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Sale of Immovable Property Project
Sale of Immovable Property Project
OF
PROPERTY LAW
The Transfer of Property Act, 1882, deals with transfers in which the transferor and the
transferee are living persons. In other words, it is concerned with transfers inter vivo (between
living persons).
Capacity to transfer
A person has capacity to transfer property when he is competent to enter into a contract and he
has title to the particular interest in the property, which he proposes to transfer. Contractual
competency is governed by the provisions of the Indian Contract Act, 1872. So far as the second
requirement, viz. ownership of the right, which is to be transferred, is concerned, the general rule
is Nemo dat quod non habet (no person can give that which he has not). But to this general rule
there are important exceptions. One exception is the doctrine of holding out.
Doctrine of holding out: Suppose A is the real owner of the property but he allows B to
hold himself out to the world as the owner. Then if B as such ostensible owner transfers
the property to C who is a bonafide transferee for consideration and without notice of A's
title, C acquires a good title to the property. The ostensible owner B, though he himself
did not have a valid title, is able to transfer a good title to C.
Transfer of a property can be made in two ways, firstly by act of parties and secondly by law.
Under act of parties, Transfer of Property Act (TOPA) exists, which gives us further divisions
that is whether the property is movable or immovable, transfer for movable property and
immovable property. In my research paper I am going to focus on immovable property.
Immovable property is divided into six parts- sale, mortgage, actionable claims, lease, exchange,
and gifts, charge.
Transfer of property has been defined under section 5 of the transfer of property act. According
to the act immovable property does not include standing timber, growing crops, or grass.
Interpretation of the section also allows us to construe the fact that things that are attached to the
land and which cannot be detached from the earth and things which are permanently fixed to the
earth also come within the definition of immovable property. For example, timber, since it is of
no use until one takes it out of the land or detaches it, it is useless therefore it is movable
property.
A juristic person was defined in the case Shiromani Gurudwara Prabandhak Committee,
Amritsar v. Sri Somnath Dass &Ors1. In this case the court said that a juristic person can be an
individual, firm, corporate company, association, society, not including partnership firm. Any
individual who can sue or be sued under law would satisfy this requirement.
Conveyance can be present or future. However conveyance can take place only if there is
creation of new title. Therefore, there should have been nothing with the transferee before the
title. In addition to this the term future is used to define the future interest in the property and not
the future property itself. Therefore, the word future property itself must be transferred.
Therefore, the word future is for the conveyance.
5. Fifthly, it must be made to a living or a juristic person. Any kind immovable property can be
transferred.
Any kind of immovable property can be transferred other than that which are given in section 6
of the TOPA. The right to re-entry, easement can’t be transferred. Specific rights cannot be
transferred, as there are only certain people who should enjoy the right. The right to sue, public
office, unlawful objects cannot be transferred.
1
AIR 2000 SC 1421
The third element is competency as under section 7of TOPA. The individual must not be
a minor or an insane person. The person must have the title of property or the person
must have the authority to transfer; in part or in whole, as held in the case Krishna
Kumar Khemka v. Grindlays Bank2, if transfer is made ultra virus to the authority vested
in the agent, the transfer will be void.
The fourth element being that under Section 6(h) (3) the person must not be a legally
disqualified transferee. For example under section 136 of TOPA judges, legal
practitioners and officers connected to the court are disqualified from purchasing
actionable claims.
The fifth element being that a valid transfer can also happen under section 9 of TOPA as
an oral transfer.
Transfer of immovable property may happen only in certain ways. They can either
be through sale, mortgagee, lease, and gifts or through actionable claims. These are
modes of transfer:
1. Sale
Contract of sale of immovable property is basically a contract, which states terms for the
permanent transfer of property. The sale takes place in accordance to the terms, which are
settled by both the parties in the contract itself. Such contract of sale does not create any interest
in or charge on such immovable property. A kind of obligation is created in respect of the
ownership of the property. Essentials of a contract of sale are several. The parties to the transfer
or the vendor should be competent enough to contract under Section 2 of the Indian Contract
Act. Price is another essential ingredient for all transactions of sale and in the absence of this
price, which constitutes consideration; the transfer will not be regarded as a contract of sale.
Delivery of property is necessary for a transfer by way of sale. In case of tangible property
worth less than Rupees one hundred, the transfer can be made by a registered instrument or
putting the purchaser in possession of the property. If it is more than rupees one hundred then
the instrument has to be registered under Registration Act, 1908. There are certain rights and
duties of the buyer and the seller, which are subject to the contract. These rights and duties are
governed under Section 55 of the Transfer Property Act.
2
1991 AIR 899, 1990 SCR (2) 961
2. Mortgage
Transfer of immovable property can also take place through mortgage. Section 58(a) of the
TOPA says, a mortgage is the transfer of an interest in specific immovable property for the
purpose of securing the payment of money advanced or to be advanced by way of loan, an
existing or future deist, or the performance of an engagement which may give rise to a pecuniary
liability. Ingredients of mortgage; in a mortgage, the mortgagor transfers any one of his interests
in specified immovable property to the mortgagee. Money to be advanced by way of loan arises
in the case of a running account between the parties. Future debt is a contingent liability, which
arises on the happening of some contingency. If the promise not competed an obligation to pay
arises. These may be a pecuniary liability.
An under taking be a person borrowing money not to alienate his property until the money is
repaid is not a mortgage, because there is no transfer of interest in property.
3. Charge
Transfer of immovable property can also take place through charge. According to Section 100
when a person by the act of parties or operation of law creates a security for the payment of
money to another, and the transaction should not be a mortgagee, the latter is said to have a
charge on the property. Charge is created by operation of law, this distinguishes mortgage,
which is created by act of parties.
4. Lease
Transfer of immovable property can also take place though lease. Section 105 defines lease.
According to it, lease of immovable property is a transfer of a right to enjoy such property, made
for a certain time, express or implied or in perpetuity in consideration of a price paid or
promised, or of money, share of crops, service or any other thing of value, to be rendered
periodically or on specified occasions to the transferor by the transferee, who accepts the
transfer on such terms.
5. Transfer can also take place through exchange, gifts and actionable claims.
6. Other ways-
Immovable property can also be transferred by way of law that is if there is insolvency,
succession or the absence of a will. In the situation of the absence of a will, the court shall
declare the transfer of property by way of interstate.
However, there are some things that cannot be transferred. Section 6 of the Transfer of Property
Act discusses the immovable properties, which cannot be transferred. Spec successions cannot be
transferred. According to section 6(a) it is void.
In the case Annada Mohan Roy v. Gom Mohan Mullick 3, the appellant purchased the rights
expectant upon the termination of the surviving widows rights from the respondents and further
on there was a compromise between the widow and the respondents as a result of which the
respondents got certain properties. In a suit by the appellant to recover the properties received by
the respondents, it was held, “Transfer was of a spes successionis and since S. 6(a), TOPA
forbids such transfers of expectancies, the transfer is void.
Are benefits arising out of land immovable? Yes, benefits like crops from your land; fish and the
lake and anything 12nm from the main land are immovable and can be transferred. In the case
Anand Bahera v.State of Orissa 5, petitioner had licence from the proprietor of an estate for
3
1923 SCC OnLine PC, (Vepa P. Sarathi’s, Law of Transfer of Property, EBC, page 25)
4
AIR 1965 SC 1752 (Vepa P. Sarathi’s, Law of Transfer of Property, EBC, page 25)
5
AIR 1956 SC 17 (Vepa P. Sarathi’s, Law of Transfer of Property, EBC, page 6)
catching and appropriating all the fish in lake and they have paid the proprietor large sum of
money. The lake vested in the respondent-State under the Orissa Estates Abolition Act. The State
refused to recognize the licence and the petitioner claimed that the transactions were really sales
of future goods as fish was movable property and hence, the Abolition Act was not applicable. It
was held that as a profit a prendre is regarded as a benefit arising out of land is immovable
property. The right to walk on the land and to draw fish from the lake and taking it away is
immovable property as it is the profit arising of the land. Grazing of cattle on the land is also
immovable property as it is profit arising of the land.
Section 54 of the price Transfer of Property Act 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 case of tangible immovable property of the value of one
hundred rupees and upwards or in the case of revision or other intangible things, can be made
only by 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 of by delivery of the property.
Delivery of tangible immovable property takes place when the seller places the buyer or such
person as he directs, in possession of the property.”
In case of tangible immovable property of a value less than Rs. 100, there must either be,
A registered conveyance, or
Delivery of property.
6
(2011) 11 SCC 153,[ Vepa P. Sarathi’s, Law of Transfer of Property, EBC, page 171]
Sale and Contract for Sale:
Section 54 of the Act defines ‘sale’ as a transfer of ownership in exchange for a price Paid or
promised or part paid and part promised.
Section 54 also defines ‘contract for sale’ as, “a contract for the sale of immovable property B a
contract that a sale of such property shall take place on terms settled between the parties,”
Thus a sale may be preceded by a contract for sale. A contract for sale is merely a document
creating a right to obtain another document namely, a duly executed sale deed. On the Other
hand, a sale of immovable property is a transfer of ownership.
A sale passes an absolute interest in the property to the purchaser, but a contract for sale does not
of itself create any interest in, or charge upon the property in favour of the buyer. It does not
convey any little to the purchaser.
A sale must be registered, if it deals with the conveyance of tangible immovable property of the
value of Rs. 100 or more, or a reversion or any intangible things.
b) Duty to assure that seller has saleable subsisting interest in property and right to transfer:
Section 55(2) of the Act provides that—
"The seller’s be deemed to contract with the buyer that the interest which the seller professes to
transfer to the buyer subsists and that he has power to transfer the same. (This is also known as
implied covenant for title and the vendor’s liability with respect to this covenant arises after
completion of sale. It is an implied covenant): Provided that, where the sale is made by a person
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.
Therefore, before completion of sale, under S. 55(1), the buyer could make sure that the title
offered by the vendor is free from doubt. After completion, the buyer can rescind the contract,
because the non-disclosure of the defect would amount to fraud. He can also sue for damages
under clause (2). If the seller has no title at all the purchaser can get contract annulled.
[Motivahoo v Vinayak Veerchand7]
The benefit of the contract mentioned in this rule shall be annexed to, and shall go 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.”
Section 55(3) of the Act provides that, where the whole of the purchase-money has been paid to
the seller, he is also bound to deliver to the buyer all documents of title relating to the property
which is in the seller’s possession or power. However, the proviso to Section 55(3) lays down
that:
Where the seller retains that part of the property with him, which of greatest
value and, such property is included in the documents, the seller is entitled to
retain all the documents with him.
Where the whole of such property is sold to several buyers the persons who
purchase the largest part of the property would be entitled to retain all the
documents.
3. Seller’s Right before Sale—Section 55(4) (a) provides that ‘the seller is entitled to the
rents and profits of the property till the ownership thereof passes to the buyer’. ‘Thus,
before completion of the sale, the seller is entitled to all the rents, profits or other benefit
interests of the property’.
If after completion of sale, the price or any part of it remains unpaid, the seller acquires a lien or
charge on property. Accordingly to Section 55(4) (b) if price remains unpaid, the seller cannot
7
ILR (1882) 12 Bom 1, (Vepa P. Sarathi’s, Law of Transfer of Property, EBC, page 183)
refuse delivery of possession for can claim back the possession if already given to buyer, but he
(seller) is given a right to recover unpaid purchase money from and out of the property.
Section 55(6) (a) of Act provides that the buyer is entitled to (unless he has improperly
declined to accept delivery of property):
A charge on the property for the purchase money properly paid by him in
anticipation not the delivery.
Interest on such purchase money.
The earnest and cost awarded to him in a suit to compel specific performance of
the contract or to obtain a decree for its recession in case he properly declines to
accept delivery.
4. Buyer’s Right after sale—after sale, the buyer is entitled to the benefits of any
improvement in, or increase in value of, the property, and to the rents and profits thereof..
SALE OF GOODS (Movable Property) UNDER SALES OF GOODS ACT, 1930
1. Goods means every kind of movable property other than actionable claims and money
and includes stock and shares, growing crops, grass, and things attached to or forming
part of the land which are agreed to be severed before sale or under the contract of sale.
2. Thus, immovable are not goods and the Act does not apply to sale of immovable property
like land, building, plant erected at site etc. Thing attached to earth like ‘Standing crop or
‘tree’ is ‘goods’ only when it is agreed to be served before sale or under contract of sale.
3. Actionable claim is a claim which can be enforced by going to the court. An overdue debt
is an actionable claim, since the creditor can take action against the debtor to enforce the
claim by going to a court of law. Thus, an actionable claim cannot be bought and sold as
goods, though it can be assigned.
Existing goods are such goods as are in existence at the time of the contract of sale, i.e., those
owned or possessed by the seller.
Future goods mean goods to be manufactured or produced or acquired by the seller after making
the contract of sale. Thus, under the Act, a contract of sale of future goods, e.g. 1,000 quintals of
potatoes to be grown on A’s field, is not illegal, though the actual sale of future goods is not
possible. This is an example of “agreement to sell”.
Contingent goods mean goods, the acquisition of which by the seller depends upon happening/
non – happening of an uncertain event (contingency). They are also a type of future goods.
E.g.: ‘A’ agrees to sell 10 units of an article provided the ship, which is bringing them, reaches
the port safely.
It is a contract whereby the seller transfer or agrees to transfer the property in goods to the
buyer for a price.
From the Sale of Goods Act, 1930, we see that certain elements must co-exist for a contract of sale
to be constituted. They are as follows:
1. The presence of two parties is a must. As is the case with a contract, there must be at least
two parties in the contract of sale. One shall become the seller and the other a buyer.
2. The clauses therein present in the contract of sale must limit their scope to only the
movable property. This “movable property” may constitute existing goods, goods in
the possession or the ownership of the seller or future goods.
6. The other essential elements of a contract, that we have already seen must also are present
here. The crucial elements of a contract like competency of parties, the legality of object and
consideration etc. have to be present like in any other contract.
A contract is a formal or verbal agreement that is enforceable by law. Every contract must have an
agreement but every agreement is not a contract. The section 4(1) of the Sale of Goods Act, 1930
states that – ‘A contract of sale of goods is a contract whereby the seller either transfers or agrees to
transfer the property in goods to the buyer for a decided price.’
In Section 4(4) of the Act, it is maintained that for an agreement of sale to become a sale, the time
has to elapse or the conditions have to be fulfilled subject to which the property in the goods is to be
is to be transferred.
SALE
Here the property in goods is transferred at once to the buyer from the seller. The Section 4(3) of the
Act says that “where under a contract of sale the property in the goods is transferred from the seller
to the buyer, the contract is then known as a sale.” A sale is carried out on deliverable goods. Goods
are said to be in a deliverable state when they are in such a condition that the buyer would, under the
contract, be bound to take delivery of them [Section 2(3)].
The transfer of goods may be affected directly, after the fulfillment of a contingency or to a party
authorized by the seller.
Agreement to Sell:
In a sale the property in the goods is transferred from the seller to the buyer. However, in an
agreement to sell, the ownership of the property in goods is not transferred immediately. The
objective of the agreement is to transfer the goods at a future date, once some contingent clauses in
the agreement or certain conditions are satisfied.
The Act in Section 4(3), defines what an agreement to sell is. The section 4(3) of the sale of Goods
Act defines it as, “where the transfer of the property in the goods is to take place at a future time or
subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.”
Thus we see that a contract for the sale of goods may be either sale or agreement to sell. This
depends on the condition whether it postulates an immediate transfer of property from the seller to
the buyer or whether it postulates the transfer to take place at some future date.
Conclusion
Therefore for a property to be transferable several conditions need to be satisfied. These include
that of constituting a transfer; it to come within the definition of an immoveable property and it
should not be amongst those items, which may not be transferred under Section 6 of the Transfer
of Property Act. In addition to this it is clear that there are several kinds of transfer that may take
place. Each kind of transfer as has been explained has different procedures and conditions, which
need to be satisfied. These are hence the various elements that are required to be transferred for a
property to be transferable. It is advisable that the buyer’s advocate should investigate the title of
the property after entering into an agreement for sale. The title should be traced for at least 30
years. Besides, the title deed search should be also done in the office of the Sub Registrar or
relevant revenue authority to investigate whether there is any encumbrance on the property
whether there is any defect in the title and whether the property stands in the name of the seller
in the land revenue and municipal records. It is also advisable that the buyer’s advocate should
enquire from the relevant authorities and gather information on whether a notification has been
issued for acquisition of the property. In major property deals the buyer through his advocate
should give a public notice in the newspaper stating his interest in purchasing the property. The
sale deed is chargeable with stamp duty under Article 23 of Schedule 1 to the Indian Stamp Act
and it has to be executed on stamp paper equal to that of conveyance or else attracts duty penalty
of 10 times that of actual stamp duty. The sale deed transferring immovable property of the value
of 100 or more requires registration under Indian Registration Act 1908.
BIBLIOGRAPHY
BOOKS REFERED:
Dr. Avtar Singh, The Transfer of Property Act, 3rd Edition, Universal Law Publication
Vepa P Sarathi’s, Law of Transfer of Property, 6th Edition, EBC Explorer
WEBSITES REFERED:
https://www.toppr.com/guides/business-laws/the-sale-of-goods-act-1930
https://www.casemine.com/judgement/in
https://www.lawyerservices.in
https://indiankanoon.org