SALE

Section 54 of TPA defines sale as, ‘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.
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. (Nahar Lal v. Brijnath 1928
AC 385)
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.
(National Brake & Electric Co. v. Christensen, CCA Wis. 229 F 564, 570)
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.
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. (Bhabani Sarma v. Narayan Sarma, AIR 2003 Gau 171.)
II. Essentials of a sale
1. Parties
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.
2. Competency
For a valid sale both the buyer and seller have to be competent on the date of the sale.
a. Seller
The seller must have the ownership of the property which he is going to sell.
(Gangotri Bai v. Jeevarkhan Lal, AIR 2006 Chh. 88)
The seller must have a legal title to it only then he can sell the property. (Arjuna
Subramanya Reddy v. Arjuna China Thangavelu AIR 2006 AP 362)
The seller must be competent to contract. (N. Ramchandran v. M. Nayanamalai,
(2007) 3 MLJ 910)
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.
b. Buyer
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
another legal person.
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. (Alama Chand v. Chhajju,
AIR 1923 All 530, 531, Col. 2: ILR 45 All 559: 74 IC 339.)
An agreement between the parties cannot be rendered nugatory on the ground that the
consideration was not adequate. (Sheo Shankar Kr. Khetan v. Widow of Late A.
Prasad, (2007)
Price,49 that is fixed by the contract antecedent to the conveyance is the essence of a
contract of sale,50 and in the ordinary sense connotes money consideration for the
sale of property.51
Where, instead of price, some other valuable consideration is kept, the transaction is
not a sale but can be an exchange or a barter.
52 Where the consideration is money but is not specific, the transaction would still be
a sale. If the transaction on the face of it is complete, it cannot be regarded as a mere
agreement only on the ground that the price is unascertained at that time.

Case In Kewal Krishan v Rajesh Kumar,54 the Apex court observed,55

… a sale of immovable property has to be for a price. The price may be payable in
future. It may be partly paid and the remaining part can be made payable in future.
The payment of price is an essential part of a sale covered by section 54 of the TPA. If
a sale deed in respect of an immovable property is executed without payment of price
and if it does not provide for the payment of price at a future date, it is not a sale at all
in the eyes of law. It is of no legal effect. Therefore, such a sale will be void. It will
not affect the transfer of immovable property

In this case, A, the property owner, executed a power of attorney in favor of his elder
brother. Using this authority, the elder brother executed two sale deeds transferring the
property to his wife and minor sons. However, the court identified key issues:
No Proof of Consideration:
There was no evidence of payment for the property as per the sale deeds.
The wife and minor sons of the elder brother had no earning capacity at the time,
making the claim of consideration implausible.
Sham Transaction:
The transfer was deemed a sham transaction since it involved the elder brother
transferring property to his immediate family without valid consideration.
Court’s Ruling:
The sale deeds were declared void for lack of consideration.
The transaction did not affect the rightful ownership of one-half of the property
belonging to the appellants.
The sale deeds were ruled to confer no legal rights, title, or interest to the elder
brother’s wife and children.

Conclusion: A sale is invalid in the absence of proof of consideration, and transactions

lacking genuine intent are deemed sham and void.

A compromise,57 a decretal amount,58 an advance made by one person to

another,59 or an agreement to protect and defend the property at the purchaser’s
cost,60 is a good consideration for sale. Likewise, a family settlement is a valid
consideration for an agreement to sell.61 Where a son-in-law executed an agreement
for sale in favour of his mother-in-law in consideration of a family settlement, it was
held that it amounted to a valid consideration for the sale.

Price Paid or Promised

The general rule for a sale is that payment of consideration is made at the time the
conveyance is executed. However, this rule can be modified based on an agreement
between the parties. Key points are as follows:
Payment Timing Flexibility:
Payment can occur before, during, or after the execution or registration of the sale
deed, depending on the terms agreed upon by the parties.
For instance, part payment at the time of execution and the remainder at registration
or later is valid.
Essence of Contract:
Price is essential to the contract of sale, but the timing of payment is not unless
explicitly stated in the contract.
Delayed payment does not invalidate the sale if agreed upon in advance.
"Paid or Promised" Clause:
A sale is complete upon registration even if the price is only promised to be paid later.
Payment is not a mandatory condition (sine qua non) for the completion of the sale.
Seller's Remedies:
If the buyer fails to pay the price as promised, the seller cannot cancel the sale or
reclaim possession.
The seller’s remedy is limited to suing the buyer for the unpaid price.
Conditional Ownership:
If the agreement explicitly states that ownership will transfer only after full payment,
registration alone does not transfer ownership.
Relevance of Circumstances:
If the agreement is unclear, surrounding circumstances and the conduct of the parties
will determine the validity of the sale.
In conclusion, the sale remains valid even if the price is paid later, provided this aligns
with the agreement between the parties. However, conditions linked to payment can
affect the transfer of ownership.
 The term “paid or promised to be paid” also suggests that this promise to pay must be
genuine. The buyer cannot escape his primary liability to pay the consideration and if
he tries to evade payment by dubious means, no title would pass from the seller to the
buyer. For instance, if the buyer pays money through a cheque which is dishonoured,
or if there is an assertion in the sale deed that the sale consideration is already paid
and this assertion is false,80 the sale would not take effect
In Ashishsinh Dolatsinh Ran v Jashvantlal Nanchand Shah, the court examined
whether a registered sale deed is invalid if the buyer fails to pay the agreed
consideration to the seller. Key points from the case are:
Facts of the Case:
A sold land to B, but B failed to pay the full consideration within the agreed time.
B then sold the land to C.
A argued that since B did not pay, the sale to B was void, and consequently, B could
not transfer any title to C.
A's Contentions:
A claimed that the sale deed to B was void due to non-payment of consideration.
He argued that since B did not acquire valid title, the sale to C was also void under the
principle that no one can transfer better title than they hold.
Alternatively, A sought to recover the unpaid consideration of ₹40 lakhs from B.
Issue:
The primary issue was whether the failure to pay consideration invalidates a
registered sale deed.
Court's Observation:
Payment of Consideration: The court clarified that non-payment of consideration does
not automatically invalidate a sale deed.
A sale is complete upon execution and registration of the sale deed if the intention to
transfer the property exists, even if payment is pending.
The remedy for the seller in such cases is to sue the buyer for the unpaid price, not to
declare the sale void.
Transfer of Title: Once the sale deed is registered, title passes to the buyer, regardless
of whether the buyer paid the full price, unless there is a specific condition linking
payment to the transfer of title.
Conclusion:
The sale to B was valid despite non-payment.
B, having acquired valid title, could transfer it to C.
A could not claim the transaction was void but could pursue recovery of ₹40 lakhs as
unpaid consideration.
The court reaffirmed that non-payment of consideration affects the seller's right to sue
for the price but does not invalidate a registered sale deed.

4. Conveyance
Section 54 provides for two modes for transfer of property –
1. 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. 2. 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.

5. Registration

Formalities for Effecting a Sale

Section 54 lays down a specific method for the execution of a sale deed with respect to immovable
property and completion of sale. Generally speaking, in a sale, the three requirements of law are
that transfer of property by sale must take place with the help of a validly executed sale deed, by
the transferor in writing, is properly attested, and registered. 100 Till all three formalities are
complied with, no right passes from the seller to the buyer but in case the property is of nominal
value, the sale of property can be completed by a simple delivery of possession of such property. In
such cases, due to the small value of property, the formality of writing, attestation and registration
is dispensed away with, but this does not mean, that immovable property whose value is less than
Rs 100 cannot be transferred by adhering to these three requirements. It is only that writing,
attestation and registration in such cases is optional. 101 The test is the value of the property and
not the amount of consideration or the price. If the property is worth more than Rs 100, but is
being sold for less than this value, the modalities of writing, attestation and registration would be
necessary.
The above-mentioned requirements of executing a formal sale deed so as to confer a valid title in
favour of the transferee are not applicable in case of sale of property at a court auction and a
certificate of sale issued by the court is enough as the purchaser’s document of title

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
Since sale of immovable property becomes complete and effective only when it stands
registered in a written instrument, there may be issues for determination of the market
value of the property where the land also has a building over it, but the owner of the
land does not own the building. Both the title in the land and the building over the
land are separable and vest in two different persons. In Ashok Kumar v Chief
Controlling Revenue Authority,118 the owner sold the land. The land had a hotel
constructed over it and the owner of the land was not the owner of this hotel. It was
held that while affixing stamps, the value of the land only would be included and not
that of the hotel. Further, in such a sale of land, the title with respect to the land only
 will pass and not in the property constructed over the land, as the owner had no title in
the hotel.

Date of Execution not the Determining Criteria

In case of parallel claims over the ownership of the property, the date of execution of
the sale deed is not the sole determining criteria for determining the ownership issues.
In a case from Gujarat,135 A claimed to purchase a land on 25 July 2002. B also had a
parallel claim, through a written deed dated 16 July 1999. The court held that the
ownership issues cannot be decided merely from the dates of the execution of the sale
deeds.
. Intention of the Parties
The general rule of passing of ownership on registration is subject to the intention of
the parties expressed in the contract. A document must be construed in its entirety for
it to satisfy all the requirements of a conveyance of sale as envisaged under section 54
of the TP Act, 1882.136 Where the intention cannot be gathered from the document or
appears ambiguous, extraneous evidence is admissible for clarity.137 An intention
that the deed would be void unless the price is paid in a fixed time is valid, and
accordingly, if the price is not paid within a specific time, the sale would become
invalid

Delivery of Tangible Immovable 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.155 Possession of house can
be given by delivery of keys,156 and that of land by going over to the land.157 An
equity of redemption of the value of less than Rs 100 can be delivered by showing the
boundaries158 or some other overt act signifying the change in possession.159 Where
the purchaser is already in possession of the property then delivery of possession is
complete if the seller by appropriate acts or declarations converts permissive
possession into possession as an owner.

Consequences of Lack of Registration

If there is no registration of the sale deed, no property passes as there is no
transfer.143 Execution of a mere power of attorney or an agreement of sale without a
registered conveyance would not transfer ownership in the property.144 An admission that
the land has been sold will not operate as an estoppel so as to do away with the necessity for a
registered conveyance.145 Title to the land does not pass by mere admission when the Act
requires a conveyance, and the law gives no protection to a person claiming a right under an
unregistered alleged sale.146 An unregistered sale deed can be used as evidence as to
character of possession of the property,147 despite its value,148 such as adverse
possession149 or of co-ownership.150 Sale of immovable property where the value exceeds
Rs 100/ has to be executed with a written, attested and registered document. A sale effected of
such property with the help of an unregistered document in the years 1960 and 1963, would
not be admissible in evidence even for a collateral purpose.151 Where an unregistered sale
deed was accompanied by a money receipt stating that the transferor had received a specific
amount as consideration for the land that he had sold to B, without any registration or revenue
stamp, it was held that the document did not affect a valid sale in favour of B. In such cases,
even if possession were delivered to B, he would not be entitled to the benefit of the doctrine
of part performance.152
In Sudarshan Mandal v Bhushan Mandali,153 the suit tank was registered in the name of
three persons jointly. An Agreement was executed by one of the co-owner, D in favour of
one A which entitled them to get 50% income derived from D’s share. The value of the tank
was of more than Rs 100 and therefore the document creating the right was required by law
to be with the help of a registered document since the right to catch and carry away fish is a
right in profits–e-pendre and is immovable property. This unregistered agreement to catch
and carry fish in favour of A since unregistered neither created any right nor it extinguished
the title of the co-owner. Thus, it was held that A was not entitled for permanent injunction
declaring their fisheries rights.
Again, in Vakacharla Veeraiah v State of Andhra Pradesh,154 it was held that a purchaser
under an unregistered sale deed does not acquire any right or interest in the immovable
property in view of section 54 of the TP Act, 1882. Where the property is subsequently
notified by the government and is acquired for public purposes, such a person cannot claim
any compensation on the basis of its mere possession.

Contract for Sale

A contract of sale must be based on a mutual agreement between the seller and the buyer.
(Misabul Enterprises v. Vijaya Srivastava, AIR 2003 Del. 15.) 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. (Raheja Universal Ltd. v. NAC Ltd., 2012 4 SCC
148)
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.

While a sale is a transfer of ownership, a contract for sale is merely a document creating a
right to obtain another document, namely a registered sale-deed to complete the transaction of
sale of an immovable property.
in Ramesh Gaikwad v Lalitha Srikrish,189 the court held,
it is thus clear that a transfer of immovable property by way of sale can only be by a deed of
conveyance (sale deed). In absence of a deed of conveyance (duly stamped and registered as
required by law), no right, title or interest in an immovable property can be transferred.190
Further, any contract of sale (agreement to sell) which is not a registered deed of conveyance
(deed of sale) would fall short of the requirements of sections 54 and 55 of the TPAct and will
not confer title nor transfer any interest in an immovable property (except to the limited right
guaranteed under section 53A. According to TPAct, an agreement of sale whether with
possession or without possession is not a conveyance. Section 54 enacts that sale of
immovable property can be made only by a registered instrument and an agreement of sale
does not create any interest or charge on its subject matter.191
A contract of sale is different from a sale, as it need not be registered.192 It does not create a
charge or an interest in the property. It is merely a document or an agreement that gives a
right to obtain another document, i.e. a sale deed. A sale operates by itself and without
delivery to transfer property in goods sold. The word “sale” connotes both contract and
conveyance or transfer of property. The distinction between contract of sale and agreement to
sell lies in the transfer of property in a thing from one person to another, for a price. A
registered sale deed alone conveys a valid title over the property, but a sale agreement does
not create any valid title. As a contract for sale is not the same as a sale and is not required to
be compulsorily registered and title remains with the vendor, but if an agreement of sale is
coupled with delivery of possession in part performance of conveyance, rights created under
this document requires compulsory registration as this agreement of sale partakes the
character of a conveyance and would require both registration and stamp duty.193 However,
some equities do arise in favour of the transferee.
For instance:
 (i)Where, despite an agreement of sale, the property is transferred to another person,
the subsequent transferee with notice of the earlier transaction holds the property in
trust for the prior agreement holder.194
 (ii)A suit for specific performance can be granted on the basis of an agreement of
sale.195 But if the contract of sale is subject to future negotiations for finalisation of
more terms of contract for sale,196 such a suit cannot be granted.
 (iii)A contract for sale does not create a title in immovable property, but if in
furtherance of this contract, possession has been delivered to the transferee, and if
other conditions laid down in section 53A are satisfied, the transferee is entitled to
protect his possession and is also empowered to restrain a trespasser from interfering
with his peaceful possession of the property.

Contract of Sale does not Create a Charge

An agreement of sale does not of itself create any interest or charge on such
property201 even after a decree for specific performance has been passed with respect
to it.202 All that a person gets is a right of litigation on this basis.203 A person who has
contracted to buy the land is not entitled to mense profits204 or to apply to set aside an
execution sale of the same property.
 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 Does not require registration
immovable property of Rs. 100 or more

Distinction between sale and Exchange

(i) Sale is a transfer of ownership for a price. An exchange also implies a transfer of
ownership but not for a price.
(ii) In an exchange, the ownership one thing is transferred for the ownership of
another thing, neither thing being money. In a sale, the price is always money.

RIGHTS & LIABILITIES OF BUYER AND SELLER

Section 55 of the Act, “in the absence of a contract to the contrary”, defines the duties,
liabilities, and rights of both the buyer and seller, respectively, where there is a transfer of
immovable property. The main objective behind Section 55 is to ensure fair dealings, prevent
fraudulent acts, and keep the property in circulation (avoid the property becoming stagnant
and going to waste).
It is important to note, that Section 55 is applicable only where there is no contract to the
contrary – which implies that as long as there is a clause in the contract of sale outlining the
rights, liabilities, and duties of the buyer and seller, there is no need for the provisions of
Section 55 to apply.
Seller’s duties or liabilities before the sale
1. Liability to Reveal Fault:- to disclose to the buyer any material defect in the
property 1[or in the seller’s title thereto] of which the seller is, and the buyer is not,
aware, and which the buyer could not with ordinary care discover; In the
Case “Ganpat Ranglal V/s Mangilal Hiralal” High Court held that the seller is not
bound to disclose such faults which is really known by buyer or otherwise he is in
know of the information.
What is a material defect?
A material defect is a factor that can affect the decision of the buyer on whether to buy a
certain property or not, once he becomes aware of it. Material defects can be of the following
types:
Something which interferes with or obstructs the enjoyment of the property;
 Failure to disclose a defect in the title;
  Non-disclosure of street alignment, lack of right of way, or non-existence of
independent passage to the property;
 Right of way of public which cannot be discovered on first inspection of the property;

2. Defect in title
It is the duty of the seller to convey a good title to the buyer. However, the burden of
proof to show that there has been non-disclosure with respect to a defect in the title
lies with the buyer.
In some cases, there is a defect in both the property and the title. For example, when
the property which is the subject-matter of the transfer, is illegally built on
government land. Consequently, the seller receives a notice of demolition for the
illegally built property.

3. Liability to Submit Document:-

to produce to the buyer on his request for examination all documents of title relating
to the property which are in the seller’s possession or power

4. To answer relevant questions as to title

to answer to the best of his information all relevant questions put to him by the buyer
in respect to the property or the title thereto; in the case of Laxmidas & Company
V/s D.J. Tata it has been held by the Mumbai high court that if the seller does not
answer for such questions then the contract may be rescinded by the buyer.

5. To execute conveyance
Conveyance is the legal process of transferring the property from the seller to the
buyer. The conveyance is executed before the execution of the sale deed to complete
the process of the sale. Section 55(1)(d) stipulates that the buyer must tender the
instrument.

6. Liability to Protect Document:- between the date of the contract of sale and the
delivery of the property, to take as much care of the property and all documents of
title relating thereto which are in his possession as an owner of ordinary prudence
would take of such property and documents.

7. To pay the outgoings

If there are any encumbrances on the property then it is the seller’s duty to clear them
up before the execution of the sale deed. Regardless of whether the seller has
knowledge of the encumbrance or not, the seller still has to resolve it. The buyer has
the right to enforce this duty on the seller through Section 69 of the Indian Contract
Act, 1872. The seller has to pay any rents or charges accrued to the property before
the date of execution of the sale deed. The seller also has the duty to deal with public
charges, and in cases where necessary, gain the permission of the statutory authority
to make the sale.

Seller’s duties after the sale

The following are the seller’s duties/liabilities after the sale of immovable property:-
1. To Deliver the Possession:- to give, on being so required, the buyer, or such person
as he directs, such possession of the property as its nature admits; in the case Darpan
 V/s Kedar Nath it has been held that if Seller does mistakes in delivering up to
possession the buyer can file a suit against seller.
2. To covenant for title
It is the duty of the seller to deliver a good title to the buyer, free from any defects or
problems. In order to enforce the right of specific performance against the buyer, the
seller must ensure that the title is beyond reasonable doubt and convince the court of
its authenticity.
The seller must have a saleable interest in the property. Where the seller does not in
fact have a saleable interest, even if he is not guilty of fraud, he is still liable to pay
damages to the buyer.
In Ram Swarup and Another v. Fattu (1960), it was held that the buyer need not
inquire into the seller’s title. Mere suspicion of the buyer with respect to whether the
seller’s title holds good or not, does not prevent the covenant from operating. The
English law doctrine – caveat emptor, i.e. buyer beware – does not apply here.

3. To deliver title deeds on receipt of the price

Once the consideration has been paid by the buyer to the seller, it becomes the latter’s
duty to deliver all documents relevant to the property’s title that he owns/holds. The
right to the deeds runs with the land, therefore, there is an absolute transfer from the
seller to the buyer. The buyer needs to be careful to check if there is an unregistered
mortgage with respect to the property and title deeds, and his failure to inquire about
this would amount to gross negligence.
Where only a part of the property is sold, while the seller retains a portion as well, he
is entitled to hold onto the title deeds. Where the property is sold to multiple buyers,
the buyer of the lot of the greatest value gains the right to hold the title deeds.
However, the holder of the title deeds has the duty to furnish said documents to the
other property-holders when asked, at the cost of the one who asked for the deeds.
The individual holding the title also has the duty to keep the title documents in good
condition, safe from damage and fire.

Right to Seller:-
According to section 55(4) of transfer of property act 1882
1. Right to get Rent and Profit:- to the rents and profits of the property till the
ownership thereof passes to the buyer.
2. Right to get Interest on Unpaid buying money:- where the ownership of the
property has passed to the buyer before payment of the whole of the purchase-money,
to a charge upon the property in the hands of the buyer, any transferee without
consideration or any transferee with notice of the non-payment, for the amount of the
purchase-money, or any part thereof remaining unpaid, and for interest on such
amount or part from the date on which possession has been delivered. In “Subba Rao
V/s Vasudev Shastri” the A.P High Court decided that the seller is entitled to get
interest on selling-money only when the possession of sold property is given to buyer.

Liabilities of buyer :-
According to section 55(5) of transfer of property act 1882
1. Liability to disclose facts– To disclose to the seller any fact as to the nature or extent
of the seller’s interest in the property of which the buyer is aware, but of which he has
reason to believe that the seller is not aware, and which materially increases the value
of such interest. In the case of Hazi isha V/s Daya Bhai (A.I.R 1896 mumbai
 522) it has been held that it is the duty of the buyer that he should provide all
information related to ownership which he is in know, to the seller. This arrangement
is based on the principle of equity and relations of believe between buyer and seller.
2. Liability of payment of purchase money- To pay or tender, at the time and place of
completing the sale, the purchase-money to the seller or such person as he directs:
provided that, where the property is sold free from encumbrances, the buyer may
retain out of the purchase-money the amount of any encumbrances on the property
existing at the date of the sale, and shall pay the amount so retained to the persons
entitled thereto.
3. Liability to bear damages– where the ownership of the property has passed to the
buyer, to bear any loss arising from the destruction, injury or decrease in value of the
property not caused by the seller.
4. Liability to pay due amount- where the ownership of the property has passed to the
buyer, as between himself and the seller, to pay all public charges and rent which may
become payable in respect of the property, the principal moneys due on any
encumbrances subject to which the property is sold, and the interest thereon
afterwards accruing due. In the case of Gangi V/s Govinda it was held that the buyer
is liable to pay all the charges after sale. Due amount includes revenue, principal,
interest etc.

Right of Buyer:-
According to section 55(6) of transfer of property act 1882
1. Right to get Benefits, Rents- where the ownership of the property has passed to him,
to the benefit of any improvement in, or increase in value of, the property, and to the
rents and profits thereof; in “Achtak V/s Parmeshwar” it was decided that the buyer
is entitled to get benefits of the maintenance done by seller.
2. Right to get Interest-unless he has improperly declined to accept delivery of the
property, to a charge on the property, as against the seller and all persons claiming
under him, to the extent of the seller’s interest in the property, for the amount of any
purchase-money properly paid by the buyer in anticipation of the delivery and for
interest on such amount; and, when he properly declines to accept the delivery, also
for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel
specific performance of the contract or to obtain a decree for its rescission.
An omission to make such disclosures as are mentioned in this section, paragraph (1), clause
(a), and paragraph (5), clause (a), is fraudulent.

Duties of Seller
Law imposes seven duties on the seller, six prior to the passing of ownership, and one after
the title has passed in favour of the buyer, which are as follows:
 (i)Disclosure of material defects relating to property;
 (ii)Allowing the buyer to examine documents relating to property on request;
 (iii)To answer the related queries or questions of buyer;
  (iv)Execute a proper conveyance in favour of buyer;
 (v)To take care of property and related documents in between the date of contract to
sell and actual execution of sale deed;
 (vi)To give possession to the buyer;
 (vii)To pay rent or public charges due on the property till the date of the sale.
4.2.1.1. Duty of Disclosure
For instance, A has a house that he professes to sell to B. The house has an underground
drain, which makes the foundations weak. It would be a material defect, and if the seller
fails to disclose it to the buyer, the buyer has a right to rescind the contract.
Similarly, A has the title to a house X, but only as a trustee. He professes to sell the
property to B. A is under a duty to disclose the fact that the property that he is trying to
sell, though is in his name, is in fact, the property of a trust. It is a material defect in the
title and must be disclosed to the buyer. A failure to do that would be fraudulent. The
buyer’s omission to ask questions does not relieve the seller of his liability to disclose
material defects.260 If the seller fails to do so, it would entitle the buyer to refuse to complete
the sale.261 There is no duty to disclose such defects of which the buyer has actual262 or
constructive notice,263 but a mistake with respect to a fact material to the property will make
the agreement void.264
Where the property is sold at an auction, it is the duty of the bbank as seller to disclose to the
auction purchaser whether there are any dues such as electricity dues on the property. It is
the principle of caveat venditor, (seller beware) rather than caveat emptor, (buyer
beware) that is applicable. Failure of the bank to exercise due diligence to certify that
property is free from any encumbrance would not make the auction purchaser liable as it is
the duty of the bank to disclose any material defect in property at the time of the auction
sale.265 In Haryana Financial Corp v Rajesh Gupta,266 the property was to be sold by way
of an auction and for this purpose B had deposited the earnest amount with the seller A, on a
clear understanding by way of repeated correspondence indicating that A must ensure an
independent approach road to the unit. A informed B that a clear cut passage/rasta has been
provided to the unit. The passage in fact was not direct and was too narrow. Since A failed to
provide the direct and independent adequate passage to the factory, B did not pay the rest of
the consideration and A after forfeiting the earnest money invited fresh bids for the same. A
division bench of J M Punchi and Surinder Singh Nijjar, JJ, of the Apex court held that in
light of section 55 (1) (a) there was a clear duty on part of the seller to disclose a material
defect, i.e. lack of an independent passage to the factory and they cannot be allowed to take
advantage of their own wrong by forfeiting the earnest money deposited by B.
4.2.1.1.1 Material Defect
The defect must be such that if it was known to the buyer, his decision to purchase the
property would have been fundamentally affected. Such defect may also hamper the
enjoyment of the property. Non disclosure of a street alignment,267 a defect in title,268 or
non-existence of independent passage to the property,269 or a right of way of public on the
property that is not visible from a mere inspection is a material defect. The fact that rooms
and flats constructed were not authorised and were illegal is a material fact, a nondisclosure
of which would attract the application of this section.270 In Sukhdev Kaur v Gurdev
Singh,271 at the time of execution of an agreement to sell, a proposal for notification for
acquisition of the land for establishment of military cantonment was pending before the
government, but was not issued. The seller is not bound to disclose the same, and a failure of
disclosure of this information at the time of conclusion of the agreement to sell would not
amount to non disclosure of a material defect. If the buyer later resiles from the contract on
this issue and refuses to execute the sale deed, the seller would not be liable to refund the
earnest money deposited. A litigation pending in the court with respect to the property that is
proposed to be sold is a material fact. The rights of a bona fide purchaser who purchased the
property in ignorance of the pending litigation in its regard ought to be protected, but the
purchaser must be a bona fide purchaser who bought the property for adequate price.272
4.2.1.1.2 Defect in Title
The primary duty of the seller is to convey a good title to the buyer and therefore, he is bound
to disclose a defect in title, if any.273 The onus of showing a failure to disclose a defect in
title is on the purchaser.274 For instance, a notice received by the seller for the demolition of
the building that was the subject matter of sale as it was illegally extended, is a material
defect both in property as well as of title. Similarly, a notice of acquisition of the property
under the Land Acquisition Act, 1894, or titles saddled with an encumbrance,275 an
easement,276 a party wall notice and an award making owner liable for reconstruction of
building,277 are material defects. A defect does not include a clear case of fraud or sale of
property not belonging to the transferor.278
4.2.1.2. Productions of Documents of Title
The term “possession or power” suggests that he is under a duty to produce all documents
that he possesses and can produce when the buyer requests it. Such documents should be
made available within a reasonable time period.280 Law imposes a duty on the seller to
produce documents for inspection by the buyer and not to give them to the buyer for good.
He is not bound to deliver them to the buyer till he pays him the whole of the purchase
money.281 Production of documents not in possession of the seller can be insisted upon only
by an express term of the contract.282
Where, on the sale and purchase of the land the description in the contract affords a sufficient
and satisfactory identification of the property sold without a plan, the buyer cannot, require at
the expense of the seller, a plan to supplement the description.283
4.2.1.3. Seller Bound to Answer all Relevant Questions
With or even without inspection of the documents relating to the property, if the buyer raises
reasonable questions with respect to the property, the title of the seller or the encumbrances
over the property, the seller is bound to answer the same. In fact, he must answer to the best
of his information all relevant questions284 put to him by the buyer in respect to the property
or the title thereto.285 Failure to do so would entitle the buyer to rescind the contract. The
contract may give a power even to the seller to expressly rescind the contract if such
questions are put up to him that he is unwilling to comply with, yet the duty to make up his
title is attached to him.286
4.2.1.4. Seller to Execute Conveyance
The sale deed has to be executed by the seller. It is he who has to sign the deed. It is his
signatures that are to be attested properly, and it is at his behest that the document has to be
registered. Normally, till registration takes place, the ownership does not pass and therefore,
upon the payment or tender of the amount due in respect of the price, the seller is under a
duty to execute a proper conveyance of the property when the buyer tenders it to him
for execution at a proper time and place. An auction purchaser can seek issuance of the
sale certificate in favour of his nominee and the vendor has to oblige.287 The payment of
purchase money and the execution of the conveyance are presumptively contemporaneous
acts.288 If the time is fixed and an unreasonable delay occurs, the proper course is to give
notice, making time the essence of the contract.289 The requirement of a written notice is
mandatory in case a suit for specific performance is presented in the court as against the
transferor for executing a sale of the property. Even though the purchaser might be ready and
willing to fulfil his part of the contract, in absence of giving a notice to the transferor, he
would not be entitled to the relief of specific performance.290 Both, the obligations to tender
a conveyance291 and to pay the price at the time of the execution,292 are subject to a
contract to the contrary. A vendor is under an obligation to oblige the purchaser and execute
conveyance in favour of the assignee of the purchaser where the conditions of the tender/bid
do not so prohibit, where the contract is not one of personal service or where the purchaser is
not to discharge any obligation to the seller after the execution of the sale deed when the
whole of the bid amount has to be deposited. However, recognising right of assignment prior
to deposit of the whole of the consideration and confirmation of sale would not defeat the
entitlement of the applicant.293
4.2.1.5. Seller to Take Care of the Property before Conveyance
Once the contract of sale has been entered into and the seller knows that the property is going
to be sold to the buyer, still he cannot be negligent towards the property. He is bound between
the date of the contract of sale and the delivery of the property, to take as much care of the
property and all documents of title relating thereto which are in his possession as an owner of
ordinary prudence would take of such property and documents. The position of the seller is
like that of a trustee.294 He must keep the property in reasonable repair and protect it from
injury by trespassers.295 The duty extends to protect the title deeds as well.296 Neglect to
perform this duty will entitle the buyer to a claim of compensation.
4.2.1.6. Seller to Deliver Possession
Once the formalities from the side of the buyer are complied with, the seller has to give, on
being so required, the buyer or such person as he directs such possession of the property as its
nature admits. It is the duty of the seller and he cannot leave the buyer to get the possession
himself,297 notwithstanding, a condition in the sale deed that if no possession is given, the
buyer may get it himself.298 In a sale through the court, it is the court that has to ensure
delivery of possession of property even if there was no prayer to that effect by the buyer.299
There are four classes of possession: possession in consequence of proprietary interest,
possession in consequence of licensory or contractual right and gratuitous or purely
permissive possession. In the case of gratuitous or permissive possessee, a suit of injunction
against dispossession by the owner of premises is not maintainable as such person holds the
property on behalf of the owner and acquires no right or interest irrespective of long
possession. The protection of the court may be granted only if there is a valid subsisting rent
agreement, lease deed or licence agreement in his favour.300 The buyer can institute a suit
for specific performance to get possession301 as the relief is inherent in a suit for specific
performance of contract,302 but he is not entitled to compensation for the expenses incurred
in obtaining the possession subsequent to the sale.303 The nature of possession to be given
would depend on the nature of property in each case, unless any specific delivery is agreed
to.304 If the seller is not in a position to give the possession of the property sold, the buyer is
entitled to rescind the contract.305
4.2.1.6.1 When Possession has to be Given
Possession has to be given when the property passes306 to the buyer, which would generally
be at the time of the execution of the sale deed307 though it may vary from case to case.
4.2.1.6.2 Payment of Price and Handing over of Possession
Ordinarily, it is understood that the seller can retain possession till the money is paid by the
buyer, but it has been held that the transferor is not entitled to retain possession even where
the purchase money has not been paid.308 The right of the purchaser to get possession and
the right of the seller to get the purchase money may be enforced as part of a single
action,309 and if the buyer sues for possession he may be required to deposit the balance
amount in the court failing which his suit will be dismissed.310 The forfeiture of money paid
as part payment of purchase price and not as earnest money is impermissible. The
justification of the forfeiture of advance money being a part of “earnest money” should be
clear and explicit in the contract.311 In a suit for specific performance of the contract for
delivery of possession of the property by the purchaser, if the seller takes the plea that the
remaining money had not been paid, the purchaser must show that he is willing to pay the rest
of the consideration. The court can ask for proof of this intention on the part of the purchaser.
If besides the averment in the plaint the purchaser gives no evidence to show that the amount
was kept ready and available, it would be presumed that she was not ready and willing to
fulfil her part of the contract.312
4.2.1.6.3 Nature of Possession
Delivery of possession of the property would depend on the nature of possession, i.e. if the
property is in possession of the seller, he should vacate it and hand over the vacant possession
to the buyer. Where the property is in occupation of any other person, then, as far as possible,
the seller must get it vacated and give vacant possession to the buyer more so in case of
agricultural land313 or even where the land is in occupation of a trespasser.314 The buyer is
entitled to only symbolic possession and not an actual personal occupation when the property
is in occupation of a tenant315 or a usufructuary mortgagee.316
4.2.1.7. Seller’s Duty to Pay Public Charges
The seller is bound to pay all public charges and rent317 accrued that are due in respect of the
property up to the date of the sale or up to the date of possession, if the parties so
agree.318 He is also under an obligation to pay the interest on all encumbrances on such
property due on such date except where the property is sold subject to the encumbrances, or
to discharge all encumbrances on the property then existing.
4.2.1.7.1 Public Charges
Public charges literally refer to financial or other liabilities such as tax liabilities to the
statutory authorities319 and include government revenue320 and municipal taxes.321 The
public authority levying the charge levies it on the owner, and the property and is not
concerned with the rights of the buyer and the seller inter se.322 The obligation, unless there
is a contract to the contrary, is absolute.323 Such a contract to the contrary must be express
and not implied, as a result whereof the meaning of the term encumbrance would be
expanded.324 These statutory charges cannot be enforced against a buyer who purchases the
property without notice of the same.325
Other Duties of the Seller are as follows:
4.2.1.8. Seller’s Duty to Deliver Property Free from Encumbrances
Conveyance of a clear and good title and delivery of property free from encumbrances, is the
basic duty of the seller. If the sale deed contains a declaration that the property is sold free
from encumbrances, the buyer takes it free from burdens.326 If an encumbrance which ought
to have been paid by the seller, was paid by the buyer, the seller is liable to repay the
same327 irrespective of whether the buyer was aware of such encumbrance or not,328 unless
the buyer has expressly agreed to discharge it himself.329 The buyer is not bound to accept
an indemnity from the seller and if he is dispossessed by the encumbrances he can sue for
damages.330 The seller cannot take advantage of his own wrong, if, due to non-payment of
interest since the contract of sale on the mortgage already created on the property the dues
considerably increase, and he is not in a position to pay them.331 If it is not specifically
mentioned in the sale deed that the property is sold subject to encumbrances, the seller is
liable for all past encumbrances332 but this covenant does not run with the land.333 Where
the buyer has to pay a higher amount to clear an encumbrance, he cannot recover the
difference from the seller.334
A purchaser of property of a company under liquidation is entitled to get a clear title free of
charges or encumbrances, and even if there was an attachment by a statutory authority,
recovery of dues from purchaser would not be proper. As the purchaser had purchased the
property on as is where is basis and had applied for a fresh connection and not transfer of
service connection to its name, he is not liable to pay arrears dues of erstwhile company for
availing supply.335 In Carbon Resources Pvt Ltd v The Assam Electricity Regulatory
Commission,336 the property was sold under the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993. For the recovery of the outstanding electricity dues of
previous consumers of property sold by the bank it was held that the distributor is not entitled
to proceed against the seller of hypothecated property, i.e., bank but against purchaser who is
the new consumer of same premises in terms of notified conditions. Further, if electricity is
disconnected for non-payment of dues, the distributor cannot be compelled to give electricity
connections to purchaser without making recovery from him.
In an auction sale of the secured assets, the bank is obliged to disclose any dues on secured
assets in notice of sale and deliver property to auction purchaser free from encumbrances. For
failure on the part of bank, to disclose pre-sale property tax dues, the auction purchaser,
cannot be fastened with liability to pay the same after completion of sale and delivery of
possession.337
4.2.1.9. Seller’s Duty to Obtain Permission for Sale from the Statutory Authority
Alienation is a basic incident of ownership. In certain cases, an owner may have to seek
necessary permission of the relevant authorities before he can sell the property. If the seller is
required to obtain permission from the relevant statutory authority before effecting a sale, he
is under a duty to obtain such permission338 or apply for such sanction.339 A failure to do
that would entitle the buyer to rescind the contract.340
4.2.1.10. Covenant for Title
The buyer has a right to receive a good title to the property and the seller shall be deemed to
contract with the buyer that the interest which he professes to transfer to the buyer subsists,
and he has the power to transfer the same. A transferor cannot enforce for specific
performance of the contract as against the buyer unless he gives him a title free from
reasonable doubt341 and which a court would also accept as serious or sufficient.342 Refusal
of the seller to give a title with an absolute guarantee entitles a buyer also from claiming
specific performance of the contract of sale.343 If it turns out that the seller has no saleable
interest in the property, he is liable for damages even if he is not guilty of fraud.344 Mere
existence of contract for sale or a decree for specific performance would not confer a title on
the buyer and even if the buyer has been put in part performance of the contract in terms of
section 53A of the Act, such claim does not confer any title to buyer. The transfer of title
occurs only when execution and registration of document takes place. Any charge or
attachment created over the property of seller prior to the contract of sale would stand with
priority over and above transfer of property.345 The questions regarding the validity of an
agreement and enforceability without redemption of mortgage by transferor in the case of an
agreement for sale of property mortgaged with bank are, therefore, required to be determined
by courts.346
4.2.1.10.1 Representation of a Higher Title
A seller cannot give a higher title than what he has.347 If he professes to transfer personal
occupancy rights, he is not liable if the buyer is evicted by the title paramount,348 but if he
represents an absolute entitlement while he does not have it, he is liable in damages for
breach of contract.349 Sale of non-transferable cantonment land as if he is absolutely
entitled,350 or a land subject to an encumbrance sold as free from encumbrances,351 or sale
of a mortgage debt under an invalid mortgage352 will make the seller liable for damages.
4.2.1.10.2 Improper Description of the Property
A covenant of title does not extend to the mis-description of property,353 but if a
misdescription is discovered before the conveyance is executed, the purchaser is entitled to
rescind the contract or claim damages354 where the mis-description is substantial and claim
compensation only if it is minor.355 There may be a special covenant in the deed for
compensation of errors which entitles a purchaser and even a sub-purchaser for damages.356
4.2.1.10.3 Buyer’s Duty to Inquire into the Title
The buyer must satisfy himself with respect to the competency of the transferor to transfer the
property. His credentials as the owner of it must be thoroughly checked by the prospective
purchaser. In Jagadambai v Suresh Kumar,357 A, projected himself as the owner of the
property left by F under a Will, claiming to be his son, while in fact the claim was
unfounded. F’s wife was able to prove to the satisfaction of the court that A was a helper,
whom F had kept with him since childhood for taking his care. The court held that it was
upon the prospective purchaser B to verify the credentials of A and the documents relating to
his parentage and having failed to do so, B cannot be given the title of a bonafide purchaser
of the property.
4.2.2. Contract to the Contrary
An implied covenant may be superseded358 by a contract to the contrary359 with clear and
unambiguous expressions.360 Such a contract cannot be oral as that is inadmissible in
evidence.361 The onus of proving a contract displacing presumption of contract for title is on
the seller.362 An express stipulation to compensate the purchaser for defect in title does not
exclude implied covenant for title and the buyer is entitled to maintain a suit for refund of the
purchase money.363 Where a suit for money is based on an express covenant contained in the
deed,364 or in case of an agreement to sell by a mortgagee when it does not extinguish the
equity of redemption, the buyer is not liable for damages, but only to return of purchase
money.
4.2.3. Covenant for Quiet Enjoyment
An express covenant for quiet enjoyment does not wipe out the statutory covenant for
title365 but the usual express covenant for title includes a covenant for quiet
enjoyment.366 A covenant to refund the purchase money in case of subsequent dispossession
does not apply to an eviction by a pre-emptor.367 There is no breach of quiet enjoyment
covenant where no possession was delivered and no subsequent dispossession.368
In case of an express covenant for quiet enjoyment, limitation will run from the date of the
disturbance.369
4.2.4. Sale by a Person in a Fiduciary Capacity
Where a person makes the sale in a fiduciary character, he shall be deemed to contract with
the buyer that the seller has done no act whereby the property is encumbered or whereby he is
hindered from transferring it. An implied covenant does not apply in case of a guardian
selling on behalf of the minor.370
4.2.5. Benefit of the Covenant to Run with Land
The benefit of the implied covenant annexes to and goes with the interest of the transferee as
such, and may be enforced by every person in whom that interest is for the whole or any part
thereof from time to time vested. The covenant for title runs with the land371 and is also
enforceable by a pre-emptor in whom the property vests.372
4.2.6. Consequences of Breach
Any omission to make a disclosure is fraud,373 and where a person discovers the material
defect after the conveyance, he has to make out a case for fraud to set aside the sale.374 The
measure of damages for breach of covenant of title is the market value of the land on the date
of eviction.375
4.2.7. Delivery of Title Deeds
Where the whole of the purchase money has been paid to the seller, he is bound to deliver to
the buyer all documents of title relating to the property, which are in the seller’s possession or
power.376 The right to the deeds goes with the land, which includes a right to kabuliyat and
counterpart leases.377 If the property is subject to an unregistered mortgage by deposit of
title deeds, and the purchaser does not make any demand for the title deeds the purchaser
would be guilty of gross negligence. He would be imputed with constructive notice of the
prior mortgage and even an encumbrance certificate showing no mortgage does not help
him.378
4.2.8. Delivery of Title Deeds in Case of Multiple Transferees
In case the property is sold to more than one person, or the seller sells part of the property and
retains part of it himself, a question may arise, as to whom should the title deeds be delivered.
The law is that if the seller retains any part of the property comprised in such documents he is
entitled to retain them all and where the whole of the property is sold to different buyers, the
buyer of the lot of greatest value is entitled to such documents. But the seller, and the buyer
of the lot of the greatest value is bound upon every reasonable request by the buyer or by any
of the other buyers as the case may be and at the cost of the person making the request, to
produce said documents and furnish true copies thereof or extracts therefrom as he may
require. In case the sales are at different times, the last purchaser will be entitled to all the
documents.379 In the meantime, the seller or the buyer, as the case may be, of the lot of the
greatest value, shall keep the said documents safe, uncancelled and undefaced unless
prevented from doing so by fire or other inevitable accident.
4.2.9. Rights of Seller
The corresponding rights of the seller are as follows:
 (i)To rents and profits till passing of ownership; and
 (ii)To payment of money in case the ownership passes before such payment.
4.2.9.1. Rent and Profits
Where the property is in occupation of the tenants or otherwise yielding income, the seller is
entitled to the rents and profits of the property till the time ownership thereof passes to the
buyer, despite an agreement to sell the property which passes no title to the prospective
purchaser.380 Possession is to be given to the buyer when ownership passes.381
If the buyer takes possession before completion of sale he will take rents and profits, but pay
interest on the unpaid purchase money.382 The new owner has the use and possession of the
property, and the former parting with this property has an interest on the price,383 but if the
ownership passes and the seller retains the possession, he is not entitled to interest384 on the
unpaid money,385 and must account to the purchaser for the rents and profits of the
land.386 The same person cannot enjoy both the rent and profits of the land as also the
interest on the money.387 The rule that possession and interest are mutually exclusive is
applicable to a case of compulsory acquisition, and owner is allowed interest on price from
the date on which he is dispossessed.388
4.2.9.2. Payment of Money and Charge Over the Property
The seller is entitled to the full consideration as agreed upon between the parties. The money
must be paid within a reasonable time period unless a specific time has also been stipulated in
the contract. It must be remembered that time is the essence of the contract if the contract
says so, and a buyer would commit a breach of contract if he does not pay within the
specified time. In a case from Andhra Pradesh,389 in an agreement to sell, it was stipulated
that the buyer would pay the first instalment of money by a specific date. The transferee made
an oral assurance for the payment of money, but did not make any deposit. The court held that
this oral assurance was not sufficient, and even a deposit of money after a court order does
not indicate that he was willing to fulfil his part of the contract. Accordingly, a prayer for
specific performance of the contract was denied to the transferee.
Where the ownership of the property has passed to the buyer, but before the payment of the
whole of the purchase money, the seller is entitled to a charge upon the property in the hands
of the buyer. If the buyer transfers the property, even then this charge can be enforced against
any transferee without consideration or any transferee with notice of non-payment for the
amount of the purchase money or any part thereof remaining unpaid. The seller is also
entitled to the interest on such amount or part of it from the date on which the possession has
been delivered. A seller’s charge for unpaid purchase money comes into existence not at the
date of contract for sale, but on the completion of the conveyance.390
In Praleen Chopra v Honey Bhagat,391 A who was the owner of property executed a sale
deed of the same in favour of B for a sum of Rs 7 crores. Out of it, Rs 4 crores were paid
to A by B after raising a loan from the bank and mortgaging this very property. As he was
unable to repay the loan to the bank, the bank caused the property to be sold. At this
time, A sought cancellation of the sale deed on the ground that full payment has not been
made and therefore no one, i.e. either B or anyone deriving title from him can sell the
property. The court dismissed her contention and held that since after registration, the title
vested in B the remedy available with A is not cancellation of the sale deed but to sue for
balance payment, either B or anyone with notice of non-payment of unpaid amount.
The rule does not apply in case of oral sales392 or to lease393 and a transferor has no charge
on the unpaid part of the consideration.
A seller’s charge is not extinguished by execution of a promissory note for unpaid
money.394 A sum of money kept with the buyer under a sale deed,395 or an agreement to
pay an additional amount to be paid to the vendor if the property yielded higher
income,396 or the reconveyed village by the mortgagee who has purchased the entire
mortgaged property to the mortgagor,397 is a portion of the unpaid money and a charge on
the property. A seller is not entitled to the interest on the unpaid purchase price if he does not
deliver possession,398 but if the buyer accepts an alternative property in substitution to the
original, the seller must be paid the interest on the unpaid money.399
The seller is not empowered to forfeit the earnest amount paid by the buyer without notice in
case of non-payment of the balance amount by him, and without there being a clause in the
contract to that effect. The court may direct the seller, to return the earnest with interest in
such cases to the buyer.400
There is a difference between earnest money and advance amount. In Sunil Jain v Vishal Ram
Sahu,401 A under an agreement to sell the property agreed to purchase a plot of land
from B for developing and selling plots and paid an amount of Rs 1.25 lakh. There was no
stipulation in the contract that the advance amount would be forfeited if the sale did not go
through. He came to know subsequently that the land was reserved as a green area and it
would not be possible for him to develop it for plots and flats as was his original intention.
Upon the refusal of A to return the advance amount, the matter went to court. It was held that
such an advance amount that is different from the earnest amount cannot be forfeited by A in
the absence of any stipulations to that effect in the contract. The court said that whether the
earnest or advance amount would be forfeited or not depends upon a stipulation in the
contract. In absence of such a stipulation in the contract the advance amount cannot be
forfeited.
4.2.10. Lien Non-possessory
The lien for the unpaid money is non-possessory,402 which means that a seller cannot retain
possession in lieu of unpaid price.403 This lien is not personal and is transferable. It can be
transferred to an assignee404 only through a registered deed.405 The charge enures in favour
of the unpaid vendor’s assignee also.406 In case of several purchasers, the charge is on the
whole of the property and the seller is not concerned with the portions that each purchaser has
to pay.407
4.2.11. Persons Claiming under the Buyer
The seller can enforce the claim for the unpaid money not only against the property in the
hands of the buyer but also against all other persons claiming under him, if they had notice of
the sale.408 The seller cannot cause the property purchased by a third party to be sold for the
recovery of the unpaid purchase money to which, he, as a decree holder, is not
entitled.409 An admission by seller of receipt of consideration in the sale deed will operate as
an estoppel in enforcement of the charge against a transferee for value410 as such a recital
may give rise to a presumption of payment,411 but if the price was in fact not paid, there
would be no estoppel.
4.2.12. Charge when Excluded
If the seller of an immovable property himself endorses a receipt for purchase money on the
sale deed, he cannot later set up a lien for unpaid purchase money as against a mortgagee for
value without notice under the purchaser.412 A lien is not lost merely by taking a personal
security such as a promissory note, or a bond, or a memorandum of agreement or a mortgage,
unless it is not intended to be a collateral security but is to be treated as the price itself. If the
buyer under the direction of the seller executes a promissory note in favour of a third party
with respect to the unpaid purchase price, the charge of the seller is lost and the buyer
becomes liable to the third party. Even an agreement to pay the balance of purchase money in
instalments,413 or to pay the whole or part of the purchase money to a third party on behalf
of the seller,414 or to his creditor,415 does not imply abandonment of lien, but where the
seller leaves a part of the purchase money with the buyer to be paid by him to his illegitimate
son when he attains majority, his lien is lost.
4.2.13. Purchaser’s Right to Possession Against Unpaid Seller
Although payment of consideration is one of the primary duties of the buyer, in absence of a
contract to the contrary, mere non-payment of money does not prevent the passing of
ownership of the purchased property. The situation would be different if the parties intended
to postpone the operation of conveyance till consideration has been actually paid. Despite
non-payment of price, the purchaser can sue for possession of the property.416 The unpaid
seller cannot retain possession to enforce payment of the money due to him.417
Even if there is an admission in the sale deed that the payment of the purchase money has
been made, the seller is entitled to lead evidence that the buyer has not paid the money either
in full or part of it.418
The lien or charge may be enforced by a sale of the property,419 but it cannot be enforced by
a creditor,420 by a judgement creditor,421 or against a bona fide purchaser for value.422
The seller may also obtain an injunction against the purchaser if the sale is complete, as apart
from his lien, he also has a personal remedy against him.423
In Inderjeet Singh v Nasim Meman,424 A claimed that B had executed a sale deed of the land
in his favour. However, B’s name continued to appear on the revenue records as A failed to
apply for getting the revenue papers mutated in his name nor could prove to the satisfaction
of the court that pursuant to the alleged sale, possession of the property was ever delivered to
him. It was held that A was not entitled to the relief of possession of the property.
4.2.14. Duties of the Buyer
The corresponding duties imposed on the buyer are as follows:
 (i)Disclose material facts, increasing the value of property;
 (ii)To pay purchase money;
 (iii)Bear loss or destruction of property if any after ownership passes to him, and;
 (iv)To pay charges and rent due on the property after ownership passes to him.
4.2.14.1. Buyer’s Duty of Disclosure
The buyer is bound to disclose to the seller any fact as to the nature and extent of the seller’s
interest in the property of which the buyer is aware, but of which he has reason to believe that
the seller is not aware and which materially increases the value of such interest.
4.2.14.2. Payment of Price
One of the primary duties of the buyer is to pay the consideration. He is bound to pay or
tender at the time and place of completing the sale, the purchase money to the seller or such
person as he directs. This liability of the buyer is personal425 in nature and if the seller
refuses to accept it, it is open to the buyer to deposit the money in the court.426
4.2.14.3. Encumbrances on the Property
Normally, the property that is the subject matter of sale should be sold as free from
encumbrance. If the buyer is given an assurance that there is no encumbrance on the property,
but before payment of the price he discovers there are charges due on the property, he has a
right to retain part of the purchase money for the amount of any encumbrances on the
property existing at the date of the sale.427 He can pay this amount so retained to the person
entitled thereto. He can also, in the alternative, discharge it himself and set off the amount
against the purchase money,428 or recover it from the seller by filing a suit.429 If the amount
is greater than the purchase money, he can keep the purchase money as security.430 In case
the seller gives him some money to discharge the encumbrance, the buyer should discharge it
by using the money and return the excess to the seller.431
4.2.14.4. Liability to Bear Losses
Where the ownership of the property has passed to the buyer, any loss arising from the
destruction, injury or decrease in the value of the property not caused by the seller is to be
borne by the buyer. The rule applies even in cases where the possession is yet to be delivered
to the buyer, or the payment of the price has not been made by the buyer. The relevant time
for shifting of the liability to bear losses is the passing of ownership of the property, and not
its delivery of possession.
4.2.14.5. Payment of Public Charges and Rent
The obligation to pay public charges is also transferred along with the ownership of the
property. The rule is that when the ownership of the property has passed to the buyer as
between himself and the seller, it is the buyer who is liable to pay all public charges and rent
which may become payable in respect of the property. The obligation extends to pay the
principal money due on any encumbrance subject to which the property is sold and the
interest thereon after accruing due. Public charges include taxes to be paid to the
municipality,432 and where a mortgagee brings the property to sale, the amount of such taxes
due to the municipality till the date of the sale are to be deducted from the sale
proceeds.433 The body levying public charges does it on the property and not against the
buyer or the seller in particular,434 but as a rule, they are paid by the seller or the buyer
accordingly, as they accrue before the sale by the seller,435 and after it by the
buyer.436 Once the sale is complete, the seller cannot claim a benefit which the buyer derives
from the property,437 and correspondingly has a right of indemnity against the buyer for a
charge levied after the completion of sale.438 Where electricity is disconnected for non-
payment of dues, distributor cannot be compelled to give connection to buyer without making
recovery from him,439 but where the property of a company under liquidation is purchased
on as is where is basis and the buyer applies for fresh connection in its names, the buyer will
not be liable to pay arrear dues of erstwhile company for availing supplies.440
4.2.15. Rights of Buyer
The buyer is entitled to:
 (i)Benefits of improvements;
 (ii)Charge for pre-paid purchase money.
4.2.15.1. Benefits of Improvements
If the value of the property increases in between the time when the ownership in the property
has passed but the price has not been paid by the buyer, the seller cannot demand a higher
price than the one agreed before, and the buyer would be entitled to the increase in the value
of the price of the property. He is also entitled to the benefit of any improvement or increase
in value of the property and to the rents and profits thereof,441 including the repairs carried
out by the seller after the completion of the sale.442 The seller cannot participate in any
benefit that the purchaser derives from his purchase.443
4.2.15.2. Charge for the Pre-paid Purchase Money
In many cases, the seller demands and takes an advance amount from the buyer before the
completion of the sale. It is usually done at the time of an agreement to sell the property and
its quantum may vary from case to case. It may be the full consideration or even a part of it.
The buyer is entitled to444 a charge on the property as against the seller and all persons
claiming under him, to the extent of the seller’s interest in the property for the amount of any
purchase money properly paid by the buyer in anticipation of the delivery and for interest on
such amount, and when he properly declines to accept the delivery, then also he is entitled for
the earnest (if any) and for the cost (if any) awarded to him of a suit to compel specific
performance on the contract or to obtain a decree for its rescission. It creates a statutory
charge445 that arises immediately on payment of the purchase money,446 and can be
enforced by the buyer against the property and even against a subsequent transferee without
notice.447 If an immovable property is charged and converted into another property or
money then the charge will fasten on that converted property or money. The charge would be
available not only against the seller but also as against all people claiming under him.448
The rule embodies principles of equity, justice and good conscience.449 Even the vesting of
the property in the Central Government under the order of compulsory purchase cannot
defeat the buyer’s lien.450 Interest on the purchase money is to be paid from the date of the
payment to the date of delivery of possession.451 Even insertion of a clause like “for any
cause whatsoever” will not permit the seller to take advantage of his wrong,452 but the
charge is not available when the sale is invalid,453 not genuine,454 is in contravention of a
statutory provision455 or the buyer commits a default.456 The buyer’s charge would never
be lost to the vendor even though he has not filed a suit for specific performance on the basis
of agreement of sale. Subsequent compromise entered into between seller and buyer and that
too at time when seller had lost title would not efface statutory charge available to the buyer
under section 55(6)(b).457
In O K Eldhose v N K Shybii,458 an agreement of sale was agreed between A and B. The
buyer B, had claimed that he had paid an earnest amount of Rs 3 Lakhs and the same would
amount to a charge on the property. The facts showed that it was B who was not willing to
fulfil his part of the contract and that the property therefore was already alienated in favour
of C. It was held that B was not entitled to have a charge over the property.
4.2.15.2.1 Buyer’s Refusal to Accept Delivery
If the buyer’s refusal to accept the delivery of the property is not justified, this improper
refusal will result in the negation of the charge over purchase money but the seller still has to
account for it,459 even if the buyer declines to complete the sale due to seller’s refusal to
secure a charge over the price paid by the buyer.460
4.2.15.3. Earnest
Earnest is a part of the purchase money kept as a security461 when the transaction goes
forward. It is forfeited and the seller is entitled to keep it462 if the buyer commits
default.
On the other hand, the buyer gets a refund of this amount by filing a suit463 if the seller is at
default.464 If the seller, who himself is at fault, keeps it, then he would be asked to pay for
the expenses incurred in pursuance of the contract to the buyer.465 A delay on the part of the
buyer is not a default.466 The seller is at default if he fails to make out a good title,467 obtain
renewal of leases in time,468 or to deliver the possession,469 or obtain planned
permission.470 Earnest differs from an advance,471 but generally, the amount paid on the
date of agreement for the performance of contract is presumed to be an earnest.472
4.2.15.4. Non-disclosure Amounting to Fraud
An omission on part of the seller to declare such disclosures as are required by the law to be
disclosed is fraudulent. If the purchaser discovers the defect before conveyance, he can
rescind the contract476 or claim compensation, but if the fraud is discovered after the
completion of the sale, in order to rescind the contract, he has to establish that either there
was a fraud,477 or he had no notice of the defect,478 or that the contract has not been
substantially performed.479 When the sale deed on account of fraud or common mistake fails
to represent the true intention of the parties, the court will rectify it in conformity with the
contract.480
4.2.15.5. Claim for Compensation
The buyer can also claim compensation in cases of an express contract,481 agreement482 or
an implied warranty483 contained in the contract to that effect or for breach of express
covenants of quiet enjoyment,484 collateral warranty,485 covenant for title,486 or condition
to take care of the property.
4.2.15.6. Other Remedies Available with the Buyer
Other remedies available with the buyer are that he may sue for recovering the possession of
the property,487 or he can enforce his charge for the price pre-paid.488 He can sue for
delivery of title deeds,489 or for an indemnity against encumbrance discharged in case of
land free from encumbrance.490

AFTER SALE
Seller’s Liabilities After Completion of Sale
 To give possession to the buyer [Section 55(1) (f)]
o On being required by the buyer, the seller has a duty to give possession of the
property to buyer or to such person as he (buyer) directs. There is an
implied contract to give the possession of the property to buyer.
 To covenant for title [Section 55(2)]
 o In every sale, the seller impliedly undertakes a guarantee that the interest
which he is transferring subsists and he has authority to transfer the same.
Technically, this is known as implied covenant for title.
 To deliver title-deeds on receipt of the price [ Section 55(3)]
o The seller has to deliver the title-deeds of the property to the purchaser after
completion of the sale.
o After sale, the title-deeds are to be passed on to the buyer as a natural
consequences of the transfer of ownership.
o The seller is liable to hand over not only those documents which are in his
possession but also those which are important and within his power.
Seller’s Right After Completion of Sale [Section 55(4)(b)]
 After the completion of sale, if the price or any part of it remains unpaid, the
seller acquires a lien or charges on the property.
 The completion of sale of an immovable property does not depend on the payment of
price, the price or part of it may also be paid after the sale. Therefore, under Section
55(4) (b) the seller is given a right to recover the unpaid purchase-money from out
of the property. This is called as a statutory charge of the seller for unpaid price.
Buyer’s Liabilities After Completion of Sale
 After completion of sale, the buyer has following two liabilities:
o To bear the loss to property, if any, [Section 55(5) (c)]
 If there is any loss to property subsequent to sale, it is the buyer who
shall suffer that loss as owner of property. He cannot hold the seller
to bear the loss unless it is proved that loss was caused by seller
himself.
o To pay the out goings [Section 55(5) (d)]
 After completion of Sale, since the buyer becomes owner of the
property, he is liable to pay the outgoings e.g., Government dues,
rents, revenue or taxes.
 Liability to Bear Losses
 Where the ownership of the property has passed to the buyer, any loss arising from
the destruction, injury or decrease in the value of the property not caused by the seller
is to be borne by the buyer. The rule applies even in cases where the possession is yet
to be delivered to the buyer, or the payment of the price has not been made by the
buyer. The relevant time for shifting of the liability to bear losses is the passing of
ownership of the property, and not its delivery of possession.
 4.2.14.5. Payment of Public Charges and Rent
 The obligation to pay public charges is also transferred along with the ownership of
the property. The rule is that when the ownership of the property has passed to the
buyer as between himself and the seller, it is the buyer who is liable to pay all public
 charges and rent which may become payable in respect of the property. The obligation
extends to pay the principal money due on any encumbrance subject to which the
property is sold and the interest thereon after accruing due. Public charges include
taxes to be paid to the municipality,432 and where a mortgagee brings the property to
sale, the amount of such taxes due to the municipality till the date of the sale are to be
deducted from the sale proceeds.433 The body levying public charges does it on the
property and not against the buyer or the seller in particular,434 but as a rule, they are
paid by the seller or the buyer accordingly, as they accrue before the sale by the
seller,435 and after it by the buyer.436 Once the sale is complete, the seller cannot
claim a benefit which the buyer derives from the property,437 and correspondingly
has a right of indemnity against the buyer for a charge levied after the completion of
sale.438 Where electricity is disconnected for non-payment of dues, distributor cannot
be compelled to give connection to buyer without making recovery from him,439 but
where the property of a company under liquidation is purchased on as is where is
basis and the buyer applies for fresh connection in its names, the buyer will not be
liable to pay arrear dues of erstwhile company for availing supplies.440


Buyer’s Right After Completion of Sale [Section 55 (6) (a)]

 According to Section 55 (6) (a) of the Act, the buyer is entitled to get all the rights
over the property inclusive of all rents, profits, and also any other benefits over the
property.
 The buyer becomes the property owner after completion of the sale or, in other
words, after the transfer of ownership, and he/she is entitled to all the benefits from
the date of transfer of ownership.
 The buyer is entitled to: 4.2.15.1. Benefits of Improvements
 If the value of the property increases in between the time when the ownership in the
property has passed but the price has not been paid by the buyer, the seller cannot
demand a higher price than the one agreed before, and the buyer would be entitled to
the increase in the value of the price of the property. He is also entitled to the benefit
of any improvement or increase in value of the property and to the rents and profits
thereof,441 including the repairs carried out by the seller after the completion of the
sale.442 The seller cannot participate in any benefit that the purchaser derives from
his purchase.443
