Section 54

The following table highlights the differences between a sale and a contract for sale:

Basis Sale Contract for sale

Sale under Section 54 of the Transfer of
Property Act, 1882, refers to the transfer of
Definition
immovable property in exchange for a price
or money consideration.
Contract for sale can be defined as
the terms settled between the buyer
and the seller for the purpose of sale
of the property.

It has been expressly specified under

Creation of In a sale, there is a transfer of the title or
Section 54 that a contract for sale
interest or ownership of property from the seller to the
does not create any interest or
charge buyer.
charge on the property to be sold.

Precedes or Sale is executed after the formation of a A contract for sale always precedes
accedes contract for sale. the actual sale of the property.

How is transfer of property under the Transfer of Property Act different from the

Indian Contract Act

The purpose of the Transfer of Property Act, 1882, is to provide a law regarding the transfer
of immovable property. However, the Indian Contract Act, 1872, also has the same object of
forming an agreement between the parties for the sale of property or other transactions.
However, both statutes are different from each other. In fact, the Transfer of Property Act,
1882, completes the Indian Contract Act, 1872, in laying down the law on the transfer of
immovable property. Let us understand how!

With respect to the transfer of property, the Indian Contract Act aims at transferring the
property rights to the other person; however, the motive of the transaction is not fulfilled
unless the property in question actually gets transferred. The Transfer of Property Act is a
provision that fills this gap in the Indian Contract Act. Therefore, it can be said that until
1882, the laws regarding the transfer of property were not sufficient, and the Transfer of
Property Act, 1882 acts as a complete code. Similarly, this statute of 1882 made a law with
respect to the testamentary and inter-vivos transfer of property that was previously guided by
personal laws.
Does Section 54 of the Transfer of Property Act, 1886 apply to the whole of India?

The Transfer of Property Act, 1882, is not applicable in all Indian states. When it was
enforced, it was not made applicable to Bombay, Delhi, and Punjab because of their own
property laws. For example, it is not applicable in the state of Punjab. However, since 1955,
the second and third parts of Section 54 of the Transfer of Property Act, 1882, are applicable
in Punjab. Thus, unlike before, the sale of intangible and tangible immovable properties of
value greater than Rs. 100 is now valid only by a registered sale deed.

How is the sale of immovable property different from the gift of immovable property?

The definition of gift is provided under Section 122 of the Transfer of Property Act, 1882. It
is a voluntary transfer of property from one party to the other, without consideration. Clearly,
the primary distinction between the transfer of property by sale and gift is that the latter must
not involve consideration, while consideration is an essential element of the former.

What changes were made by the Uttar Pradesh Civil Laws (Reforms and Amendment)

Act, 1976 in Section 54 of the Transfer of Property Act, 1882?

Section 30 of the Uttar Pradesh Civil Laws (Reforms and Amendment) Act, 1976, omitted
the phrase ‘value of one hundred rupees and upwards’ in Section 54 of the Transfer of
Property Act, thereby making the registration of intangible immovable property mandatory,
even if it values less than Rs. 100.

Do hire-purchase agreements constitute sale?

No, the hire-purchase agreements cannot be called a sale because the property is not
transferred. In these agreements, possession of the property is transferred, and money is to be
paid in instalments. However, unlike in a sale executed under Section 54 of the Transfer of
Property Act, the vendee can refuse the transaction anytime before all the instalments are
paid.

This question was taken up by the Supreme Court in the case of K.L. Jauhar and Company v.
Deputy Commercial Tax Officer (1965). In this case, there was a contract of sale of the house
under which it was agreed that the buyer would pay some amount every month to the seller.
However, he could not pay the monthly instalments in time. The Apex Court declared that the
seller can repudiate this contract as this contract of sale amounts to a hire-purchase
agreement.

Therefore, in the hire-purchase agreements, the parties have the right to terminate the contract
since the payment is made in instalments.
What are the differences between sale, mortgage, exchange and lease
Sale, exchange, mortgage, and lease are different modes of transfer of property. The
similarity among all of them is that in all these transactions, the property or interest in the
property is transferred from one party to the other. On the contrary, they differ from each
other on several grounds. The following table illuminates the differences between sale,
mortgage,exchange, and lease:

Basis Sale Mortgage Exchange Lease

Mortgage refers to Lease can be defined

the transfer of an as a transfer of rights
Exchange can be
Sale refers to the interest in in a property for the
defined as the
transfer of immovable purpose of enjoyment
mutual transfer of
ownership in property as a or benefits attached to
Definition ownership from one
property in security in it. It is for a certain
person to the other.
exchange for exchange for some time period and works
In simple terms, it is
money. loan granted or an on the basis of the
known as ‘barter’.
existing or future terms agreed between
debt or liability. the parties.

The relevant
provisions It is defined
It is defined under It is defined under It is defined under
under the under Section
Section 58 Section 118. Section 105.
Transfer of 54.
Property Act

The transferor Since the property

and transferee The transferor and of one party is
The transferor and
are commonly transferee are ‘changed’ with the
transferee are
known as commonly known property of another
Parties commonly known as
seller/vendor as ‘mortgagor’ and party, they are both
‘lessor’ and ‘lessee’
and ‘mortgagee’ transferors and
respectively.
buyer/vendee respectively. transferees at the
respectively. same time.

Consideration Sale is A mortgage does There is no There might be

considered a not require any involvement of involvement of money
valid sale when consideration. It money consideration in a
one of the gives rise to the consideration in the lease, however, a lease
parties pays or interest in specific transfer via agreement is valid
promises to pay property of the exchange. even without
some mortgagor when consideration, for
consideration. he/she owes example when a share
something to the of crops is agreed to
mortgagee. be transferred by the
lessee to the lessor. It
 completely depends
upon the terms of the
agreement.

The mode of
transfer in case of
This mode of exchange is the A lease deed contains
Mode of Sale is affected transfer is same as that of sale the terms and
transfer via a sale deed. completed with a under Section 54, conditions with
mortgage deed. therefore, it is respect to the lease.
effected with a sale
deed.

Conclusion
It is apparent that for the transfer of immovable property under Section 54 of the Transfer of
Property Act, 1882, transfer of ownership and money consideration are important elements.
The sale is not valid if the parties are not competent to contract or if there is no reference to
the price to be paid by the buyer to the seller in the sale deed. Furthermore, the sale is
effected by a registration deed unless the property to be transferred is a tangible immovable
property of a value less than Rs. 100. Therefore, according to the Transfer of Property Act,
the mandate of a registration deed depends upon the price and kind of immovable property.

Section 55

Conclusion
Section 55 of the Transfer of Property Act, 1882, lists the rights, liabilities, and duties of both
the buyer and seller, with respect to a transaction where there is a transfer of immovable
property unless there is a contract to the contrary. To understand the transfer of property, it is
not enough to merely read Section 54 of the Act which describes – what is a sale; how a sale
is made, and what is a contract of sale. Section 54 must be read along with Section 55 to gain
a complete picture of the intricacies that go into the entire process of transfer between the
buyer and seller. Section 55 provides a means for both the buyer and seller to protect their
individual interests without worrying about suffering a loss due to unfair means or fraud.
Section 55 focuses on endorsing fair dealings and encourages the transfer of property to
prevent it from remaining stagnant or going to waste. This Section is also based on the
principles of fairness, equity, and good consciousness.
Section 56
Section 56 and section 81

Section 81 also adopts the Rule of Marshalling but in cases of Mortgages. Section 81 may be
understood in the following manner:

1. There must be an owner of two or more properties. He must mortgage two or more
of these properties to any person,
2. He must then mortgage one or more of these properties to another person,
3. The subsequent mortgagee is entitled to have the mortgage-debt of the prior
mortgagee satisfied out of the properties not mortgaged him. This can be subject to
a contract stating the contrary too,
4. Similar to Section 56, the rule of marshalling here too should not be so exercised
so as to prejudice the rights of the mortgagee or any person who has acquired an
interest with consideration in any of the properties.
Marshalling, in this context, may be explained by an illustration. If the mortgagor mortgages
three of his properties X, Y and Z to A and then mortgages X to B, B is entitled to have the
mortgagor satisfy his debt from the sale proceeds of the properties Y and Z and only if the
said sale proceeds fall short, can property X be sold.

In Barness v. Rector, W mortgaged two of his properties A and B to X. W then mortgaged

property A to Y and property B to Z. Here, the court held that X’s mortgages will be
apportioned proportionately between properties A and B and the surplus of A will go to Y
and surplus of B will go to Z.

The doctrine of Marshalling is thus based on the principle that a creditor who has the means
of satisfying his debt out of several funds shall not, by the exercise of his right, prejudice
another creditor whose security comprises only one of those funds.

Supersession of the Rule of Marshalling over the Contribution (s.56 and s.82)

The proviso to Section 82 denotes that the rule of Marshalling under section 81 supersedes
Contribution under Section 82. The Hon’ble Madras High Court has even held it to be well
settled that the Right to Contribution is controlled by the Right of Marshalling.This may be
best understood by an example:

There is an owner of two properties X and Y, who mortgages property X to A then to B then
X and Y properties to C and lastly property X to D. Since X and Y both contribute to C’s
mortgage, the value of the said contribution must include a deduction from property X, the
value of A’s mortgage and from property Y, the value of B’s mortgage. However, D being
the last mortgagee still has a right of marshalling and he can ask C to pursue property Y first
instead of property X. Thus, right of D to marshal his securities supersedes his contribution
that is to be made.

The reason why marshalling supersedes contribution is because the last mortgagee is given an
opportunity to make the mortgagor discharge the mortgage debt from other mortgaged
properties first before he realizes the mortgage debt from the properties mortgaged to the
person who holds the right of marshalling. However, if after exercising the right of
marshalling, the amount realized from the other properties is insufficient, the last mortgagee
must then contribute as his is the only mortgage debt left to be realized.

Conclusion
Marshalling is the right of subsequent mortgagees whereas contribution is with respect to
mortgagors. Marshalling is if a creditor has multiple funds to realize his debt, he must first
pursue the multiple funds instead of prejudicing the creditor who is secured only by one
fund. Whereas in contribution all the co-mortgagors who have taken a debt by mortgaging
their properties have to make contributions towards debt proportionately according to their
respective shares. The Proviso to Section 82 of TOPA gives precedence to the former over
the latter.

Section 57

Encumbrances and court sale

Generally, a sale needs to be free of any kind of lien, charge, or obligation. However, there
may be instances in which a property with encumbrances has been sold. Section 57 of the Act
caters to such a situation. This Section covers both the sales made by the court or in the
execution of a decree and those made outside the court. It offers a legal procedure to obtain a
declaration from the court that the property is free from any kind of encumbrance.

Section 57(a) provides that any party to the sale may apply to the Court to obtain this relief. If
the court thinks fit, it may direct or allow the applicant to deposit in court, for the
encumbrancer (who has the charge over the property), a capitalised value of the periodic
charge or a capital sum charged on the property, together with incidental charges, sufficient
to satisfy the charges or any interest thereon. The court shall also order the deposit of any
additional amount that it considers sufficient for meeting any further costs, expenses, interest,
or any other contingency, but it shall not exceed one-tenth of the original amount unless
otherwise directed by the court.

Section 57(b) states that the court may serve notice on the encumbrancer after the payment
has been made. The court can also dispense with such notice after recording its reasons. In
addition to that, the court may also declare the property to be free from any encumbrances
and proceed to issue an order of conveyance, or vesting order, proper for giving effect to the
sale. Further, Section 57(c) deals with the order of transfer and distribution of the deposit to
the encumbrancer.
It is also provided that an appeal is allowed from any declaration, order, or direction made in
accordance with this Section, just as if it were a decree. (Section 57(d)).

Under this Section, the jurisdiction is vested in either of the following Courts, as provided
in Section 57(e):

1. A High Court in the exercise of its ordinary or extraordinary original civil

jurisdiction;
2. A District Court within the local limits of whose jurisdiction the property or any
part thereof is situated; or,
3. Any other Court notified by the State Government in the official gazette from time
to time.
Recently, the Kerala High Court, in M.P. Varghese v. Annamma Yacob (2020),

 The Kerala High Court has explained the procedural way out for removal of an
encumbrance from an immovable property under Section 57 of the Transfer of
Property Act 1882 (‘TPA’). It is noteworthy that an operative, substantive and
procedural way out to facilitate the realisation of the intrinsic value of encumbered
estates and other immovable properties within the annals of TPA is very rarely been
invoked in court of law.
 the Hon’ble High Court set aside the impugned order stating that merely because the
First Respondent refused to accept the amount on account of personal disputes does
not mean the Appellant must be disadvantaged. Further, The Appellant merely had to
show an intention to sell the immovable property and was not mandatorily required to
provide a reason for sale.