TABLE OF CONTENTS

1. Abstract ................................................................................................................................ 2

2. Issues .................................................................................................................................... 2

3. Introduction .......................................................................................................................... 3

3.1. Doctrine of Part Performance in India under S. 53-A .................................................. 3

3.2. Doctrine of Part Performance in England..................................................................... 6

4. Essentials of the Doctrine of Part Performance ................................................................... 7

4.1. Contract to Transfer an Immovable Property ............................................................... 8

4.2. Transferee shall be Ready and willing to perform his part of the Contract .................. 9

5. Position of S.53-A Pre and Post the Amendment of 2001 ................................................. 12

5.1. Amending Act of 1929 ............................................................................................... 12

5.2. Amending Act of 2001 ............................................................................................... 13

5.3. Present Controversies ................................................................................................. 14

6. Conclusion ......................................................................................................................... 18

7. Bibliography ...................................................................................................................... 18
1. ABSTRACT
The doctrine of part performance is based on the equitable rule of part performance developed
under the English Law by the Court of Chancery.1 In India Section 53-A of the Transfer of
Property Act, 1882 often referred to as the doctrine of the part performance seeks to protect the
rights of the prospective transferees against the rights of the transferors by allowing them to
retain the possession of the property who after the execution of an incomplete instrument of
transfer fail to complete it in the manner specified by law without there being any fault on the
part of the transferee but is willing to perform his part of the contract. This paper is an attempt
to trace the history of the doctrine of the part performance since its inception under the English
law. The paper would also try to highlight the object and the intention of the Indian Legislature
behind importing such a provision from the English law. This paper is also an attempt to
ascertain the scope of the expression ‘willingness to perform his part of the contract’ for there
are many ambiguities in deciding whether the party was willing to perform his part of the
contract or not or the sole purpose of the transferee behind entering into the contract was the
intention to commit fraud. The paper would also delve into the ambiguities that were in existence
before the 2001 amendment of the Registration Act and the changes that have been brought by
such an amendment.

2. ISSUES
 There is always a possibility that one or the other party may abdicate his willingness to
perform his part of the contract and therefore, the arrangements under s.53-A of the
Transfer of Property Act may fail to reach its completion and fail to conclude. The
question that now arises is that whether in such cases the property can be said to be
transferred although one of the parties refrains to perform his part of the contract?
 How do the courts ascertain whether there is any willingness on the part of the transferee
to perform his part of the contract or not for there are chances and there have been many
cases where such contracts were nothing but mere frauds?

1
SAXENA, P.P., PROPERTY LAW, LEXIS NEXIS, (3RD EDITION, 2017).
3. INTRODUCTION
The doctrine of part performance also known as ‘equity of part performance’ says that if a person
has taken possession of an immovable property on the basis of a contract of sale and has either
performed or is willing to perform his part of the contract, then he would not be ejected from the
property on the ground that he ale was unregistered and the legal titles has not been transferred to
him. The doctrine of part performance was evolved by the Court of Equity in England.2 In 1677,
a statute was enacted in England known as the Statute of Frauds, 1677, to prevent perpetuation of
fraud in the transfers of land.3 Section 4 of this 1677 provided that all agreements in respect of
transfers of land must be in writing.4 Therefore, all the transfers of immovable property on the
basis of oral agreements were held illegal and transferee could not get title to the land. This in
actual application allowed perpetuation of fraud instead of preventing it. Strict application of this
law created great hardship to transferees. For helping such transferees the Courts of Equity
(Chancery Courts) came forward and held that part-performance by the transferee, who held that
lands on the basis of oral contracts would not be governed by the Statute of Frauds. Thus, the
bona fide transferees who had performed their part of the contract by paying price in full or
taking possession of land could get the title to the property even in the absence of legal
formalities of written agreement or registered instrument.

3.1.DOCTRINE OF PART PERFORMANCE IN INDIA UNDER S. 53-A

Doctrine of Part Performance under s. 53-A of the Indian Laws was first enacted in 1929 by the
Transfer of Property (Amendment) Act 1929. The section imports into India a modified form of
the equity of part performance as was developed in England in Maddison v. Alderson5 for the
first time. Recently, para 4 of s.53-A has been amended by s.10 of the Registration and Other
Related Laws (Amendment) Act 2001 (Act 48 of 2001) whereby the words ‘the contract, though
required to be registered, has not been registered, or’ has been omitted. The principle on which
the doctrine of part-performance rests is that if a man has made a bargain with another, and
allowed that other person to act upon it, he will create the equity against himself, which he
cannot resist by setting upon the want of formality in the evidence of the contract out of which
the equity in fact arises. Now this right does not merely give rise to an equity as in England. It

2
AVTAR SINGH, TEXTBOOK ON THE TRANSFER OF PROPERTY ACT, 1882, LEXIS NEXIS, (5TH EDITION,2017)
3
Id.
4
Id.
5
Maddison v. Alderson (1883) 8 App Cas 467.
creates a statutory right. However, this right is limited than the English equity in two ways. First,
according to it the contract must be in writing and it is available only as a defence. The Supreme
Court observed that the protection provided under s.53-A is a shield only against the transferor.
It disentitles the transferor from disturbing possession of the proposed transferee who has been
put into possession under the agreement. It has nothing to do with the ownership of the transferor
who remains full owner of the property till it is legally conveyed by executing a registered sale
deed. Thus, it may be said that section 53A is a partial importation into India of the English
equitable doctrine of part-performance. So far applicability of s53A of the TP Act is concerned,
what is to be seen is that the section provides for a shield of protection to the proposed transferee
to remain in possession against the original owner who has agreed to sell to the transferee, if the
proposed transferee satisfies other conditions of s.53A that protection is available as a shield,
only against the transferor, the proposed vendor would disentitle him from disturbing the
possession of the proposed transferees who are put in possession pursuant to such an agreement.
However, that has nothing to do with the ownership of the proposed transferor who remains full
owner of the lands till they are legally conveyed by a sale deed to the proposed transferees. Such
a right to protect possession against the proposed vendor cannot be pressed in service against a
third party like the state when it seeks to enforce the provision of the Act against the tenure-
holder. The equitable right of s.53A of the TP Act cannot be claimed for restraining sale of the
suit property, but can be sought for seeking protection against dispossession.

In the old Madras case, Kurri Veera Reddi v. Kurri Bapi Reddi6, the High Court held that the
English doctrine of part-performance was not applicable in Indian law. In 1914, the Privy
Council in Md. Musa v. Aghore Kuamr Ganguly7, held that the doctrine of part-performance was
applicable in India on the principle of justice, equity and good conscience. In this case, a
compromise deed (razinamah) was in writing but not registered. According to this deed, certain
lands were divided the parties who had taken possession of their respective parts of the land. The
parties remained in possession for many years and about 40 years later, the heirs of the parties
repudiated the compromise deed on the ground that it was not registered. The Privy Council
applied this doctrine and held that although the compromise-deed was unregistered, it was in
writing and therefore, a valid instrument which could not be repudiated.

6
Kurri Veera Reddi v. Kurri Bapi Reddi (1906) ILR 29 Mad 336
7
Md. Musa v. Aghore Kuamr Ganguly (1915) 17 BOMLR 42
In an Allahabad case8, the facts were these. In 1905 A sold property X with other property by a
duly registered deed to B and B sold property Y with other property to A. Possession of items X
and Y was, however, not transferred and shortly afterwards A and B agreed to exchange the two
properties. No deed of exchange was executed but the parties remained in possession from 1905.
In 1915 some of the heirs of B sued to recover property X from A in virtue of the sale deed of
1905. It was held that in the circumstances the plaintiffs were not entitled to recover. A Full
Bench of the Madras High Court, overruling Ramanathan v. Ranganathan9 and the Full Bench
case of Kurri Veerareddi v. Kurri Bapireddi10, held that part performance by way of delivery of
possession and an enforceable right on the purchaser’s part to specific performance are each
good defences to an action of ejectment on the part of the vendor.11

However, in Ariff v. Jadunath12, the Privy Council held that the doctrine of part performance was
not applicable to India because it cannot by-pass the express provisions of the Indian
Registration Act (as it did in Md. Musa’s case, where the compromise-deed written but
unregistered was held to be valid when the Registration Act provided that the document required
to be registered, if unregistered, will not be a valid document). In this case, the plaintiff granted a
permanent lease of a land to the defendant. The lease was oral and it was unexecuted and
unregistered. On the basis of this oral agreement the defendant took possession of the land and
constructed buildings on that land. After 10 years, the plaintiff sought to evict the defendant
treating him as a tenant on monthly basis. The Calcutta High Court applied the doctrine of part
performance and decided in favour of the defendant. The plaintiff appealed to the Privy Council
which reversed the decision of the Calcutta High Court. The Privy Council held that the doctrine
of part performance could not be applied against express provisions of Indian laws like Indian
Registration Act and Transfer of Property Act. The Transfer of Property Act provided in s.107
that a permanent lease could be granted only by a registered and written document and here in
this case the lease was oral.

8
Salamat-uz-Zamin Begum v. Masha Alla Khan, (1917) 40 All 187.
9
(1917) 40 Mad 1134.
10
(1906) 29 Mad 336 FB.
11
Vizagapatam Sugar Development Co. Ltd v. Muthrumareddi, (1923) 46 Mad 919.
12
Ariff v. Jadunath AIR 1929 Cal 101.
The next case before the Privy Council was Mian Pir Bux v. Sardar Mohammad Tahir13. In this
case, the plaintiff was a grantee of a plot from the Government at Sukkar. In 1919, he entered
into agreement with the defendant to sell the land to him if the plaintiff could get the permission
of the Government to live in Quetta. The plaintiff obtained the permission but failed to execute a
conveyance in favour of the defendant. The collector cancelled the grant in favour of the plaintiff
and put the defendant in possession of the plot. The plaintiff brought an action for the declaration
of his title and for ejectment of defendant. The collector’s order was found to be invalid and
defendant’s contention that the ejectment order should fail relying upon the doctrine of part-
performance. But the Privy Council rejecting the defendant’s contention held that the equitable
doctrine of part-performance was not available in India against express statutory provisions.

3.2.DOCTRINE OF PART PERFORMANCE IN ENGLAND

Walsh v. Longsdale14 and Maddison v. Alderson15 are two of the major cases that have helped
develop the doctrine of part performance in England. In India, this doctrine has been enacted
with a few modifications. It is not easy to ascertain from the authorities earlier than the case of
Maddison v. Alderson16 what precisely was the ground of the equitable doctrine as to part
performance. In that case Lord Chancellor the Earl of Selbourne exhaustively dealt with the
subject. B was A’s servant. A had promised B a certain property as life estate, meaning B could
enjoy the property during his life time. B served A for years upon this promised life estate. The
will bequeathing such interest and property to B failed due to want for proper attestation. After A
died, one of his heirs brought action to recover the property from B.
It was held that the act of part performance could not be proof of the contract since the
performance was a condition precedent to the contract. The heir of A was able to recover the said
property. In Walsh v. Lonsdale17, Walsh took a cotton mill on lease for 7 years from Longsdale,
the owner of the mill. The agreement was prepared but not signed. In the meantime, rent arrears
started to accumulate as Walsh could not keep up with the quarterly payments of rent. An
advance of one year’s rent could be demanded by Longsdale as per the contract. Lonsdale
demanded the advance rent for one year and seized some goods of Walsh when he defaulted.

13
Mian Pir Bux v. Sardar Mohammad Tahir AIR 1929 Cal 101.
14
Walsh v Lonsdale (1882) 21 Ch D 9.
15
Maddison v. Alderson (1883) 8 App Cas 467
16
Supra Note 5
17
Walsh v Lonsdale (1882) 21 Ch D 9.
Walsh sued for damages. The House of Lords decided in favor of Lonsdale stating that by
running the mill, Walsh had admitted he was a lessee and evidence of his consent to the unsigned
lease deed.

There is a wide distinction between Maddison v. Alderson and Walsh v. Lonsdale so far as the
practical application of the principles which they respectively lay down, is concerned. According
to the former, part performance of a contract may give rise to equities which complete the
contract, and it will then assume the character of a contract already executed and on the footing
of that executed contract, all the equities of the case may be adjusted; on the other hand, there
may be cases where to give the necessary reliefs to the parties, a legal right may have to be
established and for the purpose of establishment of that legal right it may be necessary to invoke
the aid of the latter case.18 In other words, if a defendant can bring his action in ejectment within
Maddison v. Alderson, he need not resort to Walsh v. Lonsdale as the former case gives him
higher rights, making unnecessary for him to have specific performance, so that Walsh v.
Lonsdale can help a defendant provided his right to specific performance is not barred whilst
Maddison v. Alderson can be resorted to even if specific performance is barred.19 Walsh v.
Lonsdale applies only to cases where there is a contract to transfer a legal title, and an act has to
be justified or an action maintained by force of the legal title to which such contract relates. It
involves two questions, (1) Is there a contract of which specific performance can be obtained?
(2) If yes, will the title acquired by such specific performance justify at law the act complained
of or support at law the action in question?20 It is to treated as though before the Judicature Acts
there had been, first a suit in equity for specific performance, and then an action at law between
the same parties; and the doctrine is applicable only in those cases where specific performance
can be obtained between the same parties in the same Court, and at the same time as the
subsequent legal question falls to be determined. The rule laid down in Walsh v. Lonsdale is not
applicable in India – as it did not constitute the doctrine of part performance.

4. ESSENTIALS OF THE DOCTRINE OF PART PERFORMANCE

The following are the essential requirements for basing a claim on s. 53-A of the Transfer of
Property Act:

18
Vakil, Darashaw, Transfer Of Property Act, Lexis Nexis, (5th Edition,2017)
19
Id.
20
Id.
 i. There must be a contract to transfer for consideration any immovable property.
ii. The contract must be in writing, signed by the transferor, or by someone on his behalf.
iii. The writing must be in such words from which the terms necessary to construe the
transfer can be ascertained.
iv. The transferee must in part performance of the contract take possession of the property,
or of any part thereof.
v. The transferee must have done some act in furtherance of the contract.
vi. The transferee must have performed or be willing to perform his part of the contract.21

4.1.CONTRACT TO TRANSFER AN IMMOVABLE PROPERTY

The first and the foremost requirement of the doctrine of part performance is that there must be a
contract and the subject matter of the contract shall be an immovable property. In short, there
must be a contract to transfer an immovable property. The contract shall be in writing. The
transferee under oral agreement cannot take benefit of this section. It must be signed by person
or his agent on his behalf whom it is sought to bind. Handing over possession of the property by
the transferor to the transferee in part performance of the contract under s. 53A of the Transfer of
Property Act, 1882 is necessary, but transfer should be of legal titles and rights to enjoy the
property. The essence of handing over the possession as contemplated in s. 53A lies not merely
in handing over possession but lies in the intention of the transferor to transfer the ownership
rights of the property for consideration in favor of transferee. The ownership rights can be said to
have been transferred when transferee/developer acquires the right to use, lease out or dispose
the property at his sole discretion. In case of Joint Development Agreement, landowner may
hand over the possession of land to the developer for development without intention to transfer
ownership to the developer in the land.22 Such a transaction is not covered under the provisions
of s. 53A. Thus in case of any Joint Development Arrangement, where possession of the land is
given to the developer by the landowner, without giving right of disposal, sale or otherwise does
not fall within provisions of s. 53A and hence not a transfer of property within the meaning of s.

21
Super note 5, Chaturbhuj Dwarkadas Kapadia vs Commissioner Of Income-Tax 2003 (2) BomCR 449
22
CS Deepak Pratap Singh, Analysis of Section 53A of Transfer of Property Act
https://taxguru.in/corporate-law/analysis-provisions-section-53a-transfer-property-act-1882.html (accessed on 12
September 2018).
2(47)(v) of the Income Tax Act, 1961.23 However, in some cases the courts have also held that
sometimes transfer of possession by the landowner to the developer constituted transfer u/s
2(47)(v). For instance in the case of Dr. Maya Shenoy v. Asst. CIT24, the assessee entered into
development agreement with ASR for construction of flats. According to the agreement the
developer was to hand over the possession of the said land and in turn had to give 45% of the
constructed area to the owner. Therefore, it was held that the handing over the possession was
towards the part performance of the agreement and held the effect of transfer as contemplated in
s. 2(47)(v).

A contract excludes a gift.25 In a Calcutta case26, the doctrine was applied to an antinuptial gift;
but the case was regarded as one of the contract, the court treating the antinuptial promise of the
bride’s father as becoming a binding contract when the marriage followed. The section applies to
a contract of dower governed by Mohammedan law, where the bride is in possession and has
married in performance of the contract.27 Partition is not a transfer of property and therefore
protection under s. 53-A is not available in such a case.28 Also, the transfer of property must be
for some consideration. Where transfer is without consideration, the doctrine shall not be made
applicable. Therefore, transfer of property by virtue of a gift has been kept out of the purview of
the doctrine of part performance. The court in the case of Hiralal v. Gaurishankar29 also held
that a gift does not involve a contract and therefore the doctrine of part performance does not
apply where the transfer of property is in pursuance of gift.

4.2. TRANSFEREE SHALL BE READY AND WILLING TO PERFORM HIS PART OF THE

CONTRACT
Readiness and willingness on the part of the transferee is a condition precedent for obtaining
relief under s.53A. The interest of the transferee shall be protected and taken care of only if it is
proved in the Courts of law that the transferee has performed or is ready and willing to perform

23
Id.
24
Dr. Maya Shenoy v. Asst. CIT (2009) 124 TTJ 692 (Hyd)
25
Hiralal v. Gaurishankar AIR 1928 Bom 250.
26
Pran Mohan Das v. Hari Mohan Das AIR 1928 Cal 856.
27
Haji Mokshed v. Del Rouson Bibi AIR 1971 Cal 162.
28
Chandrawati v. Lakhmi Chand AIR 1988 Del 13 (18).
29
Hiralal v. Gaurishankar AIR 1928 Bom 250.
his part of the contract. The principle of equity is that “he who seeks equity must do equity”.30
Therefore, the transferee who wants to take benefit of this section must also do his part of the
contract.31 Elaborating the scope of the expression “has performed or is willing to perform”,
Mulla observes that: “The doctrine of readiness and willingness is an emphatic way of
expression to establish that the transferee always abides by the terms of the agreement and is
willing to perform his part of the contract. Part performance, as a statutory is conditioned upon
the transferee’s willingness to perform his part of the contract in terms covenanted there
under.”32 The term “willingness” as used in the section does imply “readiness and willingness”
as used in s. 16 of the Specific Relief Act, 1963.33 Readiness and willingness is not only by
formal pleading, but it is required to be shown both by capacity as well as by mental attitude. 34
Willingness to perform is essentially a mental disposition, an intention.35 The readiness and
willingness on the part of the plaintiff would also depend upon the question as to whether the
defendant did everything which was required of him to be done in terms of the agreement for
sale.36 “The words ready and willing imply that the person was prepared to carry out the terms
of the contract. The distinction between readiness and willingness is that the former refers to the
financial capacity and the latter to the conduct of the plaintiff wanting performance. Generally
readiness is backed by willingness. Readiness and willingness cannot be treated as a
straightjacket formula. That has to be determined from the entirety of the facts and
circumstances relevant to the intention and the conduct of the party concerned.” 37 Where the
plaintiff neither had sufficient funds to pay the consideration amount nor was he acting promptly
within the stipulated time where time was the essence of the contract, it was held by the court
that he was not willing to perform his part of the contract.38Where major portion of the
consideration (two-third in the present case) was paid at the time of the execution of the contract,

30
Legal Dictionary,
https://legaldictionary.thefreedictionary.com/%22He+who+seeks+equity+must+do+equity.%22, Accessed on 4th
September, 2018
31
Mulla., PROPERTY LAW, LEXIS NEXIS, (EIGHTH EDITION, 2017)
32
Id.
33
Pappamal (Died) v. Sarojini AIR 1988 Del 13 (18).
34
Sri Venkatesh S/O Late Balappa And ... vs Sri D.A.C. Venkoosa S/O D. Ambasa
35
Supra Note 23
36
P. D’Souza v.Shondrilo Naidu, (2004) 6 SCC 649.
37
M/S J.P.Builders & Anr vs A.Ramadas Rao & Anr civil appeal nos. 9821-9822 of 2010
38
His Holiness Acharya Swami Ganesh Dassji v. Sita Ram Thapar, AIR 1996 SC 2095.
the court held that the party’s willingness to pay the remaining amount was apparent. 39 A person
who falsely claims to have paid a sum of money and attempts to prove the plea at trial stage
cannot be said to have been ever ready and willing to pay the sum due under the contract in
question.40 Even readiness to pay the consideration is not the only conduct which shows
willingness of the transferee to perform the contract. Where the defendant who takes the plea of
part-performance demands specific performance within the stipulated time, he is deemed to be
ready and willing to perform his part of contract. On receipt of the balance amount of sale
consideration, the transferor allowed possession of the property to the transferee. By entering
into another agreement, the transferee was allowed to use the premises as an absolute owner. She
was permitted to set electricity connection, make improvements and take all other necessary
steps. The court said that this proved willingness of the transferee to perform her part of the
contract. She was allowed to benefit of the doctrine of part performance. The existence of right
to claim protection under s.53-A would not be available if the transferee just kept quiet and
remained passive without taking effective steps. Further, he must also perform his part of the
contract and convey his willingness. On the other hand, the factual finding was that there was no
intimation by the defendant to perform his part of contract to claim protection of s.53A. likewise
there was no material to show that the plaintiff has notice of agreement of sale in favor of the
defendant

However, such willingness in the context of s.53A of the Act has to be absolute and
unconditional. If willingness is embedded with a condition, it is in fact no more than an offer and
cannot be termed as willingness. In judging the willingness to perform, one must consider the
obligations of the parties and the sequence in which these are to be performed. Unless the party
has performed or is willing to perform its obligations under the contract, and in the same
sequence in which these are to be performed, it cannot be said that the provisions of s.53A of the
Transfer of Property Act will come into play on the facts of that case. It is only elementary that,
unless provisions of s.53A of the Transfer of Property Act are satisfied on the facts of a case, the
transaction in question cannot fall within the scope of deemed transfer under s.2(47)(v) of the IT
Act. In Jacob Private Ltd. v. Thomas Jacob41, the court held that where the vendee company

39
Motilal Jain v. Ramdasi Devi, AIR 2000 SC 2408.
40
Raj Kumar Agarwal v. Thawar Das, AIR 1999 SC 3248.
41
Jacob Private Ltd. v. Thomas Jacob AIR 1995 Ker 249
expresses its willingness to pay the amount provided the plaintiff clears his income-tax arrears,
there is no complete willingness and it is not sufficient for the protection of s. 53-A.

5. POSITION OF S.53-A PRE AND POST THE AMENDMENT OF 2001

5.1.AMENDING ACT OF 1929

The Amending Act of 1929 partially introduced the equity of part performance into the Indian
Law under the Transfer of Property Act, 1882 by enacting s.53-A. It recognized in a limited
manner the English doctrine of part performance and has enabled the transferee to raise the
defence, which was not available to him before the said amending Act was passed. Section 53A
does not provide that under the circumstances stated therein, a good title passes to the transferee.
It only provides that the transferor shall be debarred from enforcing against the transferee and the
person claiming under him any right in respect of the immovable property of which the
transferee has taken possession. In addition to a valid title section 53A recognizes an equitable
interest which might accrue to the transferee in the property on the fulfillment of the conditions
mentioned therein. The act also amended the Registration Act, 1908. S. 49 of the Registration
Act 1908 lays down that a document which is required to be registered but not registered shall
not affect the immovable property or be received as evidence of any transaction affecting such
property. However the by virtue of the amendment of the year 1929, a proviso was inserted to
permit such a document being received in evidence in a suit for specific performance, or as
evidence ofpart performance of a contract for the purposes of s 53A of the TP Act. The proviso
made it clear that s.49 does not prevent an unregistered agreement or deed to be admitted in
evidence as a contract. It gave statutory recognition to Puchha lal v. Kunj Behari Lal42, and
supersedes the decision in Sanjib Chandra v. Santosh Kumar43. Under the proviso, the
unregistered document may be referred to as evidence that certain acts are done in performance
of the agreement, for instance when a building has been erected in the terms of an unregistered
lease. However, a document which must be regarded as unregistered for fraud on registration
cannot be referred to for invoking this section.

42
Puchha lal v. Kunj Behari Lal AIR 1995 Ker 249
43
Sanjib Chandra v. Santosh Kumar Case No.54 BM W.P 26963 (W) of 2017
 5.2.AMENDING ACT OF 2001
The amendments made by the amending Act of 1929, both under the TP Act as well as the
Registration Act 1908, to even an unregistered documents for the purpose of s.53A has now been
withdrawn by the amendments made by the Registration and Other Related Laws (Amendment)
Act 2001, which has come into force with effect from 24 September 2001. By this amending
Act, the words “the contract, though required to be registered, has not been registered, or,” as
appearing in p. 4 of s. 53A has been omitted. Incidentally the clause “then notwithstanding that
the contract, though required to be registered, has not been registered”, itself indicates that the
legislature always intended that such agreements were also meant to be registered. S.53A was
enacted only to protect the rights of the intended transferee and nothing more. This position has
now been clarified by the amendment in/omission to the Transfer of Property Act.
Simultaneously, ss. 17 and 49 of the Registration Act 1908 have been amended. Proviso of s.49
was amended by deleting the words “or as evidence of part performance of a contract for the
purpose of s. 53A”. Section 17 of the Registration act enumerates the documents that are to be
registered compulsorily. Sub-section (1A) was amended providing that the documents containing
contracts to transfer for consideration, any immovable property, for the purpose of Section 53A
of the Transfer of Property Act, 1882 (4of 1882), shall now be registered making it clear that
unless the documents containing contract to transfer for consideration any immovable property
for the purpose of s.53A is registered, it shall not have effect for the purposes of s. 53A. Thus,
the Power of Attorneys, Sale Agreements, Contract to Sale etc., made should be registered for
transfer of valid title of ownership to the transferee.44 In the case of Dr. T Achyutha v. Asstt.
CIT45, the assessee eneterd into a “Sale cum Development Agreement’ with the developer on 22-
08-1997. An irrevocable Power of Attorney was also signed thereby passing all rights to dispose
of the developed property and also to utilize advance and sale consideration. It was decided by
the Tribunal that was a transfer of property under S. 53A of the Transfer of Property Act, 1882,
which fell within scope of S. 2(47)(v) of the Income Tax Act, 1961. In Charanjit Singh Atwal v.
ITO Ward-VI(1) Ludhiyana46, it was held that irrevocable General Power of Attorney which
leads to overall control of property in hands of developer, even if that does not involve exclusive

44
CS Deepak Pratap Singh, ANALYSIS OF SECTION 53A OF TRANSFER OF PROPERTY ACT,
https://taxguru.in/corporate-law/analysis-provisions-section-53a-transfer-property-act-1882.html (accessed on 12
September 2018).
45
Dr. T Achyutha v. Asstt. CIT, [2007] 108 TTJ (Hyd.)
46
Charanjit Singh Atwal v. ITO Ward-VI(1) Ludhiyana, [2013] 36 taxmann.com 10 (Chandigarh - Trib.)
possession of developer, would constitute transfer within the meaning of s.2(47)(v). it was held
that the possession contemplated by provisions of s.2(47)(v) of the Income Tax Act, 1961 does
not require handing over exclusive possession. What is required is that the transferred by virtue
of possession should be able to exercise overall control for intended purposes. In Smt. Vasai
Pratap Chandv. Dy. CIT47, it was held that an immovable property can be said to be sold or
transferred either when the deed of conveyance is executed as per the general law under the
Transfer of Property Act, 1882, or when the possession is transferred in part performance of
contract within the meaning of provisions of s.53A of the Transfer of Property Act, 1882 as
provided under provisions of s. 2(47) of the Income Tax Act, 1961. The limited application of
provision of other statutes to interpret the Income Tax law would not defeat the intended purpose
of tax laws and hence it may be inferred that the transactions of genuine nature as defined in s.
53A will not be treated as transfer under the deemed provisions of Income tax even after the
amendment made in the Registration and other relevant acts including the Transfer of Property
Act, 1882. If the transactions are genuine and supported by relevant supporting documents,
whether registered or not, but subject to fulfilling other conditions specified in s. 53A.48

5.3. PRESENT CONTROVERSIES

5.3.1. WHETHER UNREGISTERED JOINT DEVELOPMENT AGREEMENT WOULD QUALIFY AS

A TRANSFER UNDER S.2(47)(V) OF THE INCOME TAX ACT, 1961.?

The present position and the cumulative effect of all these amendments is that where a person
contracts to transfer for consideration any immovable property in writing and the transferee has,
in part performance of the contract, taken possession of the said property or any part thereof, or
he being already in possession continues in possession in part performance of the contract, the
benefit of section 53A would not be available to him unless the document is registered and in the
event of non-registration it cannot be used as evidence. Therefore, it can be concluded that since
a transaction, even a part performance of which is not complete without registration after
24/9/2001, will not be a transfer within the meaning of s. 2(47) of the Income Tax Act, 1961

47
Smt. Vasai Pratap Chandv. Dy. CIT, [2004] 89 ITD 73 (Delhi).
48
R.Vaiyapuri Kannan, SECTION 2(47)(V) MAY HIT BY CHANGE IN 53A OF THE TP ACT,
https://www.caclubindia.com/articles/section-2-47-v-may-hit-by-change-in-53a-of-the-tp-act--19785.asp (accessed
on 12 September 2018)
unless it is duly registered.49 Therefore, the documents containing contracts to transfer for
consideration are required to be mandatorily registered. In other words, if a JDA is not
registered, it would have no effect in law for the purposes of s. 53A of the TOPA. Thus, it
provided an incentive to the parties to register the JDA since it granted them legally enforceable
rights. Given this background, the primary issue before the SC in Balbir Singh Maini’s case50
was whether unregistered JDA, which granted access to the developers for the purposes of
development in part performance of the JDA, would get covered within the extended definition
of ‘transfer’ under s.2(47)(v) of the IT Act. The facts of the case are as follows:

The taxpayers were members of a housing society (Society) which owned certain land in
a village. The society entered into a tripartite JDA with certain developers (Developers).
Under the JDA, it was agreed that the Developers would undertake the development of
21.2 acres of land owned and registered in the name of the Society and in respect of
which it would give development rights in lieu of consideration. It is pertinent to note that
although the JDA was executed, it was not registered and as per the terms of the JDA,
possession of the property was to be handed over simultaneously with the registration of
the JDA. Further, the Developers made only part payment of consideration and, thus, the
taxpayers offered to pay tax on the proportionate amount received. However, the JDA
was subsequently abandoned as the necessary permissions for development were not
granted.

The tax authorities and the Income Tax Appellate Tribunal (ITAT) held that since
physical and vacant possession has been handed over under the JDA, the same would
tantamount to “transfer” within the meaning of s.2(47)(v) of the Income-Tax Act (IT
Act). They also concluded that the taxpayer was liable to pay capital gains tax in the
assessment year during which the JDA was executed on the entire amount already
received and/or receivable in future. However, the High Court reversed the decision of
the ITAT and held that since no possession of land was given by the transferor to the
transferee of the entire land in part performance of the JDA, it did fall within the domain
of s.53A of the Transfer of Property Act, 1882. In the absence of the fulfillment of the

49
CS Atwal v. CIT [2015] 378 ITR 244 (P&H)
50
CIT v. Balbir Singh Maini 378 ITR 244
 ingredients of s.53A, no ‘transfer’ under s. 2(47)(v) would take place. The High Court
also observed that the possession delivered was as a licensee for the development of land
and not as transferee and in the absence of registration of JDA, the agreement would not
fall under s.53A of TOPA and consequently, s. 2(47)(v) of the IT Act would not apply.

After going through the facts and circumstances and contentions of the taxpayers as well as the
tax authorities, the SC observed that under s.2(47)(v) of the IT Act, the term ‘transfer’ includes
any transaction which allows possession to be taken/retained in part performance of a contract of
the nature referred to in s.53A of the TOPA. Taking note of the amendment to s.53A of the
TOPA, the SC went on to hold that to qualify as a “transfer” of a capital asset under s. 2(47)(v)
of the Act, there must be a “contract” which is enforceable under law (i.e. complies with the
provisions of s. 53A of the TOPA). A perusal of s. 53A suggests that in the eyes of law, there
was no contract which could be taken cognizance of, if it was not registered. Therefore, for the
JDA to be considered for the purposes of s. 53A of TOPA, it was required to be a registered
instrument and since it was not registered in the instant case, the SC held that in the absence of
registration of such an agreement, the same was not enforceable under general law and, thus, the
transaction would not fall under s. 2(47)(v).

The SC also observed that the ITAT was not correct in its view that, since s. 2(47)(v) of the IT
Act refers to “contract of the nature referred to in s. 53A of the TOPA”, the JDA was not
required to be registered to attract s. 2(47)(v) as the requirement of registration was introduced
only in 2001. The SC clarified that all that was meant by this expression was to refer to the
ingredients of applicability of s.53A of the TOPA to the contracts mentioned therein and only
where the contract contained all the essential ingredients under s. 53A of the TOPA, it will be
covered within the ambit of transfer, as provided under s. 2(47)(v) of the IT Act. Accordingly, it
was held that such an expression could not be stretched so as to say that, though registration of a
contract is required only after 2001, s. 2(47)(v) of the IT Act would include within its purview
only such contracts mentioned in s. 53A of the TOPA, but without the requirement of
registration.

At the same time, the SC rejected the view of the HC which had held that s. 2(47)(vi) of the IT
Act, would not apply in the absence of any change in membership of the Society. The SC
clarified that under s. 2(47)(vi) of the IT Act, any transaction that has the effect of transferring or
enabling the enjoyment of any immovable property would come within its purview. Such a
transfer could be by way of becoming a member or acquiring shares in a cooperative society ‘or
in any other manner whatsoever’. The SC further observed that the HC had erred by not
adverting to the expression ‘or in any other manner whatsoever’, which expression shows that it
was not necessary that the transaction must refer to the membership of a cooperative society. It
held that a reading of the JDA in the present case would show that the assessee continued to be
the owner throughout its tenor, and at no stage purported to transfer ownership rights to the
Developer. At the highest, possession alone was granted under the JDA for the specific purpose
of the property development. Thus, the present case did not attract the provisions of s. 2(47)(vi)
of the IT Act.

5.3.2. WHEN SHALL THE CAPITAL GAINS ARISING OUT OF THE TRANSFER OF PROPERTY

UNDER S.2(47)(V) BE DUE FOR TAXATION?

In 1997, the Supreme Court in the case of CIT v. Podar Cement Ltd51 took a view that
registration for the purpose of conferring ownership right was not necessary as regards taxability
of income received in respect of the property. Following the view taken by the Supreme Court in
above case the Full Bench of the Gujarat High Court in CIT v. Mormasji Macharji Vaid52 has
held that capital gain on the transfer has to be assessed to tax in the assessment year relevant to
previous year within which the date of execution of deed of transfer falls and not in the
subsequent assessment year in which the deed is registered. These decisions in the case of Podar
Cement and in the case Mormasji Mancharji Vaid seem to have set the stage for a path breaking
judgment of the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT53.
The principle emanating from the decision is that in the case of a development agreement, if the
contract, read as a whole, indicates passing or transferring of complete control over the property
in favour of the developer, then the date of contract would be relevant to decide the year of
chargeability of capital gains and substantial performance of the contract would be irrelevant.54
Lastly, it also held that as the JDA was abandoned due to lack of required approvals/permissions,

51
CIT v. Podar Cement Ltd [1997] 226 ITR 625/92.
52
CIT v. Mormasji Macharji Vaid [2001] 250 ITR 542/118 Taxman 276.
53
Chaturbhuj Dwarkadas Kapadia v. CIT (260 ITR 491) Bom.
54
IN ABSENCE OF REGISTRATION OF AGREEMENT AS WELL AS POSSESSION BEING HANDED OVER, THERE IS NO
TRANSFER UNDER SECTION 2(47)(V) OF THE INCOME TAX ACT
https://home.kpmg.com/content/dam/kpmg/in/pdf/2016/10/KPMG-Flash-News-Jawaharlal-L-Agicha-2.pdf
(accessed on 15 September 2018).
therefore, the income from capital gain on a transaction which never materialized was merely a
hypothetical income and no capital gains tax could be levied on such national income under s.45,
r/w s. 48, of the IT Act. However, the Court in the case of CIT v. Balbir Singh Maini55,
expounded the principle of “real income” and followed the well-established precedents set up by
the Indian judiciary to hold that, since no profit or gain was realized, no capital gains tax could
be levied. Therefore, the SC has reiterated that for a transaction to be regarded as a ‘transfer’
under s. 2(47)(v) of the IT Act, all the conditions of s. 53A of TOPA should be satisfied and
possession of the property should be obtained by the transferee in part performance of the
contract. It also observed that only real income should be brought to tax and not notional income.

The Finance Bill 2017, though it does not refer to the amendment to the Transfer of Property
Act, while recognizing the genuine hardship faced by the landowner in such cases has tried to
solve this conundrum by inserting a new sub section (5A) in section 45 of the Income Tax Act
which stipulates that capital gains arising from the Joint Development Agreement will be taxed
in the year in which the certificate of completion has been issued by the competent authority.

6. CONCLUSION
The above provision has been enacted to give equity. The object is to prevent the transferor or
his successor from taking an advantage on account of the non-registration of the document,
provided the transferee has performed his part of the contract. Applicability of s.2(47) of the Act
vis a vis transfer of capital asset under a JDA has been a subject matter of litigation before the
Courts. The Tribunal in the case of Balbir Singh Maini’s case observed that in absence of
registration of the agreement, the arrangement would not be construed as transfer by virtue of
provisions of s.2(47)(v) of the Act read with s.53A of the TOPA and s. 17(1A) of the
Registration Act, 1908. The decision also emphasized that only real income shall be taxed
therefore drawing a distinction between real and notional income.

7. BIBLIOGRAPHY

1. Books
 AVTAR SINGH, TEXTBOOK ON THE TRANSFER OF PROPERTY ACT, 1882, LEXIS NEXIS, (5TH
EDITION,2017)

55
CIT v. Balbir Singh Maini 378 ITR 244
  MULLA., PROPERTY LAW, LEXIS NEXIS, (EIGHTH EDITION, 2017
 SAXENA, P.P., PROPERTY LAW, LEXIS NEXIS, (3RD EDITION, 2017)
 SWAMY, N. MAHESHWARA, LAW RELATING TO TRANSFER OF PROPERTY, (ASIA LAW
HOUSE, 2ND EDITION, 2013)
 VAKIL, DARASHAW, TRANSFER OF PROPERTY ACT, LEXIS NEXIS, (5TH EDITION,2017)

2. CASE LAWS
 Ariff v. Jadunath AIR 1929 Cal 101 ................................................................................... 5
 Chandrawati v. Lakhmi Chand AIR 1988 Del 13 (18). ...................................................... 7
 Chaturbhuj Dwarkadas Kapadia vs Commissioner Of Income-Tax 2003 (2) BomCR 4496
 CIT v. Balbir Singh Maini 378 ITR 244 ........................................................................... 12
 CIT v. Mormasji Macharji Vaid [2001] 250 ITR 542/118 Taxman 276 .......................... 15
 CIT v. Podar Cement Ltd [1997] 226 ITR 625/92. ........................................................... 15
 CS Atwal v. CIT [2015] 378 ITR 244 (P&H) .................................................................. 12
 Dr. Maya Shenoy v. Asst. CIT (2009) 124 TTJ 692 (Hyd) ................................................. 7
 Haji Mokshed v. Del Rouson Bibi AIR 1971 Cal 162 ........................................................ 7
 Hiralal v. Gaurishankar AIR 1928 Bom 250.................................................................. 7, 8
 His Holiness Acharya Swami Ganesh Dassji v. Sita Ram Thapar, AIR 1996 SC 2095 .... 9
 Jacob Private Ltd. v. Thomas Jacob AIR 1995 Ker 249 .................................................. 10
 Kurri Veera Reddi v. Kurri Bapi Reddi (1906) ILR 29 Mad 336 ...................................... 4
 M/S J.P.Builders & Anr vs A.Ramadas Rao & Anr civil appeal nos. 9821-9822 of 2010 9
 Maddison v. Alderson (1883) 8 App Cas 467 ..................................................................... 3
 Md. Musa v. Aghore Kuamr Ganguly (1915) 17 BOMLR 42 ............................................ 4
 Mian Pir Bux v. Sardar Mohammad Tahir AIR 1929 Cal 101 .......................................... 5
 Motilal Jain v. Ramdasi Devi, AIR 2000 SC 2408 ............................................................. 9
 P. D’Souza v.Shondrilo Naidu, (2004) 6 SCC 649............................................................. 8
 Pappamal (Died) v. Sarojini AIR 1988 Del 13 (18). .......................................................... 8
 Pran Mohan Das v. Hari Mohan Das AIR 1928 Cal 856. ................................................. 7
 Puchha lal v. Kunj Behari Lal AIR 1995 Ker 249 ........................................................... 10
 Raj Kumar Agarwal v. Thawar Das, AIR 1999 SC 3248................................................... 9
  Sanjib Chandra v. Santosh Kumar Case No.54 BM W.P 26963 (W) of 2017 ................. 11
 Sri Venkatesh S/O Late Balappa And ... vs Sri D.A.C. Venkoosa S/O D. Ambasa ........... 8

3. ARTICLES
 Sen, G. M., The Doctrine of Part Performance in India, 11 (2) JOURNAL OF THE
INDIAN LAW INSTITUTE 224-29 (1969). Also available on
http://www.jstor.org/stable/43950022.
 Doctrine of part performance, ECONOMIC TIMES (December, 2005). Also available on
https://economictimes.indiatimes.com/doctrine-of-part-performance/article
show/1353683.cms

4. WEB RESOURCES
 R.Vaiyapuri Kannan, Section 2(47)(v) may hit by change in 53A of the TP Act,
https://www.caclubindia.com/articles/section-2-47-v-may-hit-by-change-in-53a-of-the-
tp-act--19785.asp (accessed on 12 September 2018).

 CS Deepak Pratap Singh, ANALYSIS OF SECTION 53A OF TRANSFER OF PROPERTY ACT,

https://taxguru.in/corporate-law/analysis-provisions-section-53a-transfer-property-act-
1882.html (accessed on 12 September 2018).
 S.R. Patnaik, LANDOWNERS TO BREATHE EASY – NO TAX ON JDA UNTIL ITS
REGISTRATION, https://tax.cyrilamarchandblogs.com/tag/section-53a-of-the-topa/
(accessed on 12 September 2018)

 IN ABSENCE OF REGISTRATION OF AGREEMENT AS WELL AS POSSESSION BEING HANDED

OVER, THERE IS NO TRANSFER UNDER SECTION 2(47)(V) OF THE INCOME TAX ACT

https://home.kpmg.com/content/dam/kpmg/in/pdf/2016/10/KPMG-Flash-News-
Jawaharlal-L-Agicha-2.pdf (accessed on 15 September 2018).