SALE OF IMMOVABLE PROPERTY- ESSENTIALS OF A VALID SALE
INTRODUCTION
Property can be conveyed by distinct methods or ways viz., sale, gift, mortgage, exchange, lease, etc. transfer of immovable property by each of the provided methods, has its importance, disadvantages, and advantages. Thus, the article describes the meaning of sale and its essentials.
DEFINITION OF SALE
‘Sale’ is a transfer of ownership in exchange for a price paid a promised to be paid or partly-paid and partly-promised (Section 54).
Transfer of tangible immovable property of the value of Rs. 100/- and above can be made only by a registered instrument.
The term ‘Tangible’ means ‘capable of being perceived by the senses. Tangible property is corporeal property such as fields, gardens, etc.
Transfer of immovable property of a value less than Rs. 100/- may be either by a registered instrument or by the delivery of the property.
‘Delivery’ means the seller places the buyer or any person the buyer directs, in possession of the property.
EXPLANATION
The transaction of sale involves a transfer of ownership in consideration of a price. In a sale, there is the absolute transfer of all rights in the property sold.
Madan Pillai Vs. Badra Kali Ammal
This is a leading case on Section 54 – definition of sale and how the sale is made. As far as the sale is concerned, it is only the intention by which the property passes to the buyer on registration that is essential to determine whether it is a sale or not.[1]
If the intention is that the property should pass on after registration, then the sale is complete as soon as the deed is registered irrespective of whether the sale price has been paid or not. This is clear from the words in section 54 which reads “price paid or promised or part promised and partly paid”.
Thus, if the intention between both the seller and the buyer is that the property should pass on, immediately on registration, then the sale is complete and the seller should hand over the possession of the property to the buyer. In case he fails to give possession of the property, then the buyer has the right to sue for possession and the seller cannot take the defense that the price was not paid.
Similarly, if the buyer does not pay the price as agreed, the seller can only sue for the price and can have a charge on the property for the unpaid purchase money.[2]
ESSENTIALS OF SALE
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Essentials of a valid contract
In a sale, all the essentials of a valid contract as per section 10 of the Indian Contract Act 1872 must be complied with. There must be 2 parties namely the seller and the buyer. The seller must have a valid title or authority to transfer the property.
- Madam Pillai V. Badra Kali
The court held that a contract of sale of immovable property is governed as per the terms settled between the contracting parties.
- Biswanath Sahu V. Tribeni Mohan case
It was held that Karta had the authority to dispose of the property of a joint Hindu family under certain circumstances.
The seller and buyer must be competent to contract. A minor or lunatic cannot be a transferor/vendor as he is not competent to contract. However, it has been held that a minor or a lunatic can be a transferee or purchaser in the case of transfer by way of sale or mortgage, represented by his guardian.
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Existence of subject matter of sale
The subject matter of sale may be any immovable property (Sale of movable property is governed by the Sale of Goods Act 1930). Immovable property includes land, the benefits arising out of the land, crops, etc.
The property must be in existence at the date of transfer and must be a transferable property within the meaning of Section 6 of the Transfer of Property Act.
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Price
The consideration of a sale is the price which is the essence of the contract of sale, and without consideration, there is no enforceable contract of sale. ‘Price’ means ‘monetary consideration’.
The price can be paid fully in cash or it can be partly paid and partly promised to be paid in the future. The price can be fixed by the agreement between the parties before the conveyance of the property. The price is to be fixed reasonably.
Nalamathu Venkaiya V. B.S. Neelakanta, the court held that payment of consideration is of the essence when a transfer of property is made through a sale. The time of payment of consideration is not material and the consideration may be promised or paid at a future date.[3]
The presence of monetary consideration thus is a necessary element for a sale. If the consideration is not money, but some other valuable consideration it is an exchange or barter but not a sale.
A pre-payment of the price is not a condition precedent to the completion of the sale. Payment of the price is not always a necessary condition for the completion of the sale.
If the intention is that the property should pass on registration, the sale is complete as soon as the deed is registered, whether the price has been paid or not.
Price is an essential ingredient for all transactions of sale and in the absence of the price or the consideration, the transfer by way of sale must be in exchange for a price. It has been held that price normally means money.
Shivlal Vs. Bhagwan I.L.R. (1889)
If the seller does not get the remaining part of the promised sale money, then he can file a suit against the buyer for its recovery, but he cannot transfer it to someone else by declaring the previous sale as void.
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Transfer of Absolute Interest: (By Registered Instrument or Delivery of Possession)
There must be conveyance, i.e., transfer of an absolute interest in the property by the seller in favor of the purchaser in a manner prescribed by law. There are two modes of transfer by sale.
They are:
- By registered instrument
- Delivery or possession
A sale cannot be affected in any other mode except these modes. Delivery is said to take place when the seller places the buyer or any person he directs, in possession of the property. Delivery may be actual or constructive.
However, immovable property of more than the value of Rs. 100/- must necessarily be registered for transfer of ownership from the seller to the buyer.
- Arjuna Reddy V. Arjuna C Thanga (2006)
In a sale of a property of a value less than rupees hundred, the formalities required are optional.[4]
- Kashmir Chand Vs. Vazir Begum (1939)
If the property is valued at less than Rs. 100/-, then the transfer can be either effected through registration or delivery of possession.
- Jhandu Vs. Ramesh Chand, (1971)
The Court observed that if the instrument is registered, the transfer is affected from the date of writing the contract and not from the date of registration.[5]
CONTRACT OF SALE AND CONTRACT FOR SALE
A contract of sale is the actual sale and hence all the essentials of sale are necessary to be complied with. Whereas a contract for the sale of immovable property is a contract of a future sale.
In other words, it is only an agreement between seller and buyer for effecting a future sale. The sale of a property shall take place in the future as per terms agreed between seller and buyer in the contract for the sale deed.
Before the passing of the Transfer of Property Act, the law was that a contract for sale created an interest in the land itself in favor of the purchaser.
But after the passing of the Transfer of Property Act, Section 54 of the Act states that a contract for the sale of immovable property does not, by itself, create any interest in, or charge on the sale of the property.[6]
Ram Baran Prasad Vs. Ram Mohit Hazra
The Court held that a mere contract for the sale of immovable property does not create any interest in the immovable property.[7]
CONCLUSION
Under the Transfer of Property Act, 1882, sale signify to that of immovable property which includes both palpable and impalpable property, also rights appear out of the land. For the sale, the parties must be capable. If the sale is of immovable property more than Rs. 100, it has to be registered.
BIBLIOGRAPHY:
- Madan Pillai v. Badrakali Archives – The Fact Factor, https://thefactfactor.com/tag/madan-pillai-v-badrakali/ (last visited Jun 22, 2022)
- Sale under Transfer of Property Act | Essentials of sale | Legal PaathShala, https://legalpaathshala.com/sale-under-transfer-of-property-act/ (last visited Jun 22, 2022)
- Sale of Immovable Property – Law Times Journal, https://lawtimesjournal.in/sale-of-immovable-property/ (last visited Jun 22, 2022)
- Arjuna Reddy v. Arjuna C Thanga Archives – The Fact Factor, https://thefactfactor.com/tag/arjuna-reddy-v-arjuna-c-thanga/ (last visited Jun 22, 2022)
- Sale of immovable property: Essentials of valid sale The Fact Factor, https://thefactfactor.com/facts/law/civil_law/topa/sale-of-immovable-property/2270/ (last visited Jun 22, 2022)
- KNOW, W., What is Contract of Sale: Everything You Need to Know UpCounsel, https://www.upcounsel.com/what-is-contract-of-sale (last visited Jun 22, 2022)
- Ram Baran Prasad Vs. Ram Mohit Hazra and others casemine.com, https://www.casemine.com/judgement/in/5609ab4be4b014971140c226 (last visited Jun 22, 2022)
[1] Madan Pillai v. Badrakali Archives – The Fact Factor, https://thefactfactor.com/tag/madan-pillai-v-badrakali/ (last visited Jun 22, 2022)
[2] Sale under Transfer of Property Act | Essentials of sale | Legal PaathShala, https://legalpaathshala.com/sale-under-transfer-of-property-act/ (last visited Jun 22, 2022)
[3] Sale of Immovable Property – Law Times Journal Law Times Journal, https://lawtimesjournal.in/sale-of-immovable-property/ (last visited Jun 22, 2022)
[4] Arjuna Reddy v. Arjuna C Thanga Archives – The Fact Factor, https://thefactfactor.com/tag/arjuna-reddy-v-arjuna-c-thanga/ (last visited Jun 22, 2022)
[5] Sale of immovable property: Essentials of valid sale The Fact Factor, https://thefactfactor.com/facts/law/civil_law/topa/sale-of-immovable-property/2270/ (last visited Jun 22, 2022)
[6] KNOW, W., What is Contract of Sale: Everything You Need to Know UpCounsel, https://www.upcounsel.com/what-is-contract-of-sale (last visited Jun 22, 2022)
[7] Ram Baran Prasad Vs. Ram Mohit Hazra and others casemine.com, https://www.casemine.com/judgement/in/5609ab4be4b014971140c226 (last visited Jun 22, 2022)
AUTHOR: Adithya Narayanan,
5 Yr BBA-LLB, SDM Law College,
Mangalore, Karnataka.