14 Sale of Immovable Property

Definition of Sale

Section 54 provides that 'Sale' is a transfer of ownership in exchange for aprice paid or promised or
part-paid and part-promised.
Essential elements of a valid sale

Transfer of Money Parties must Subject matter Transfer has been

ownership consideration be competent must be made in accordance
immovable property with law

Transfer of ownership: Sale is the transfer of ownership. Ownership is an absolute interest in the
property. It is a sum total of all rights and liabilities of person in the property. Complete rights in he
property are transferred by the seller. It means that seller or transferor is left with no right in the property.
Money consideration: The sale consideration must be money. This money is referred to as 'price' in
Section 54. The term 'price is not defined in the Act but Supreme Court in Commissioner of ncome
Tax v. M/s Motors and Gn. Stores Pt. Ltd., AIR 1967 SC 200 held that the term 'price is used in the
same sense as it has been defined in the Sale of Goods Act i.e. money consideration. It must be noted that
adequacy of price is irrelevant. What sum of money is fixed between the parties is not a relevant factor
under this section.

Price must be referred in the sale deed. Time of furnishing money consideration is also kept
flexible.
Section 54 says that 'price' may be paid at the time of transfer or it can be paid in future. It can also be part
paid at the time of transfer and part-paid in future.
If the consideration is not money then the nature of transaction will cease to be that of 'sale. Fro
example, if the ownership is transferred in exchange of some other property then it will not be termed as
'sale'. It will take the character of 'exchange'. Similarly, when the ownership is transferred without
consideration
it is called 'gift'.
Parties must be competent: Sale consists of twoparties, transferor (seller) and transferee (purchaset,
Both the parties must be competent to contract. Apart from this requirement it is also required that the sele
must have the right to sell the property. Sale consists of transfer of ownership, therefore, the seller must be
theowner of the property because nobody can pass a better title than he himself has. Also, property mus.
be transferable within the meaning of Section 6 of the Act.
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Seller Transferor
Parties of Sale

Purchasser - Transferee
It must be noted that minor is not
competent to contract but he is a competent purchaser. If he nas
Cecnished the consideration and no obligation is outstanding on his part he can
court of law.
enforce the sale through the

Subiect matter: Under Transfer of Property Act, the subject matter of

sale is immovable property.
Sale of movable property is dealt in Sale of Goods Act, 1929.
Immovable property means land, benefits
arising out of land and things attached to carth. The property must be
sufficiently idenified. [Note: for
dailed study on immovable property refer to previous discussion on immovable property in
this book]
Transfer must be made in accordance with law: It is essential for a valid sale that it
must comply
with all the procedural requirements of transfer. Section 54 also deals with mode of
transfer of property.
Section 54 provides that 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
aregistered instrument. In the case of tangible immoveable property of a value less than one
hundred
rupees, such transfer may be made either by:
(a) A registered instrument or
(b) By delivery of the property.
Registration of sale-deed is compulsory in following cases
(a) When the property is tangible immovable property and its value is Rs. 100or more and
(b) When property is intangible immovable property of any value.
When asale is to be completed by registered sale-deed, the gwnership or title is deemed to pass on to
buyer on the date of execution of the sale deed, and not on the date when the deed was registered. Section
47 of the Registration Act provides that registered instrument operates from the time which it would have
Commenced to operate if no registration thereof had been made. It means that although the sale is not
complete until the registration is done, but once registration is done it wll relate back to the date of
execution of sale deed.
Contract for sale
Section 54 provides that a contract for the sale of immoveable property is a contract that asale of
Such property shalltake place on terms settled between the parties. It does not,of itself, create any interest
in or charge on such property. Sometimes, parties are not able to complete the sale in present so they agree
between themselves that the sale shall take place at some future date. In order to have a proof of this
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understanding, they enter into a contract. It is called 'contract of sale'. Parties do not in tend to affect
immediate transfer but they intend to carry out transaction on agreed terms in future.
Section 54 clearly provides that the 'contract of sale' does not create any interest in the property. No
itie or interest is passed when contract of sale is entered into. In English law 'contract of sale' creates an
equitable ownership, but this is not the position in India. It is merely adocument containing a right to obtain
asale deed on agreed terms in future. However, if such 'contract' is not honoured the aggrieved party may
institute asuit for specific performance of contract under Specific Relief Act, 1963 or alternatively aks for
compensation for breach of contract.

Rights and Duties of Buyer and Seller

Section 55provides the rights and liabilitiesof buyer andseller. Section 55 starts with the phrase 'in the
absence of the contract tothe contrary. Parties are free to impose any terms and conditions while entering
into sale transactions. Sale constitutes acontract between the parties. Generally, law provides parties freedom
tocontract ie. parties are free to choose their terms and conditions subject to the limitations prescribed in
the Contract Act or any other law. The phrase in the absence of the contract to the contrary means that
rights and liabilities given under Section 55 willbe applicable only when parties have not agreed otherwise.
Any contract between the parties regarding rights and liabilities will override Section 55.
Rights and duties of seller and buyer have been divided into two categories as follows
(a) Rights and duties before the sale.
(b) Rights and duties after the sale.
Seller's duties before sale: Before completion of the sale, the seller's duties are as follows
(1) Duty to disclose to the buyer any latent material defect in the property or any defect in
his own title [Section 55 (1) (a)]}: The seller is bound to disclose to the buyer any material
defect in the property or the title which the buyer is not aware and which the buyer could not
with ordinary case discover. Such defects are also called 'latent defects'. Latent means hidden or
that which is not visible with ordinary prudence and care. Such kinds of defects are only known
to the seller. If the defect is of such nature which can be easily discovered by ordinary examination,
then it is called 'patent defect'. If it is apatent defect, the seller is not bound to disclose it. The rule
of caveat emptor (let the buyer beware) will be applicable. The defect should also be a 'material
defect. Material defect is adefect of such nature that if known to the buyer he would have either
not purchased it or purchased at lesser price. Supreme Court in Godrej and Boyce Manufacturing
Co. Ltd. v. State of Maharashtra, (2014) 3 SCC430 held that if the buyer knows about the
defectsor could have knownwith ordinary care, then there is no such duty on the seller.
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 Transfer of Property At
Seller's Rights and Duties

Before Sale After Sale

Duties Rights Duties Rights

Duty to disclose to the Entitled to retain all Duty to give Right to recover the
buyer any latent material therents, profits or possession of the unpaid purchase
defect in the property or other beneficial Property to the money from out of
any defect in his own title interest of the the property
buyer (Section 55 (1)
[Section 55 (1) (a)] property ())
Duty to product title Duty to covenant
deeds for inspection for title [Section 55
[Section 55 (1) (b)] (2)]
Duty to answer relevant Duty to deliver title
questions as to title deeds on receipt of
[Section 55 (1) (c)] the price [Section 55
- Duty to execute (3))
conveyance (i.e., to effect
the transfer) (Section 55
(1) ()]
Duty to take care of
property and title-deeds
[Section 55 (1)(e)]
Duty to pay the outgoings
(e-g., Government dues,
public charges, rent etc.)
[Section 55 (1) ())

the buyer demands it., the

(2) Duty to produce title deeds for inspection [Section 55 (1) (b)}:If
bound to produce all
seller is duty bound to produce title deeds tor inspection. Seller is also duty
of the buyer. Title deeds and orber
relevant documents related to the property to the satistaction
information about the property.
documents of the property give ins1ghts into valuable
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) Duty to answer relevant questions as to title [Section 55 (1) (©)]: Buyer must be satisfied
with the ownership of the seller, therefore, seller must answer allrelevant questions relating to the
title so as to satisfy the buyer.

(9 Duty to execute conveyance (i.e, to effect the transfer) [Section 55 (1) (d)}: It is the duty
of the seller toeffect the transfer of the property after payment of price due. It is also called duty
to execute the conveyance. This is done by affixing thumb impression on the sale deed ie.
executing sale deed.
() Duty to take care of property and title-deeds [Section 55 (1) (©)): Between the date of
contract of sale and the delivery of the property, the seller is to take as rnuch care of the property
and all the documents of the property, as the owner of ordinary prudence would take care. This
1s because the property and the documents are to be handed over to the buyer and it is in the
buyer's interest that he must get the property and the docurnents in proper state of affairs.
(6) Duty to pay the outgoings (e.g., Government dues, public charges, rent etc.) [Section
55 (1)(g)}: Since the seller continues to be the owner of the property before the completion of
sale, hence all government dues, public charges, rents etc. are to be paid by the seller. In other
words, he should discharge all the encumbrances. Property must be handed over to the buyer
free from all encumbrances.

Seller's duties after sale: After completion of the sale, seller's duties are as follows
(1) Duty to give possession of the property to the buyer (Section 55 (1) ()]: In sale there is
implied contract to give the possession of the property. As discussed earlier sale is transfer of
ownership and ownership is complete bundle of rights. Possession is an essential aspect of
ownership. Delivery of possession depends upon the nature of the property. It can be actual or
Constructive.

(2) Duty to covenant for title Section 55 (2)]: It means that the seller undertakes a guarantee that
he has the title to the property which he is transferring. In sale there is an implied understanding
that the seller has the title to the property. If the sale is made in a fiduciary character then there is
a deemed contract that the seller has not done anything which has encumbered the property. Thus
covenant for title shall be annexed with the property and shall run with the land. It means that the
benefit of this clause is also available to all subsequent transferees.
(3) Duty to deliver title-decds on receipt of the price (Section 55 (3));:Once the sale is complete
the buyer becomes the owner of the property, therefore, he must get the title deeds of the
property. Accordingly the seller has to deliver the title deeds to the buyer. However, proviso to
Section 55 (3) provide that

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 Transfer of Property Aa
(a) Where the seller retains that part of property with him, which is
of greatest value, and s
property included in the documents, the seller is entitled to retain all the documents with
1S
him.

(b) Where whole of such property is sold to several buyers, the person who
purchases largest
partof the property would be entitled to retain all the documents.
Seller's Rights before Sale: Section 55 (4) (a) provides that before completion of sale the seller is
entitledto retain all the rents, profits or other beneficial interest of the property.
Seller's Rights after Sale: Section 55 (4) (b) provides that after completion of the sale, seller has right
to recover the unpaid purchase money from out of the property. When the sale is complete and the price
remains unpaid the seller cannot refuse delivery of possession. He cannot claim back the possession if
already given. It is because completion of sale does not depend upon the payment of price. Therefore, in
order to safcguard the interest of the seller this section gives the right to recover the money from the
property. It is also called statutory charge. Seller can enforce his right under Section 100 of the Act. Unpaid
price is considered as debt; therefore, seller is also entitled to interest on the unpaid price.
Buyer's Duties before Sale: Before completion of the sale, the buyer is under following duties
Rights and Dutics of Buyer's

Before Sale After Sale

Duties Rights Duties Rights

|
Price is paid and the - Duty to bear loss to The buyer is entitled
- Duty to disclose facts
sale does not take property (if any) toget all the benefits
which materially increases
effect due todefault [Section 55 (5)Xc)] of property as an
the value of property
of seller, buyer has a Duty to pay owner with effect
[Section 55 (5) (a)]
right to recover all outgoings (e.g. from date of transfer
- Duty to pay the price government dues, of ownership.
the sums with
(Section 55 (5) (b)) interest from the revenues, taxes etc.)

date of payment of (Section 55 (5X)]

such price.

disclose facts which materially increases the value of property (Section 55 (5)
(1) Duty to
facts which materially increase the value of he
(a)l: Buver is duty bound to disclose those fraud or misrepresentation. Under
any such facts may be regarded as
property. Concealment of
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Section 55(1)(a) seller has aduty todisclose latent defect and in the same manner a
corresponding
duty iscast upon the buyer in this section. Under this section the duty of the buyer is limitei vs
disclosure of only those facts which are related to title or interest of the buyer.
(2) Duty to pay the price [Section 55 (5) (6)}: As already discussed the completion of sale is ner
dependent on the payment of price. If the formalities of sale are complete, transfer of property
takes place and the buyer has not paid the price or part-price then he has the duty to pay the price.
Buyer's Duties after Sale: After completion of the sale, the buyer is under following duties
(1) Duty to bear loss to property (if any) [Section 55 (5)(c)]: After sale buyer becomes the
owner of the property, therefore, any loss caused to the property after the sale has to be borne
by the buyer. He cannot hold seller responsible for that.
(2) Duty to pay outgoings (e.g. government dues, revenues, taxes etc.) (Section 55 (5)\d):
On the same reasoning, as mentioned above, the buyer is lable to pay all
government dues, taxes.
revenues etc which are incurred after the sale.
Buyer's Rights before Sale: Section 55(6)(b) provides that where price is paid and the sale
does not
take effect due to default of seller, buyer has a right to recover all the
sums with interest from the date of
payment of such price.
Buyer's Rights after Sale: Section 55 (6)a) provides that after completion of sale, the
buyer is
entitled to get all the benefits of property as an owner with effect from date of
transfer of ownership.
Marshalling by Subsequent Purchaser
Section 56 incorporates the rule of marshalling. Marshalling means arranging
something. If the mortgaged
property is sold then the buyer of such mortgaged property has a right to make
certain arrangements with
respect to his property. It provides that if the owner of two or more
properties mortgages them to one
person and then sells one or more of the mortgaged properties to another person then
the buyer is entitled
to claim that the mortgage-debt be satisfied from the property
which is not sold to him. It must be noted
that this right is subject to the contract to the contrary and this right will in no
way prejudice the rights of the
mortgagee or persons claiming under him or any other person who has for consideration acquired an
interest in any of the properties.
For example, A is the owner of two properties X and Y. He
mortgages both the properties to D
After that he sells the property X to C. Now, here C is the owner of the
property which is alreaay
mortgaged to B. Suppose, Bwishes to enforce his mortgage from the both the properties X and "Y then
Ccan insist that themortgaged debt be first satisfied from the
property not sold to him ie. propery 1
But if even after that mortgage debt is not realized then this section will not
prevent B from procceuu5
against theproperty 'X.

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 Transfer of Property Acd
Previous Years' Ouestions of Mains
TWhat is the distinction between a contract of sale and a
Examinations
contract for sale? Is it necessary that a contract rOr Sale is
registered?
[RJS 1969]
Define sale of immovable property. What is distinction between sale and
contract for sale? Does the purchaser
acquire any right in or charge upon the property to be sold by the virtue of the contract for sale of such
property?
Discuss.
(BJS 2018]
Distinguish between sale and exchange. Can money be exchanged with money.
Agives his horse to B in consideration of 50 dollars (United States currency). Will the transaction be a sale or
exchange? (BJS 1979]
Explain the liability of buyer of immoveable property. [BJS 2000]
Define the expression 'Sale', 'Mortgage' and 'Mortgager. JJS 2001]
What is required to be proved by a person claiming to be bona fide purchaser for consideration without notice with
aview to sustain his claim? Explain. UJS 2001]
Define sale. Explain, in detail, the rights and liabilities ofbuyer and seller. [BJS 2006, 2014, M.P. CJ 2006]
What is transfer of property? Distinguish between sale and exchange. [RJS 1976]
What are the rights and liabilities of buyer and seller in asale? What is afraudulent transfer? [RJS 1994]
How a sale in case of tangible immovable property of a value less than one hundred rupees can be made under
Section 54 of the Transfer of Property Act, 1882. [RJS 2016]
What is sale? How is it effected? Whether a contract for sale itself create any interest in or charge on such property?
[MP.J 1996]
liabilities of a seller. [M.P. CJ 1998]
What is sale? Explain. Describethe rights and
What is sale? What is immoveable property? [BJS 2006]

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