SALE UNDER TRANSFER OF PROPERTY ACT: PROVISIONS, ESSENTIAL PRINCIPLE AND CASES

Author-Rituparna Panda, Birla Global University Bhubneswar

INTRODUCTION

The integral component of Indian Property Law is the Transfer of Property Act 1882. It supervises the transfer of ownership of immovable property by various means which includes sale. According to the Transfer of Property Act Sale succinctly means “Transfer of ownership in exchange for a price paid or promised, or part paid or part promised”[1]. If we bifurcate this definition, it highlights the three substantial elements of sale i.e., Transfer of ownership which means the person who sells the property voluntarily yields over the ownership of the said property to the purchaser, Second element that this definition put lights on is Price as the transfer is done some monetary value is received in return. Lastly it concentrates on the payment terms which says that the price of the purchase can be settled as a whole, in instalments, or can be partially paid with a remainder pledged for later.

Following each sale, the buyer receives full ownership rights to the property as specified in the ‘selling agreement’. Ideally, every sale is registered with the sub-registrar’s office. A verbal contract is legal alongside the written contract, albeit it is not recommended.

Stamp duty is incurred on each selling transaction, based on the selling price or sale value of the property.

  • Keywords (Minimum 5): Transfer of Property Act, 1882 (TPA), Sale of immovable property, Ownership transfer, Consideration (price), Registration of sale deed.

Historical Background / Evolution

Prior to the implementation of TPA 1882, property transfer in India was done in a very complicated procedure-

  • Personal Laws- As we know India is called the ‘Land of Diversity’, having various religious community like Hindu and Muslim and they having their own personal laws and rules regarding the transfer of property resulting in discrepancies and lack of standardization throughout the country.
  • Civil Procedure Code 1859- This code offered a primitive foundation for carrying out the court rulings which at a time involved property transfers. However, it somehow lacked behind in framing the regulations that will govern sales transaction.
  • Indian Contract Act 1872- This act was established to govern the principles of contract law, which also has some rules and regulations utilised for sale agreement to some extent. However it did not covered the specifics of property transfer.

This decentralised legal system led to ambiguity and discrepancies, making it challenging for the buyers and sellers to foresee the transaction outcomes. This resulted in a lot of disagreements ultimately leading to limitless lawsuits. This lead to an urge of having an universal laws that will facilitate secured property transactions across the country, thereby meeting the requirements for clarity and standardization.

It was the time when British Colonial Administration came into the picture and adopted TPA 1882 to codify the existing laws and principle that regulates the property transfers. It streamlined the sales procedure by identifying the key aspects, rights and duties for both the parties involved. The TPA was designed in an uniform system for registering the sale deeds, that not only ensures the public record but also strengthens the legal protection. This key milestone in Indian property law, with subsequent revisions and court interpretations, forms the foundation of property transfer legislation today.

Comparison with other Countries

While TPA in India provides a codified framework, while other nations have their own legal frameworks for regulating the property sales. Here are some of ideas for comparison-

  • Property Transaction in common Law jurisdictions, such as England and the United States, are influenced by the common law concepts.
    • Fraud Statutes- These jurisdictions, like TPA, demand that certain transactions (like as land sales) be in writing.
    • Recording Systems-To provide openness and legal certainty, several countries establish public land registries.
  • Civil Law jurisdictions such as France and Germany.
  • Notarial System- Notaries are important in transfer of property in territories where civil law prevails.
  • Formalities- Strict procedure are often need to be followed for property transactions.
  • Publicity- The public record consists of the details about ownership of property.
  • Country Specific Practices-
  • United States- Each has a unique set of property laws, such as those governing sales, deeds and title transfers.
  • United Kingdom- The land registry handles property records, guaranteeing openness and efficiency in the conveyancing process.
  • Germany- Notaries regulates the property transfers, and registration is required for legal validity.

Types / Kinds 

There are two kinds of sale-

  • Conditional Sale
  • Sale with Leaseback
  • Conditional Sale- Certain criteria, such as getting government clearances or resolving title problems, must be met before the transaction may go through.
  • Sale with Leaseback- Under a lease arrangement, the seller leases the property to the buyer while retaining ownership for a set amount of time.

Forms / Modes 

The mode is dependent on the value of the property-

  • Registration- For immovable property worth Rs.100 or more, the sale needs to be registered under the Registration Act 1908 for lawfully transfer of ownership.
  • Delivery of Possession (Limited)- For the properties worth less than Rs. 100, an authorized sale can be accomplished merely by handling over the actual possession of the property to the purchaser. However, for greater legal protection registration act as a best safeguard.

Essentials / Elements / Pre-requisites

The Transfer of Property Act (TPA) defines numerous basic requirements for a legitimate sale of immovable property-

  • Competent Parties-
  • Seller (Transferor)- The seller must be legally authorized to transfer the ownership. This essentially means that they needs to be of sound mind, an adult (above 18 years of age), and must not be disqualified by any law.
  • Buyer (Transferee)- Similarly like the transferer the transferee requires to be competent to get involved in such kind of contract.
  • Transferrable Subject Matter-

The agreement to purchase involves immovable property, which includes land, buildings, and anything permanently linked to the earth.

  • Price (Consideration)-

The considerations needs to be first set and it needs to be determinable. Mostly the consideration is monetary in nature but it may also include other types of significant reimbursements, which needs to be agreed by both the parties.

Contract Of Sale-

A Contract for Sale under section 54 of TPA is defined as an agreement between an seller and buyer that a certain immovable property would be sold on the terms and conditions agreed upon between them. The aforementioned contract does not transfer the ownership of the property but instead it defines the parameters and circumstances for a future transfer.

  • Essentials-
  1. Competent Parties- Both the seller as well as buyer needs to be legally competent i.e., they must be of sound mind and must be above the age of 18, and must not be disqualified by any law.
  2. Transferrable Subject Matter- The immovable property means the property which are permanently linked to the earth like land, buildings etc, must be the subject matter of the agreement.
  3. Definite and determinable Price- The agreement made for the property must be in exchange of a definite amount of consideration which can be paid fully or in instalments.
  4. Terms and Conditions- The agreement needs to have the terms and conditions clearly-
  • The description of the property should be precise enough to identify it individually.
  • The timing and parameters under which the buyer will take physical possession of the property.
  • The agreement also specifies about who will be responsible for any loss or damages occurred in the property before the completion of the transaction.
  • Any extra criteria required needs to be completed before the sale took place. Like- getting permissions or resolving title difficulties etc.
  • Importance of Contract for Sale-
  • A well drafted contract gives the clarity and certainty that helps in protecting both buyer and seller, by clearly elaborating them their rights and duties and reducing the conflicts that may arise in future.
  • It also helps in legally enforcing, if either parties violates the term of the contract.
  • It helps in formally transfer of title upon registration and the provisions agreed upon acts as a foundation of the final sale deed.

It is a very critical task to analysis and recall that a contract of sale under this act generates ‘Right in Personam’[2] for the buyer which means it may be enforced against the seller only. The seller retains title of the property until the transaction is finalised by registering the selling deed, which creates a ‘Right in Rem’[3] that is enforceable against everyone.

Case Laws / Precedents / Overrulings

  • VIDYADHAR V. MANIKRAO (1999)[4] 

In this case the supreme court ruled that ‘a sale’ required the intention of the party to transfer the ownership of the property. The purpose is derived from the disclosures in the sale deed, the parties actions and the evidence on file.

  • COMMISIONER OF INCOME TAX V. M/S MOTOR AND GENERAL STORES (1967)[5]

In this case the Supreme Court held that the price, in the general terms refers to monetary gains for the sale of the property. It was also additionally determined that if any other consideration is retained, then the transaction will not be considered as a sale rather it will be determined as exchange or barter.

  • HAKIM SINGH V. RAM SNEHI (2001)[6]

In this case the Allahabad court held that insufficiency in payment is not a significant factor in sale. Even if the court discovers that the price or the consideration given is less than the property’s worth in the market, the sale nonetheless will be considered to be legitimate.

Doctrines / Theories 

While the TPA 1882 has not given any specific emphasis on the “doctrines” in relation to sale but here are some of the frequently referred doctrines which are applicable to sales-

  • Doctrine of Estopple-

This theory strictly prohibits a person from rejecting or contradicted to its opinion that they had already mentioned and if the other party acted according to it and had faced a huge damage as result of it.

Under sale this may be very important in case where the seller makes any misleading claim regarding the property, causing the buyer to engage into the transaction and then attempting to back out from the same. In such circumstances this doctrine will act as a boon for the buyers as it will prevent the seller from refuting its representation because of buyer’s trust and possible loss.

  • Doctrine of Caveat Emptor-

This doctrine especially gives an idea which means “let the buyer beaware” typically expressing that the buyer will be responsible for investigating and ensuring the condition of the property that they are buying.

While not specifically stated, the TPA’s emphasis on “caveat venditor” (let the seller beware) through mandated disclosures and potential penalties for seller misrepresentations offers a framework that somewhat mitigates the strictness of “caveat emptor.”

  • Doctrine of Election[7]

This idea came into existence when the person has the right to claim the same property under two or more contradictory titles. Here the individual can select only one title, not entitle for both.

CONCLUSION & COMMENTS

The Transfer of Property Act 1882, is an important regulation in India that serves seamless and safely sale of immovable property. It safeguards the rights and interests of purchasers and sellers by setting an unambiguous structure for ownership transfer. Understanding the characteristics enables people to navigate the sales procedure with assurance and protect their interests. Further research into current events and upcoming trends might assist negotiate the intricacies of selling under the TPA.

REFERENCES

  1. Books / Commentaries / Journals Referred
    1. THE TRANSFER OF PROPERTY ACT BY-DR. R.K. SINHA
  2. Online Articles / Sources Referred
    1. https://www.coursehero.com/file/92741157/Sale-and-Exchange-under-Transfer-of-Property-Actdocx/
    2. https://blog.ipleaders.in/sale-under-transfer-of-property-act-1882/
  1. Cases Referred
    1. https://indiankanoon.org/doc/1332419/
    2. https://indiankanoon.org/doc/1798885/
    3. https://indiankanoon.org/doc/1898632/
    4. https://www.casemine.com/judgement/in/5767b11ae691cb22da6d3514
  2. Statutes Referred
    1. Transfer of Property Act 1882
    2. The Indian Contract Act 1872

[1] Section 54 of Transfer of Property Act 1882.

[2] It gives the person rights against one person or party to the contract.

[3] It gives the right that relates to a specific property and can be enforced against anyone who interferes with the property.

[4] AIR 1999 SC 1441

[5] 1968 AIR 200

[6] (1908) ILR 30 ALI 248

[7] Section 40 of TPA 1882

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