of the seller and vice versa.
◦ Rights and duties are contractual before sale and proprietary after sale.
Parties to the contract can decide rights and liabilities. Parties are free to decide any terms in their
contract.
◦ It’s a contract- parties are free to decide terms/conditions (legal conditions).

If not so decided, rights and liabilities under S. 55 apply (where the sale deed is silent about the
rights and liabilities of parties).
 Duties of Seller (before completion of sale- before passing of title)
◦ Duty to disclose all latent material defects in property or in title to the buyer. -S. 55 (1) (a)
◦ Latent-hidden- which the buyer cannot discover with ordinary care.
◦ Material defect- which may affect decision to buy the property.
◦ (e.g.- Underground drain- latent - Non-disclosure amounts to fraud- buyer can avoid the contract
and claim damages.
◦ A agreed to purchase a property with B. the Buyer finds out that under a decree for partition, a
portion of the property sold was allotted to some third person. This fact was not disclosed by seller
to buyer- fraud- buyer can set aside the sale and claim damages. (Latent material defect).
◦ Easements are regarded as material latent defects- hinders full enjoyment of property. Must be disclosed.
◦ If buyer discovers the defect before sale- can rescind the contract and claim damages.
◦ What is a material latent defect- is a question of fact. –depends upon facts of each case.
◦ Duty to produce all documents of property for examination-
at the request of the buyer. (S. 55 (1) (b)
◦ To produce all title deeds for inspection on demand within reasonable
time. Demand is necessary. Buyer can only inspect. If fails to produce-
buyer can rescind the contract and demand earnest money with
interest.
◦ If deeds not in possession – but within his power- he must make
arrangement for inspection. (e.g. deeds are with bank).
◦ Buyer must not omit: would amount to constructive notice of the fact
contained in the title deeds.
Duty to answer all the relevant questions relating to
property as put to him by the buyer. (S. 55 (1) (c)

◦ To answer all questions asked by the buyer relating to

property and title thereof.
◦ If answers falsely- fraud. If does not answer- buyer can
repudiate the contract for sale.
◦ Duty to take care of the property and the title-documents between the date of contract
and the actual delivery of property. (S. 55 (1) (e).
◦ Between the date of contract and delivery of property.
◦ In between these dates- risks do not pass to the buyer – seller is responsible for any damage to the
property or the title deed. Buyer can claim compensation.
◦ Duty to take reasonable care.
◦ Personal obligation in nature of a trust.

◦ On payment of amount, duty to execute a proper conveyance deed on price being

tendered by the buyer. (S. 55 (1) (d)
◦ To execute the title deeds- on payment or tender of price by buyer for execution of sale deed.
◦ Writing of deed, stamp duty, registration
◦ Reciprocal duties- payment of price and execution of sale deed.
◦ Place and time may be stipulated in the contract of sale. Time can be made essence of the contract.
To pay all public charges (municipal taxes, govt. dues), rent accruing up to
the date of sale as the Seller continues to be the owner until ownership
passes to the buyer. (S. 55 (1) (g)
•Government dues, Municipal Taxes, revenue, water and electricity bills,
development charges, maintenance charge etc.
•Before completion of sale- seller continues to be the owner so his duty to pay.
•Seller’s duty to deliver the property free from encumbrances (liabilities).
•If seller does not pay and buyer pays – the buyer can recover the same from
seller. (S. 69, ICA, 1872-Reimbursement of person paying money due by
another, in payment of which he is interested.)
 Duties of Seller (after completion of sale)
◦ Duty to give possession of property to the buyer or his agent, whenever desired by the
buyer. - S. 55 (1) (f)
◦ On demand by buyer- give possession to buyer or his agent.
◦ Actual-constructive- symbolic possession.

◦ Duty to deliver the title deeds of the property to the buyer on receipt of the whole
price. S. 55 (3)
◦ After receipt of the whole purchase money- shall deliver the title deeds to buyer.
◦ After completion of sale- buyer is entitled to the title deeds.
◦ Till the price is paid fully- he can exercise lien over title deeds.
 Seller’s Right Before and After Sale
Seller’s Right before Sale:
◦ Right to all the rents and profits arising from the property till the ownership gets
transferred to the buyer – S. 55 (4) (a)
◦ Entitled to rents, profits, mesne profits,

Seller’s Right after Sale:

◦ Right to receive unpaid money, if any, from the buyer.
◦ If property delivered to buyer before payment of unpaid money, Seller acquires
a charge over the property in the hands of the buyer/transferee without
consideration.
 Buyer’s Duties and Rights
Buyer’s Duties (before Sale)
◦ Duty to disclose all facts relating to Seller’s interest in property, within the knowledge of the buyer
and not within the knowledge of the seller and which may materially increase the value of property.
◦ Such non-disclosure is fraudulent- Seller may avoid the contract for sale or get the sale deed set aside
if already completed.
◦ To pay the purchase money to seller.

Buyer’s Duties (after Sale)

◦ After transfer of ownership to buyer, buyer is bound to bear any loss arising from destruction,
injury or decrease in value of the property.
◦ After completion of sale, buyer is bound to pay all public charges as buyer has become the
owner.
 Buyer’s Rights Before and After Sale

Buyer’s Rights before Sale:

The buyer is entitled to (Unless he improperly declines to accept the delivery of
property)
◦ A charge over property for the purchase money paid by him in anticipation of delivery of property.
◦ Interest on such purchase money.

And where he properly declines to accept the delivery-

◦ The earnest money and
◦ Any cost awarded to him by Court in a suit for specific performance of the contract or to obtain a
decree for recession of contract.
 Buyer’s Rights after Sale
After completion of sale

◦ Right to any improvement in/increase in the value of

the property and to all the rents and profits accruing
after passing of ownership to buyer.