SALE:

A sale relates to a transaction between living parties dealing with immoveable property. Section 54-57 contained
in Chapter III of the Transfer of Property Act, 1882 (TPA) deals with the concept of sale. Generally, the law
categorises the subject matter of the sale into moveable and immoveable properties. TPA deals with sale of
Immovable Property.

SECTION 54: SALE DEFINED:

Section 54 deals with three different subjects which are given below and will be discussed one after the other:
(1) Definition of sale
(2) Mode of transfer by sale
(3) Contract for sale

Section 54 states that "sale" is a transfer of ownership in exchange for a price paid, promised, or part-paid and
part-promised. Therefore, sale is the transfer of ownership for money consideration. It implies an absolute
transfer of all rights in the property sold, with no rights in the property left to the transferor. In a sale, the
transferee must pay the entire purchase price at once, and all the rights of the transferor are transferred to him.

The two elements necessary to constitute a sale are:

1. Transfer of ownership.
2. Money consideration.

Ownership means the bundle of all rights and liabilities in a property. When ownership is transferred, all these
rights and liabilities are transferred to the transferee, leaving nothing for the transferor. The ownership of the
property must be transferred in exchange for money, and the money exchanged for ownership is called the
"price." Transfer of ownership only for money consideration is known as a "sale."

Where the vendee was ready and willing to execute the sale deed but the vendor could not deliver vacant
possession of the suit property, the vendee was held entitled to a refund of advance with reasonable interest.
Although time is generally considered the essence of a contract, the legal proposition is that time is not the
essence of the contract regarding the sale of immovable properties, unless specifically stipulated. If the time
fixed in the sale agreement is a relevant factor, and time is considered to be the essence of the contract, notice
must be given to the other party accordingly. However, in this case, because the vendor did not push the vendee
to complete the sale or act within the stipulated time, it suggested that the vendor did not consider the timeline
critical for the performance of the contract.

Essentials of a Sale:
(1) Parties
(2) Subject-matter
(3) Money-consideration
(4) Conveyance

1. PARTIES:
For a valid sale, both the buyer and seller have to be competent on the date of the sale:

o The seller must have ownership of the property which he is going to sell.
o The seller must have legal title to it, only then can he sell the property.
o The seller must not be a minor.
o The seller must not be of an unsound mind.
o The seller must not be statutorily incompetent.
o The buyer must be competent to take the ownership of the property.
o The buyer should not be disqualified from buying the immovable property by any law in force at the
time of the sale.
The seller and buyer may be natural persons or juristic persons, for example, corporations or other legal persons.
Under mortgage, until the secured creditor confirms the sale, the borrower retains the right to redeem 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 (Lakhwinder Singh v.
Paramjit Kaur, 2004), but if the Power of Attorney executed in favour of the holder expressly authorizes him to
transfer the property he would be a competent seller (A Bhagyamma v. Bangalore Development Authority,
Bangalore 2010).

The karta of a joint family property is authorized to transfer the property under certain specified circumstances
(Biswanath Sahu v. Tribeni Mohan, 2003). Similarly, 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 (Sarup Chand v.
Surjit Kaur, 2002).

2. SUBJECT-MATTER:
The Transfer of Property Act, 1882, deals with the transfer of immovable properties only. Therefore, the transfer
of ownership must be in some immovable property only. (The Sale of Goods Act, 1930 deals with sale of
movable properties.) Immovable property includes land, the benefits arising out of land and the things attached
to the earth except standing timber, growing crops and grass. The right to catch and carry away fish is "profit a
pendre" and construed as intangible immovable property. Immovable property can be tangible or intangible. It
was held that settlement of record of right neither creates nor extinguishes title.

3. MONEY CONSIDERATTION:
The price is a crucial element of a sale, and it must be determined at the time of the sale contract. Payment can
be made in a lump sum or installments as agreed. Generally, payment occurs simultaneously with the execution
of the conveyance, but this can be altered by mutual agreement.

The time of payment of consideration is not material. Consideration may be promised or paid at a future date.
Payment is not necessary but its reference is necessary for the completion of sale. The promise to pay must be
genuine; if the buyer attempts to evade payment, such as using a dishonored cheque, no title will pass.
Inadequacy of consideration does not invalidate a sale, even if the price is below market value. However, if the
consideration is deemed too low, courts may suspect fraudulent transfers.

Title can pass to a buyer upon registration, even if full payment hasn't been made. If the sale deed specifies that
title only passes after full payment, then the transfer will not occur until that condition is met. The parties'
intentions can be assessed from the sale deed and their actions. If a deed allows for title transfer upon part
payment but includes a condition for cancellation if the rest isn’t paid on time, it indicates the vendor may not
have intended to transfer the property fully. The vendor should take action if payment isn't made by the
deadline.

4.CONVEYANCE:
Section 54 has provided two modes of transfer of immovable property:—
(i) Delivery of possession, and
(ii) Registration of sale deed.

(i) Delivery of possession:

Where the property is tangible immovable property of a value less than one hundred rupees, its transfer may be
made either by a registered instrument or by delivery of the property. Delivery of tangible immovable property
takes place when the seller puts the buyer or such person as he directs in possession of the property. Where the
market value of the property is less than hundred rupees, the oral sale of immovable property is completed
merely by possession. The court, however, satisfied itself that the entire consideration has been paid. Delivery of
possession means transferring of physical control of the property to the buyer.
Mohiuddin v President, Municipal Corp, Khargone:
In this case, a piece of land was sold for less than Rs 10 with unregistered sale deed. No physical possession of
the property could be proved. It was held by the court that the transaction of sale could not be proved to have
taken place. Where actual physical possession is not the possible to be proved due to the nature or kind of
property, then anything done by the seller which amounts to change in possession from the seller to buyer is
deemed to be delivery of possession.

If the purchaser is already in the possession of the property which he has purchased, it is not necessary that there
should be any formal taking over of the possession, only a direction is sufficient to constitute delivery of
possession.

(ii) Registration of sale deed:

Where the property is tangible immovable property of the value of one hundred rupees and upwards or in the
case of a reversion or other intangible thing, transfer can be made only by a registered instrument. Where the
property is intangible immovable property of any valuation, it will require registration for completion of sale.

An agreement allowing the original owner to repurchase the property does not change its nature as a sale
agreement. The sale of movable and immovable property in one deed is valid if the transaction is unified.

Signatures and thumbprints on deeds can be validated through affidavits, even if not notarized. Courts demand
proof that deeds were explained to parties under disability, with a focus on independent legal advice for illiterate
individuals. Mere presence during drafting does not prove understanding of the document.

No presumption of undue influence arises solely from familial relationships or the executant's age or character.
Lastly, tangible immovable property valued under one hundred rupees can be transferred via a registered
instrument or through delivery of possession, making the sale valid and enforceable.

Alteration of sale deed:

Words for reconveyance were entered into the sale deed after its execution but before registration. This was
done without knowledge or consent of the buyer. The Court held him to be not bound by such words. He did not
know that he was signing an altered deed.

CONTRACT FOR SALE:

A contract for the sale of immovable property sets the terms for a future sale but does not create any interest or
charge on the property itself. Unlike English law, where a contract of sale transfers an equitable estate, in India,
it doesn't. However, the buyer can sue for specific performance or recover money paid under the contract if the
sale doesn't go through.

The buyer has a charge for any pre-paid amount, similar to the seller's charge for unpaid price under Section
55(4)(b). This charge can extend to other property or money if the original property is converted.

A contract for sale merely creates a right to obtain a sale deed. It does not give the buyer any interest in the
property, nor can the buyer prevent the owner from selling to another. It is merely a promise to execute a sale
deed later. In case of multiple agreements to sell the same property, the Supreme Court held that a bona fide
purchaser (P2) who buys without knowledge of the first agreement cannot be compelled to honor the earlier deal
(P1).

A contract for sale doesn't transfer ownership, but if a buyer takes possession under the contract and meets the
conditions of Section 53A, they can protect their possession against others, except those with a better title.

CONTIGENT AGREEMENT:
A contingent agreement of sale cannot be specifically enforced unless the contingency is fulfilled.
Sale in Violation of Contract- voidable

CANCELLATION OF DEED:
A transfer by way of sale was affected by a registered deed of transfer. The court said that it became an absolute
transfer from vendor to purchaser. The vendor became divested of this ownership. He retained no control or
right over the property. Such transfer could not be annulled as cancelled unilaterally by the vendor by executing
a deed of cancellation. Such deed cannot be accepted for registration. Cancellation of a sale deed can be ordered
only under section 31 of the Specific Relief Act, 1963. If a transferor wants to cancel the sale deed subsequent
to registration, he has to file a civil suit for cancellation under the Specific Relief Act, 1963 or alternatively he
can buy back the property from the transferee. He cannot execute a cancellation deed unilaterally nor can he
have it registered.

Difference between Sale and Contract of Sale

1. A sale of an immovable property is the transfer of ownership, whereas a contract for sale is merely an
agreement for the sale of property in the future on terms agreed between the parties. After a sale, all the
rights and liabilities of the owner transfer to the vendee, but in a contract of sale, no interest of the
vendee is created in the property. The ownership of the property remains with the vendor.

2. A sale conveys a legal title to the purchaser because the absolute interest of the vendor passes to the
vendee (purchaser). A contract of sale does not convey a legal title to the purchaser. It does not create
any right in the property or charge upon the property in favor of the party to the contract.

3. A sale creates a right in rem, whereas a contract of sale creates a right in personam, where only the
promisee (purchaser) can compel the seller-promisor or a subsequent purchaser with notice to execute
the promised conveyance.

4. A sale requires compulsory registration where the sale is of tangible immovable property of Rs 100 or
more, a reversion, and any intangible thing, whereas a contract of sale does not require any registration.

RIGHTS AND LIABILITIES OF BUYER AND SELLER:

Every property transaction create certain rights and liabilities for the contracting parties. In the case of a sale, the
contracting parties, a buyer and a seller, are also vested with some rights and liabilities. Generally, the parties
themselves expressly agree as to which rights and liabilities they will subject themselves to. However, section
55 itself has given detailed rights and liabilities of both the seller and the buyer not only before the sale but after
the completion of the sale.

Rights and Liabilities of a seller

Labilities before completion:

 Disclosure of material defects (Section 55(1)(a)):

A seller is bound to disclose any material defect in the property or his title of the seller to the property.
About such a defect only the seller is aware but not the buyer and the buyer could not discover that
defect with ordinary care. It is necessary that the defect must be a material defect about which if the
buyer had known he would not have purchased that property. [Flight v Booth (1834)]. Such defect can
be charges, encumbrance or any easement (right of way) or any nuisance in neighbour.

 Production of title deeds for inspection (Section 55(1)(b)):

A seller is bound to produce all the title documents relating to the property at the request of the buyer
for his inspection. He can examine such documents for his own protection. Where the buyer does not
examine the title deeds, the court will presume that he is satisfied with the authority and title of the sell
etc and will etc. If a buyer does not inspect the title-deeds, he would be fixed with the constructive
notice of any defect.

 Answer relevant questions regarding his title or the property (Section 55(1)(c)):
The seller must answer every relevant question put to him by the buyer relating to his title or the
property. The answer must be to the best of his information. he must be fully satisfied about the
ownership rights of the seller and his authority to make the transfer.

 Execute a proper conveyance of the property (Section 55(1)(d)):

Conveyance means an act of transferring a property. It can be done by signing or affixing a thumb
impression on the sale deed by the seller. A seller is bound to execute a proper conveyance only on the
payment of the consideration by the buyer. This clause imposes reciprocal duties on both the buyer and
the seller. The clause also provides that the execution must be at a proper time and place. Can be
decided by mutual agreement. However, the conveyance must be within reasonable time after tender of
 price. If unreasonable then can give notice.

 Take reasonable care of the property and title deed (Section 55(1)(e)):
The seller is bound to take care of the property and title deed in the same manner as an owner of
ordinary prudence would do. This duty is to be exercised till the delivery of the property to the buyer
(between the date of contract of sale and the delivery of property). He holds the property as a trustee of
the buyer because he has already executed the conveyance, only the delivery of the property is to be
made.

 Pay all the charges (Section 55(1)(g)):

A seller is bound to pay all the rent and public charges of the property, with interest if any, due till the
completion of the sale except if the buyer purchased the property with all the encumbrances. Where the
seller does not pay the outgoings and the buyer subsequently pays them, the buyer becomes entitled to
be reimbursed by the seller. The buyer has a right to require the seller to produce evidence that the
property is free from encumbrances.

Labilities after the completion:

 To give possession (Section 55(1)(f)):

The seller is bound to put the buyer or person as directed by the buyer in possession of the property on
being so required. This clause uses the words- “…such possession of the property as its nature admits.”
It refers to the nature of possession. For instance, in the case of tangible immoveable property,
physical control is to be given over property. In the case of intangible immoveable property, the
possession is symbolic. The possession is to be given after the transfer of ownership.

 Implied liability (Section 55(2)) –

The seller must undertake impliedly that he holds the perfect title to the property and is transferring the
same free from any encumbrance. The rights or interest created by the sale shall vest with the transferee
and may be enforced by every person in whom that right or interest is for the whole or any part thereof
from time to time is vested. If after the sale, it is found that the seller's title to the property is defective,
the buyer has the right to sue for damages. If the buyer is dispossessed of the property due to this
defect, they can also claim back the purchase money.

 To deliver title deeds on receipt of price (Section 55(3)):

The seller is bound to hand over all the documents relating to the title of the property to the buyer on
payment of the whole of the purchase money. The proviso to this clause lays down that—
(a) where the seller retains any part of the property comprised in such documents, he is entitled to
retain them all, and
(b) where the whole of such property is sold to different buyers, the buyer of the lot of greatest value is
entitled to such documents.

But in such cases, the seller and the buyer of highest value respectively are bound upon reasonable
request by the buyer (or anyone of the buyers) and at the cost of the person making such request to
produce the documents and furnish true copies of it.
The seller and the buyer of the lot of greatest value have to keep the documents safe, uncancelled, and
undefaced, unless he is prevented from doing so by fire or other inevitable accident.

Rights before completion:

 Right to take rents and profits (Section 55(4)(a)):

The seller is entitled to collect rents and profits from the property until ownership is transferred to the
buyer. Until then, the seller remains the legal owner and can enjoy the property's benefits.

If the buyer takes possession before the sale is completed, the seller can claim interest on unpaid
purchase money. The buyer, before paying, cannot claim profits from the property and must pay
interest to avoid benefiting from both the property and unpaid purchase money.Right after completion:

Rights after completion:

  Charges upon the property for the unpaid price (Section 55(4)(b)):
When ownership is transferred to the buyer before full payment, the seller is entitled to a charge on the
property for the unpaid purchase money or interest. This charge applies to the property in the buyer's
hands or in the hands of a transferee without consideration or with notice of non-payment. The sale of
immovable property does not depend on full payment, so the seller has a right to recover unpaid
amounts from the property. This charge is an actionable claim and can be transferred to a third party.
However, it can be waived by express or implied contract.

Rights and Liabilities of a buyer

Libalities before completion:

 Disclosure of all the facts known to the buyer that materially increase the value of the property
(Section 55(5)(a)):
The buyer is under obligation to confide to the seller any fact to which he has reason to believe is not
known to the seller relating to the increase in the property’s value. If he fails to do so, it will be
considered fraud, and the seller can avoid the sale if it is proven.

In the English case of Summers v. Griffiths (1866), an old lady contracted to sell a property at a much
lower price, believing that her rights in the property were not absolute. The buyer was aware that the
lady’s interest in the property was perfect and absolute, but he did not disclose it to the lady. He was
held liable for fraud, and the sale was set aside.

 Pay the price in accordance with the contract (Section 55(5)(b)):

The buyer must pay the purchase money at the time of completion of the sale to the seller or any person
as directed by the seller. If there are any encumbrances existing on the property at the time of sale, the
buyer is free to deduce such amount from the consideration he has to pay. It is in correspondence with
the duty of the seller to execute a proper conveyance. The buyer is not bound to pay the full amount
before transfer or ownership. He may either pay the price or promises to pay it at the time of
completion of sale. The buyer is not bound to pay the price until the conveyance is executed.

Liabilities after completion:

 To bear loss to the property (Section 55(5)(c)):

After the completion of the sale, the ownership is completely transferred to the buyer. From that date, if
any damage, destruction or decrease in value occurs in the property, the buyer will be bound to bear
such losses.

 To pay the outgoings. (Section 55(5)(d)):

The buyer is liable to pay all the public charges or rent accruing after the completion of the sale or as
agreed by the terms settled in the sale deed. After the completion of the sale the buyer becomes the
owner of the property and he becomes liable to pay the outgoings, for example, Government dues,
taxes, rents and revenue etc. The purchaser of the properties of a company in liquidation is entitled to
get a clear title free of all charges or encumbrances.

Right before completion:

 Refund of money paid on proper denial to accept delivery (Section 55(6)(b)): The buyer is entitled
to receive the amount of any purchase money with interest properly paid by him to the seller in
anticipation of delivery. The buyer is also entitled to get a refund of any earnest money paid by him or
the cost awarded to him in a suit to compel the specific performance of a contract or to obtain a decree
for its rescission. He is entitled to a refund of the amount paid, with interest, if the seller defaults or
fails to complete the sale. This charge also applies if the property is converted into another form or
compulsorily purchased by a competent authority.

Rights after completion:

  Benefit of the increment. (Section 55(6)(a)): Any benefit arising from improvement or increase in
value of the property or the rents and profits after completion of the sale shall vest with the buyer.

Liability to Pay Taxes:

The vendor has to pay taxes in respect of the property up to the date of sale. Liability of vendee to pay taxes
arises only form date of sale.

CASES:
1. Rogers v Hosegood103.—In this case, the purchaser of a plot of land covenanted not to erect more than one
dwelling house on the plot which would be used for residential purpose only. The court held that such a
covenant runs with the land and can be enforced by an assignee of the covenantee.

2. Gajapathi v Alagia104.—A sold a property to B After the conveyance, B discovered that under a decree of
partition, a portion of the property had been allotted to C It was held by the court that the sale was fraudulent
and the conveyance could be set aside.

MARSHALLING BY PURCHASER (SECTION 56):

Marshaling means to arrange, systematize or regulate. So, the basis of Marshalling is that –“the mortgagee
should not act in such way which can hamper the right of other mortgagee OR subsequent buyer for that
matter”.

According to this section:

1. If the owner of two or more properties,

2. mortgages them to one person and then sells one or more of the properties to another person,
3. the buyer is entitled to have the mortgage-debt satisfied out of the property or properties not sold to
him (subject to the contrary contract) so far as the same will extend,
4. But this will not prejudice the rights of—
(a) the mortgagee, or
(b) persons claiming under him, or
(c) of any other person,
who has for consideration acquired an interest in any of the properties.

The section says that if the owner of two or more properties mortgages them to one person and then sells anyone
of those properties to another person, the buyer is entitled to claim that the mortgage-debt be satisfied out of the
properties not sold to him. Therefore, this section protects the interest of the buyer and it applies only between
the buyer and the seller and not as between the subsequent purchasers. The section is based on the principle that
when a person purchases some property free from encumbrances, his absolute interest should not be prejudiced.

Marshalling by purchaser is exercisable only between the buyer and the seller. It cannot be exercised detrimental
against the rights of the mortgagee or other person claiming under him or any person having an interest in any of
the properties. The subsequent purchaser can claim the right of marshalling only if the interest of the prior
mortgagee or persons claiming under him or any other person who has acquired interest in any of the properties
for consideration is not affected thereby.

In Brahm Parkash v. Manbir Singh (1963), the Supreme Court held that under Section 56, a subsequent
purchaser has a right to claim marshalling. This Section also provides that such marshalling shall not affect the
rights of the mortgagee, persons claiming under him, or any other person who has acquired any interest in the
property for consideration.

Illustration
A mortgages three properties X, Y, and Z to B. Subsequently, he sells property X to C free from the
encumbrance. Under marshalling, C shall be entitled to insist that B should realize his debts first from properties
Y and Z, which are unsold. If, after exhaustion of Y and Z, any part of the debt remains unsatisfied, then only B
can draw upon X. Here, although C has paid full price for X to A in taking it free from encumbrance, B still has
a right to proceed against X unless he has agreed with A and C on payment of a part of the mortgage debt or
otherwise that he would have no right to do so. In case there is no such agreement, if B proceeds against X as
the last resource, C will be entitled to claim from A the amount actually realized by B from A.

DISCHARGE OF ENCUMBRANCES ON SALE (SECTION 57)

provides a legal mechanism for clearing encumbrances (like mortgages or charges) on immovable property
when it is sold, either through court proceedings or otherwise. Here's an explanation of the key points:

1. When the Section Applies

This section applies when an immovable property, subject to an encumbrance (such as a mortgage or
charge), is being sold by the court, in execution of a decree, or even out of court.
2. Payment into Court
A party to the sale (e.g., the seller, buyer, or creditor) can apply to the court for a solution where the
encumbrance can be discharged. The court can direct or allow payment of the amount required to
satisfy the encumbrance into the court:
o Annual or Monthly Charge: If there’s an ongoing charge on the property (like rent or regular
payments), an amount can be paid into court, which, when invested in government securities,
will generate enough interest to cover these charges.
o Capital Sum: If a lump sum is charged on the property, an amount sufficient to pay off the
encumbrance (including any interest due) can be paid into court.

In either case, the court may also require an additional amount to cover potential future costs, expenses,
or interest that might arise.

3. Declaration of Property as Free from Encumbrance

Once the required payments are made into the court, the court, after notifying the encumbrancer (the
person or entity holding the charge), may declare the property free from the encumbrance. The court
can then issue an order for the transfer of ownership (through conveyance or a vesting order) to
complete the sale.
4. Distribution of Funds
After notice is given to those with an interest in the money (i.e., the person who holds the
encumbrance), the court can direct how the money in court should be distributed. The court has the
power to decide how the capital sum or income from the investment is applied or distributed to satisfy
the encumbrance.
5. Appeal
Any order, declaration, or direction made by the court under this section is treated like a decree,
meaning it can be appealed.

Purpose and Procedure

This section outlines the process for discharging encumbrances when property is sold. It ensures that:

 Encumbrancers are paid off properly,

 Buyers can purchase the property free from any financial liabilities attached to it,
 The court supervises the process, ensuring fairness for all parties involved.

The court does not act suo motu (on its own); an application must be made by one of the parties to the sale.