Sale of Immovable Property (S. 54)

Law > Civil Laws > Transfer of Property Act > Sale of Immovable Property

Section 54 of Transfer of Property Act, 1882 defines the sale of immovable property.

Section 54 in The Transfer of Property Act, 1882

“Sale” defined.—‘‘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 immoveable 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 immoveable 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 immoveable 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.

Property can be transferred by different modes or ways viz. Sale, mortgage, lease, gift, exchange, etc. Transfer of immovable property by each of the aforesaid modes has its own significance, advantages, and disadvantages. In these articles, we should study the meaning of the word “SALE” and its essentials.

For a sale of immovable property, for example, a building, there will be a contract between the parties requiring the seller to transfer the ownership in the building for a price in cash. The contract will provide the terms of the sale, including the time of passing of the ownership, delivery of the property and payment by the buyer. In the performance of the contract, when the seller transfers the ownership in the property, the sale is done. At some point of time, the seller will give possession of the property to the buyer. A sale of immovable property is done through a registered instrument.

The Essential Elements of a Sale of Immovable Property:

According to Section 54, the following are the essentials of a valid sale

• Parties to a sale;
• The subject matter of sale;
• Price or consideration;
• Registration;
• Conveyance.

Parties to Sale:

The parties to a sale are the transferor who is called a seller or vendor, and the transferee known as the buyer or vendee. A contract of sale must be based on a mutual agreement between the seller and the buyer. Thus there are two parties to a sale.

Competency of Transferor or Vendor:

• The transferor or the seller must be a person who is competent to enter into a contract on the date of sale (Section 7 of the Act) i.e., he must be a major (completed 18 years of age) and of sound mind and should not be legally disqualified to transfer the property.
• A minor or a person of unsound mind is incompetent to transfer his own property despite being its owner, but a transfer by a mentally challenged person during lucid intervals is considered valid.
• Incompetency imposed under law or a statute is called statutory incompetency. When a person is declared as an insolvent, his property vests in the official receiver and he is incompetent to transfer the same. Similarly, a judgment debtor is not capable sell his property that is to be sold in execution under the order of the court. The property cannot be sold when it is under the management of the Court of Wards.
• The transferor must be the owner of the property and he must have a legal title to it.
• The transferor or seller may be a real person or a legal person.

Case Laws:

• In Shakeela Bano v. Mohd Bismil Siraj, AIR 2006 MP 192 case, a sale deed was executed by father on behalf of the respondent (minor) held void ab initio.
• In Biswanath Sahu v. Tribeni Mohan, AIR 2003 Ori 189 case, the Court held that the transferor should either be the owner of the property or should have an authority to dispose of it. For example, the Karta of joint family property is authorized to transfer the property under certain specified circumstances.
• In Sarup Chand v. Surjit Kaur, AIR 2002 P & H 54 case, the court held that the guardian of the property of a minor is empowered to sell it with the permission of the court, and without such permission, the sale would be invalid.
• In Lakhwinder Singh v. Paramjit Kaur, AIR 2004 P & H 6 case, the Court held that an agent having a power of attorney to sell the property can also sell it without being the owner of the property. Where the sale is executed after getting a general power of attorney; without obtaining the requisite permission of the court, the sale deed is invalid and would not confer any title on the transferee.
• In A Bhagyamma v. Bangalore Development Authority, Bangalore, AIR 2010 Kar. 63  case, the Court held that if the Power of Attorney executed in favour of the holder expressly authorizes him to transfer the property and he would be a competent seller.
• In Misahul Enterprises v. Vijaya Srivastava, AIR 2003 Del 15 case, the Court opined that a contract of sale like other contracts must be based on a mutual agreement (mutuality) between the seller and the buyer.

Competency of Transferee or Vendee:

• The transferee must be a person competent to receive a transfer in his favour.
• He should not be disqualified by any law for time being in force for purchasing a property. For example, Under Section 136 of this Act, an actionable claim cannot be purchased by a judge, legal practitioner or an officer connected with the court. Similarly, an officer performing an official duty in connection with the sale of the property cannot purchase the same.
• The transferee or buyer may be a real person or a legal person.

Case Law:

In Ram Jiwan Rai v. Deoki Nandan Rai, AIR 2005 Pat 23 case, the Court held that a minor is a competent transferee in a transaction of a sale. Similarly, a mortgage or a lease can be executed in favour of a minor, but a minor cannot take a lease in his favour, as a lease has to be executed by both the parties. A lease in favour of a minor is, therefore, void.

Subject Matter of a Sale:

Section 54 only governs the sale of immovable property which is transferable (Section 6 of the Act). The Sale of Goods Act, 1930 deals with the sale of movable properties.

Characteristic of Transferable Immovable Property:

• Immovable property can be tangible or intangible. Tangible property is one that can be touched, such as a land, a house, a tree, things attached to earth, etc., while intangible property refers to property that cannot be touched such as a right of ferry, a right to mortgage, a right of fishery, a right of way, etc.
• The property must be properly and sufficiently identified.

Case Law:

In Ram Jiwan Rai v. Deoki Nandan Rai, AIR 2005 Pat 23 case, a suit for declaration of title of the property, the controversy was with respect to the identity of the property. There was a mistake in the plot number. The court held that as both boundaries and plot number was given in the sale certificate a mistake in the plot number must be treated as a misdescription which did not affect the identity of the property sold. Rather, it is intrinsic evidence in proving that the seller wanted to convey the right and title in the suit property to the buyer.

Price or Consideration:

The price is an essential element of a sale. At the time of the contract of a sale, a price must be ascertained at which the property is going to be transferred. The definition of “Sale” in Section 54 specifies that there is an exchange of ownership for a price paid or promised or part-paid and part-promised. Thus price can be paid at the time of sale or before the sale in advance or after the sale. At the same time, it can be paid in a lump sum or in part. If the price is not ascertained then the contract of sale is incomplete and void because it is not enforceable. Thus the payment of the price is not necessary for the completion of the transfer but its reference is necessary. It may be paid at the time of execution or promised to pay or the same part of it may be paid at the time of execution and rest may be promised to be paid in future. Thus payment of the price is not a sine qua non for completion of the sale.

In Ramlal v. Phagua (2006)1 SCC 168 case, the Court held that the term price has not been defined in the Transfer of Property Act, 1882, but is used is the same sense as in the Indian Contract Act, 1872, S. 77;

In Commissioner of Income Tax v. Motor and General Stores, AIR 1967 SC 200 case, the Court opined that the price, in the ordinary sense connotes money consideration for the sale of the property. In the same case the Court further observed that where, instead of price, some other valuable consideration is kept, the transaction is not a sale but can be an exchange or barter.

In Unnao Commercial Bank v. Kailash Nath, AIR 1955 All 393, case, court held that where the consideration is money but is not specific, the transaction would still be a sale. Thus, 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.

In Hakim Singh v. Ram Sanehi AIR 2001 All 231 case, the Court held that for the validity of the sale, the inadequacy of consideration is not any relevant factor. Even when the price or the consideration is found by the Court to be less than the market value of the property, the sale is valid.

The consideration should be reasonable, otherwise, the Court may presume to be fraudulent, having mistake, or made under coercion and can declare it void.

A compromise (Krishan Tanjabi v. Aba, (1910) ILR 34 Bom 139), a decretal amount (Sura Reddy v. Ram Sarasa, AIR 1937 Mad 714), an advance made by one person to another (Ashok Chandra v. Chota Nagpur Banking Corpn., AIR 1948 Rang 294), or an agreement to protect and defend the property at the purchaser‘s cost,( Berni Madho v. Joh., AIR 1947 All 110) is a good consideration for sale.

In K. Lakshaman Rao v. G. Ratna Manikyamba, AIR 2003 AP 241  case, 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 family settlement amounted to a valid consideration for the sale of immovable property.

An agreement to maintain the transferor (Rati Ram v. Mam Chand, AIR 1959 Punj 117) or not to contest a suit, (Mahima v. Dinabondhi, AIR 1960 Ori 16) or to file a suit for redemption and bear all its costs, (Sabadeo Singh v. Kubernath, AIR 1950 All 632) cannot be called price as is understood under this section and therefore, if these are the considerations, the transaction would not be a sale.

In Ghulam Mohamad v. Tek Chand, AIR 1921 Lah 82  case, the Court held that a transfer effected where the consideration is the work done in clearing and sinking a well is not a sale.

In Madan Pillai v. Badrakali, AIR 1922 Mad 311, case, the Court held that the transfer of a life interest in land in the discharge of a claim for maintenance is neither a sale not an exchange nor a gift.

In Malik Mohamad Shujaagt v. Salim Jahan, AIR 1949 All 204 case, the Court held that transfer effected in lieu of kharcha-e-Pandan is not a sale, while in Saburannesa v. Mohiuddin, AIR 1934 Cal 693  case, the Court held that a transfer of immovable property in lieu of dower of a Muslim woman can be a sale of immovable property .

In Chandra Shankar v. Abhia AIR 1952 Bom 56 case, the Court opined that the ordinary rule governing sale is that payment of consideration is simultaneous with the time when the conveyance is executed by the seller. This rule can be deviated from in case of an agreement to the contrary by the parties.

In Nalamathu Venkaiya v. B.S. Neelkanta, AIR 2005 Andh Pra 535 case, the Court held that a price is the essence of the contract of sale but the time for payment of it is not the essence of the sale unless the contract stipulates so.

In Hara Bewa v. Banchandilal, AIR 1957 Ori 243 case, the Court held that if the recitals are indecisive, surrounding circumstances or conduct of parties are the relevant factors to decide the validity of the sale.

In Shiva Narain Sab v. Baidya Nath Tewari, AIR 1973 Pat 386 case, the Court held that the payment of the price is not a sine qua non to the completion of the sale.

In Sahadeo Singh v. Kubernath, AIR 1950 All 632  case the Court held that a promise that price will be paid within a year is valid, but if it is no paid the seller cannot set aside the sale or sue for getting the possession back. His only remedy would be to sue the buyer for the price.

In Kaliperunal v. Rajagopal, AIR 2009 SC 2122  case, the Court held that where the intention of the parties was clear that the title in the property would pass in favour of the transferee only after the payment of complete consideration, then notwithstanding the fact that the sale deed has been registered, the transfer of ownership would not take place till the payment of the total price.

In Inder Kaur v. Tara Singh, (1978) 80 Punj LR 41 the Court held that if the buyer pays money through a cheque which is dishonoured, the sale would not take effect.

Registration:

According to S.54 of the Act, writing, attestation, and registration are the essential requirements for the completion of a valid sale of the property, whose value is more than Rs. 100 (see phrases ‘only by’ in the S. 54). For sale of property whose value is less than Rs. 100 the registration is optional (see the phrase ‘may be’ in S. 54).

In Munnalal v. Armaram, AIR 2008 (NOC) 843 (MP)  case, the Court opined that 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. Unless all the three conditions are complied with, no right passes from the seller to the buyer i.e. there is no sale of immovable property.

in case of property of nominal value, the sale of the property can be completed by simple delivery of possession of such property. In such cases, due to the small value of the property, For immovable property whose value is less than Rs. 100 can be transferred without registration.

In Arjuna Reddy v. Arjuna C Thanga, (2006) 7 SCC 756 case, the Court held that the property of a value less than Rs. 100 can be transferred. It is only that writing, attestation, and registration in such cases are optional. The test is the value of the property and nor the amount of consideration or the price.

In Lakshmi Narain Bamwal v. Jagdish Singh, AIR 1991 Pat 99; case, the Court held that Transfer of ownership of property whose value is more than Rs. 100 cannot take place without registration and it concludes on registration unless there is a clause contrary in the contract.

Conveyance of Property:

In Ram Saran Lall v. Domini Kuer, AIR 1961 SC 1747 case, the Court held that a suit for preemption that can be filed only after the conclusion of the sale, if filed before registration, will be premature.

In Tapan Krishna Das v. Hazi Ali Khan, AIR 2005 Cal 60  case, the sale deed was executed on 28 July 1989 but was registered on 22 June 1992, a preemption suit filed on 18 June 1992, was held by the Calcutta High Court as premature.

In Kameshwar Choudhary v. State of Bihar, AIR 1998 Pat 141 case, the Court held that once registration takes place, the-ownership passes with effect from the date of the execution of the sale deed unless there is an intention of the parties to the contrary.

In Venkataramana v. Rangiab, AIR 1922 Mad 249 case, the Court held that the ownership under a deed for sale executed before but registered after a suit was filed with respect to this property, will not be lis pendens.

In Chander Singh v. Jamuna Prasad, AIR 1958 Pat 193 case, a subsequently registered deed will not affect a former executed sale deed, though registered later.

The general rule of the passing of ownership on registration is subject to the intention of the parties (i.e. buyer and seller) explicitly expressed in the contract.

In Prem Singh v. Distt Board of Rawalpindi, AIR 1934 Lah 917 case, the Court held that if the intention of parties to pass the ownership can not be gathered from the document, then extraneous evidence is admissible for clarity.

In Bishnudeo Narain Rai v. Anmol Devi, AIR 1998 SC 3006 case, the Court held that if the intention of parties to pass the ownership is ambiguous in the document, then extraneous evidence is admissible for clarity.

In Ponayya Goundan v. Muttu, (1894) ILR 17 Mad 146 case, the Court held that if the intention was that transfer of ownership is to take place on the registration, the ownership in the property passes on such registration even though the possession has not been delivered.

In Shib Lal v. Bhagwan, (1888) 11 All 244 case, the Court held that if the intention was that transfer of ownership is to take place on the registration, the ownership in the property passes on such registration even though the price has not been paid.

In Mathura Mohan v. Ram Kumar, (1916) ILR 43 Cal 790 case, the title to the land does not pass by mere admission when the Act requires a conveyance.

In Abdul Alim v. Abdul Sattar, AIR 1936 Cal 130 case, the Court held that an unregistered sale deed can be used as evidence as to the character of possession of the property.

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