SALE OF IMMOVABLE PROPERTY

Section 54 of the Transfer of Property Act, 1882 defines ‘sale’ and specifies how a sale of
immovable property may be made. Herein, sale refers to the sale of immovable property whether
tangible or intangible (example – easement rights)

Sale is a transfer of ownership for a money consideration. It implies an absolute transfer of all
rights in the property sold. No rights in the property sold are left in the transferor. 1
Section 54
‘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.

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
1. 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.
2. 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. 2

1
Dr. Avatar Singh, Prof. (Dr.) Harpreet Kaur, Textbook on the transfer of property Act, 6th Edn. Lexis Nexis, pg,
183
2
Bhabani Sarma v. Narayan Sarma, AIR 2003 Gau 171.

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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. 3
 The seller must have a legal title to it only then he can sell the property. 4
 The seller must be competent to contract. 5
 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. 6
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 other 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.

3
Gangotri Bai v. Jeevarkhan Lal, AIR 2006 Chh. 88
4
Arjuna Subramanya Reddy v. Arjuna China Thangavelu AIR 2006 AP 362
5
N. Ramchandran v. M. Nayanamalai, (2007) 3 MLJ 910
6
Dr. Avatar Singh, Prof. (Dr.) Harpreet Kaur, Textbook on the transfer of property Act, 6th Edn. Lexis Nexis, pg,
185

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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. 7
An agreement between the parties cannot be rendered nugatory on the ground that the
consideration was not adequate. 8
The price paid and price promised to stand on equal footing as regards the transaction of a sale.
There is nothing illegal, or contrary to public policy if the parties agree that the payment of the
consideration shall be postponed in certain events, or that it shall not be paid at all if the property
is lost.

Therefore, a stipulation in a sale-deed that the price will be paid within one year, provided that
possession is obtained within that time, and that if possession is not so obtained then the payment
of the price will be postponed, or that in the event of the vendee not getting the property, the price
will not be paid at all. In all the above cases, the deed is a sale-deed within the meaning of the
section. 9
If from the recitals in the sale deed it appears that title would pass after payment of full
consideration, the inference would be that until the consideration is paid, there is no transfer.

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
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.

7
Alama Chand v. Chhajju, AIR 1923 All 530, 531, Col. 2 : ILR 45 All 559 : 74 IC 339.
8
Sheo Shankar Kr. Khetan v. Widow of Late A. Prasad, (2007) 3 BLJR 2936 (Pat).
9
Umakanta Das v. Pradip Kumar Ray, AIR 1983 Ori 196

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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.

III. Contract for Sale

A contract of sale must be based on a mutual agreement between the seller and the buyer. 10
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. 11
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.

IV. Sale and Contract for Sale – Differences

Sale Contract for sale

There is merely an agreement for the sale of

There is a transfer of ownership 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

immovable property of Rs. 100 or more. Does not require registration.

10
Misabul Enterprises v. Vijaya Srivastava, AIR 2003 Del. 15.
11
Raheja Universal Ltd. v. NAC Ltd., 2012 4 SCC 148

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RIGHTS AND LIABILITIES OF BUYER AND SELLER
In sale there are at least two parties involved - the buyer and seller. The obligations imposed by
section 55 are covenants and are in the nature of statutory obligations. Rights and liabilities of the
buyer and seller can be categorised into two –

1. Before completion of sale

2. After completion of sale

I. Before completion of sale

A. Seller liabilities
 To disclose material defects [S. 55(1)(a)]
the seller is bound to disclose to the buyer any material defect which is present either in the
property or in the title of the seller to the property. About such a defect only the seller is aware but
not the buyer and the buyer could not discover that defect with ordinary care. It is necessary that
the defect must be a material defect about which if the buyer had known he would not have
purchased that property.

The material defect must be of such a nature that it might be reasonably supposed that if the buyer
had been aware of it he might not have entered into the contract at all, for he could be getting
something different from what he contract to buy. 12
 To produce title-deeds [Section 55 (1)(b)]
The seller is bound to bring all the documents of title relating to the property in his possession or
power for the inspection of the buyer. The seller is bound to produce all the documents demanded
by the buyer for his examination. The buyer should examine all the documents relating to the
property for his own protection.


To answer questions as to Title [Section 55 (1)(c)]
The seller is bound to answer to the best of his information all the relevant questions put to him by
the buyer in respect of the property or its title. Since the buyer is getting the ownership of the
property it is in his interest that he must be fully satisfied about the ownership rights of the seller
and his authority to make the transfer.

To execute a proper conveyance [Section 55(1)(d)]

Conveyance means the transfer of ownership. This is done by the signing of the sale deed or putting
thumb-impression on the sale deed by the seller. The duties of both the seller and the buyer under
this clause are reciprocal. When the buyer makes the payment, the seller has to execute the
conveyance. It must be in proper place and proper time. But what is proper place and time, it has
not been specified in the Act.

12
Flight v. Booth, (1834) 131 ER 160

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In case there is no stipulation fixing the time of execution and the seller makes unreasonable delay
in executing conveyance, the proper course is to give notice making time the essence of the
contract. 13
 To take care of property and title-deeds [Section 55(1)(e)]
This clause lays down the duty of the seller between the contract of sale and delivery of property.
Within this time, the property remains with the seller but only in trust for the buyer. He holds the
property as a trustee of the buyer because he has already executed the conveyance, only the
delivery of the property is to be made. The seller has to preserve the property as well as title-deeds.

The extent of care required by this clause is such care as an owner of ordinary prudence would
take of his own property. This duty continues till the possession of the property is given to the
buyer. If the seller fails in performing his duty, he will have to compensate the buyer for the loss
occasioned to him.

 To pay outgoings [Section 55 (1)(g)]

This clause says that the seller is bound to pay all public charges and rent accrued due in respect
of that property up to the date of sale, the interest on all encumbrances, to discharge all
encumbrances on the property then existing.

The buyer has a right to require the seller to produce evidence that the property is free from
encumbrances. The liability exists before the completion of sale and continues thereafter whether
the existence of such charges is discovered before or after the completion of sale. 14

B. Seller’s Right before sale

 Right to take rents and profits [Section 55(4)(a)]
The seller is entitled to the rents and profits of the property till the ownership of it passes to the
buyer. Sale is completed when the ownership is transferred to the buyer. Till the ownership is
transferred the seller continues to be the owner of the property and in that capacity, he becomes
entitled to the rents and profits of the property. Till that time the seller has every right to enjoy the
profits of the property.

C. Buyer’s liabilities before completion of sale

 To disclose facts materially increasing value of property [Section 55(5)(a)]
The buyer is bound 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 Summers v. Griffiths (1866) 35 Beav 27, an old lady, contracted to sell a property at much less
price believing that her rights in the property were not absolute. The buyer ha d knowledge of

13
Jamshed v. Burjorji, AIR 1934 Bom 1
14
Abdul Hameed v. Shahajahm Gegum, AIR 2008 (NOC) 640 (MP)

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the fact that the lady’s interest in the property was perfect and absolute but he did not disclose it
to the lady. He was held liable for fraud and sale was set aside.
 To pay the price [Section 55(5)(b)]
The buyer is bound to pay or tender, at the time and place of completing the sale, the purchase-
money to the seller or to such person as he direct; provided that where the property is sold for free
from encumbrances, the buyer may retain out of the purchase-money the amount of any
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.

D. Buyer’s rights before completion of sale

 To charge for price prepaid [Section 55(6)(b)]
When the buyer properly declines to accept delivery, he becomes entitled to refund of earnest (if
any) and for the costs (if any) also awarded to him in a suit to compel specific performance of the
contract or to obtain a decree for its recession.

The principle underlying this section is a trite principle of justice, equity and good conscience. The
charge would last until the conveyance is executed by the seller and possession is also given to the
purchaser and ceases only thereafter.

If immovable property is charged and converted into another property or money then the charge
will fasten on that converted property or money. The charge is available not only against the seller
but also against all persons claiming under him. 15

II. After completion of Sale

A. Duties of seller
 To give possession [Section 55(1)(f)]
The seller is bound to give, on being so required, the buyer or such person as he directs, such
possession of the property as its nature admits. The seller is to give possession of property either
to the buyer or his authorised person whenever the buyer so requires.

In case of tangible immovable property, the physical control is to be given over property. In the
case of intangible immovable property, the possession is symbolic.

Implied covenant for title [Section 55(2)]

The seller shall be deemed to contract with a buyer that the interest which the seller professes to
transfer to the buyer subsists and that he has the power to transfer the same. Such a covenant is

15
DDA v Skipper Construction Pvt. Ltd. AIR 2000 SC 573

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implied in every sale of immovable property and it is not required to be expressly mentioned in a
sale deed.

 To deliver title-deeds on receipt of price [Section 55(3)]

Where the whole of the purchaser-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.

After the completion of sale when the ownership of property passes on to the buyer, and he pays
the price of the property, the seller becomes bound to deliver all the title deeds relating to that
property to the buyer which are in his possession or power.

The proviso to this clause lays down that –

 Where the seller retains any part of the property comprised in such documents, he is entitled
to retain them all, and
 Where the whole of such property is sold to different buyers, the buyer of a lot of greatest
value is entitled to such documents.

B. Seller’s rights after-sale

1. Charge upon property for unpaid price [Section 55(4)(b)] – This clause says, that where
the ownership of the property has passed to the buyer before payment of the whole of the
purchase-money, the seller becomes entitled to a charge upon the property –
 In the hands of the buyer,
 Any transferee without consideration, or
 Any transferee with notice of non-payment,
 For the amount of the purchase money or if any part of the purchase money remaining
unpaid, and
 For interest on such amount of purchase money or any part unpaid from the date on which
the possession has been delivered

C. Buyer’s liability after completion of sale

 To bear loss to the property [Section 55(5)(c)]
where the ownership of the property has passed to the buyer, the buyer is bound to bear any loss
arising from the destruction, injury or decrease in value of the property not caused by the seller.
Therefore, if any loss occurs to the property either by way of accidental destruction or deterioration
after the ownership has vested in the buyer, the buyer will bear the loss.

 To pay outgoings [Section 55(5)(d)]

Where the ownership of the property has passed to the buyer, as between himself and the seller,
the buyer is bound to pay all the public charges and rent which may become payable in respect of
the property, the principal money due on any encumbrances subject to which the property is sold
and interest thereon afterwards accruing due.

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After the completion of the sale, the buyer becomes the owner of the property and he becomes
liable to pay the outgoings, for example, Government dues, taxes, rents and revenue etc. This
liability is in between the seller the buyer.

D. Buyer’s Right after completion of sale

 Benefit of increment [Section 55(6)(a)]
Where the ownership of the property has passed to the buyer, the buyer is entitled to the benefit of
any improvement in the property or increase in the value of the property and to the rents and profits
thereof. The buyer is not only entitled to the rents and profits of the property but also the increase
in the value of the property and any improvement in the property.

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ENCUMBRANCES AND COURT SALE

Section 57 – Discharge of encumbrances on sale : Where any immovable property, subject to any
encumbrance is, sold by the court or in the execution of a decree or out of court, the court may,
on the application of any party to the sale, direct or allow payment into court –
1. In a case of an annual or monthly sum charged on the property or of a capital sum charged
on a determinable interest in the property of such amount as, when invested in securities of
the Government of India will be sufficient by means of the interest thereof, to keep down or
otherwise provide for the charge;
2. And in any other case, of a capital sum charged on the property of the amount sufficient to
meet the encumbrances and any interest due thereon;
In either case, such additional amount as the court considers sufficient to meet the contingency of
further costs, expenses, and interest and any other contingency must also be paid into the court.

Thereon, the court may, if it thinks fit, and after notice to the encumbrancer, declare the property
to be free from the encumbrance, and make any order for conveyance, or vesting order, for giving
effect to the sale.

After notice is served on the persons interested in, or entitled to, the money or fund in court, the
court may direct payment or transfer thereof to the person entitled to receive or give the discharge
for the same, and generally may give direction respecting the application or distribution of the
capital or income thereof.

An appeal lies from any declaration, order, or direction under this section as if the same were a
decree.
This section gives the procedure for discharging an encumbrance on a property which is sold free
an encumbrance. This can be done only by the court’s order. The court cannot act suo motu. The
power given to the court under the section is intended to facilitate the alienation of encumbered
estates by relieving the land from the encumbrance and substituting for the land another form of
security. Different rules for payment are prescribed for different kinds of encumbrances.

At present, a prospective purchaser can easily find out about any existing encumbrance over a
property either by inspection of the Registration Registers or by securing a certificate relating to
encumbrances (that is copies of entries in the Registration Registers) from the jurisdictional Sub-
Registrar under Section 57 of the Registration Act, 1908. (T.G. Ashok Kumar v. Govindammal
and Ors. Civil Appeal No. 10325 of 2010 (Arising out of SLP (C) No. 163 of 2010)

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