TRANSFER OF IMMOVABLE PROPERTY BY SALE

 Sale: Definition – Section 54, TPA

 Essential of Sale
 Sale how made?
 Contract of Sale/ Contract for Sale
 Rights and Duties of Buyer and the Seller. – Section 55, TPA
 Agreement to Sale
 Sale Deed
 Section 56: Marshalling by subsequent purchaser.
 Section 57:Provision by Court for incumbrances and sale freed therefrom
WHAT IS SALE?
• Property can be transferred through different modes, that is through sale, mortgage, lease,
gift, exchange etc.
• Under the Transfer of Property Act 1882, section 54 states that sale is defined as the transfer
of ownership of a property in exchange for a price paid or promised or partly paid or part
promised.
• Some of the means of transfer of property from one person to another are – by sale, or by
exchange, or by gift, or by adverse possession, and in some cases, even by a decree of the
Court.
• Section 54 of the Act defines ‘sale’ and specifies how a sale of immovable property may be
made. Herein, sale refers to the sale of immovable property whether tangible or intangible.
• Sale is a transfer of ownership for a money consideration. It implies an absolute transfer of
all rights in the property sold. No rights in the property sold are left in the transferor.

“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
SALE - DEFINITION
• Sale is defined in Section 54 of Transfer of Property Act, 1882.
• First para of S. 54 defines Sale:

‘SALE’ is a ‘transfer of ownership’

• In exchange for a ‘price’
• “Price paid or promised”, or
• “Partly paid and partly promised”.

DIFFERENCE BETWEEN CONTRACT FOR SALE & CONTRACT OF SALE

• A Sale (Contract for Sale) is an agreement between a buyer and a seller whereby the seller
promises to sell something to the buyer and the buyer promises to buy it. But generally, in
this kind of contract, the ownership of the subject matter is not transferred to the buyer upon
the signing of the contract. There are usually conditions to be complied with by one or both
of the parties. And the transfer of ownership will only happen when those conditions are met.
(future)
• A Contract of Sale is an agreement between a buyer and a seller whereby the seller agrees to
give or deliver something to the buyer for a certain price which the buyer agrees to pay. In
contracts like this, when the buyer pays and the seller delivers, the transfer of ownership is
also done at the same time.

ESSENTIALS OF SALE
a. Parties in a Sale:
• A sale must involve two parties: a seller and a buyer.
• The seller must be competent to transfer the immovable property to the buyer major (18 or
above) of sound mind in accordance to Indian Contract Act.
b. Transfer of Ownership (Conveyance)
c. Competency to Transfer:
• The seller must either be the owner of the property or have the authority to dispose of it.
• A mutual agreement between the seller and buyer is essential for a valid contract of sale
(Misabul Enterprises v. Vijaya Srivastava, 2003).
d. Invalid Sale Due to Lack of Authority:
• The Property must be in existence at the time of sale
• A sale executed under a general Power of Attorney, without the required court permission, is
invalid and does not confer title (Lakhwinder Singh v. Paramjit Kaur, 2004).
• However, if the Power of Attorney expressly authorizes the agent to transfer the property,
the agent is a competent seller (A Bhagyamma v. Bangalore Development Authority,
Bangalore 2010).

e. IN EXCHANGE FOR PRICE

• What is price? – Not defined in TPA- Sale of Goods Act defines- Price as Money
consideration. Consideration is monetary value paid by buyer to seller.
• Under TPA also- price refers to money consideration only. Can be currency, coins, cheques,
bank drafts etc.
• If any other thing other than money- not a sale but it will be an exchange Or Gift
• Reference to money consideration is enough. Price may be paid or promised to be paid in
future but must be fixed in the sale deed.
• In Nalamathu Venkaiya V.B.S. Neelkanta, The time of payment of consideration is not
material Consideration may be promised or paid at a future date.
• Sale Deed must refer to Price – if no price no sale even if the sale deed is registered.
• Inadequacy of price is immaterial. (If lower than the market value). Owner free to sale on
any price.
• If grossly inadequate or illusory- the suspicion of undue influence or coercion can arise.
IN EXCHANGE FOR PRICE
• Can be paid on date of transfer or can be promised to be paid on a future date.
• Can be partly paid and partly promised to be paid on a future date.
• A part paid at the ‘time of Execution’ of the sale deed
• A part paid at the ‘time of Registration’ of the sale deed
• A part promised to be paid on a future date after registration of the deed.
NON-PAYMENT OF PRICE
• Payment of Price is not sine qua non for completion of sale. Ownership may pass if no
condition is placed in the sale deed regarding the passing of title.
• But if a condition is placed e.g. that the title would not pass until full and final payment if
made then title/ownership would pass only on the payment of price.
• Since S. 54 allows – price can be “paid or promised” – passing of title would not be
prevented by non-payment of price.
• After passing of the title if the buyer does not pay- remedy for seller- can claim the money
by filing a suit for recovery and for a declaration that the sale is void due to non-payment of
price.
• Court has the power to cancel the sale deed under S. 31 of the Specific relief Act, 1963.
SALE HOW MADE?
• Second para provide- how sale is to be effected.
• Sale of “tangible immovable property” (e.g. Land) having value “more than Rupees 100 or
above”, or
• “Intangible Immovable property” (of any value) - can be transferred by way of a
Registered Sale Deed only. (example: Right to catch fishes). Intangible Immovable and
Intangible Movable
• Tangible Immovable property – having value “less than Rupees 100”
• By a registered sale deed (registration is optional)., or
• By delivery of property.
Question: How delivery of tangible immovable property shall take place?
• When seller places the buyer or his agent – in the possession of property.
• Reversion (of the owner)
A STATE MAY REQUIRE THE REGISTRATION OF A PROPERTY BELOW RS. 100
ALSO. For example: In Uttar Pradesh- it is mandatory to have a registered sale deed for sale
of property having value below Rs. 100.
WHEN DOES SALE GETS COMPLETED?
• Delivery of possession
• Registration of sale deed.
• Where registration mandatory – On registration of sale deed sale would become complete
and , the property is considered as passed from the date of execution of sale deed. The
passing of title would relate back to the date of execution of the sale deed.
• S. 47 Registration Act, 1908- provides- “A registered instrument operates from the time
from which it would have commenced to operate if no registration thereof had been made.”
• But parties may agree otherwise- e.g. that the title in the property would pass only after
making final payment. If the deed lays down any condition- title would pass according to
that.
Vidyadhar v. Mankirao and another (1999)
• It was held that in order to constitute a sale, there must a transfer of ownership from one
person to another, i.e., transfer of all rights and interests in the properties which are possessed
by that person, are transferred by him to another person.
• The transferor does not retain any part of his interest or right in that property or else it
would not be a sale.
• The definition clearly points out that price which is an essential ingredient of the transaction
of sale, might have been paid, partly paid and partly promised to be paid.
Dave Ramshankar Jivatram v. Bai Kailasgauri (1972).
• The Gujarat High Court in this case also held that it is not enforceable in any court of law.
For instance, A agreed to sell the property to B, but they did not execute any documents.
Later on, A sold the property to C. In this case, B cannot approach the court to enforce his
right to specific performance.

Section 55 of the Transfer of Property Act, 1882 provides for Rights and Duties of Seller
and Buyer. (Rights and Duties of the buyer and the seller Inter se)
• Rights/Duties before the sale (before passing of the title) and after the sale (after passing of
the title.)
• Right of buyer is duty of the seller and vice versa.
• Rights and duties are contractual before sale and proprietary after sale.
• Parties to the contract can decide rights and liabilities. Parties are free to decide any terms in
their contract.
• It’s a contract- parties are free to decide terms/conditions (legal conditions).
• If not so decided, rights and liabilities under S. 55 apply (where the sale deed is silent about
the rights and liabilities of parties).

RIGHTS OF SELLER
SELLER’S RIGHT BEFORE SALE –
• Right to take Rents and Profits [S. 55 (4) (a)]
• The seller is entitled- to the rents and profits of the property till the ownership thereof
passes to the buyer.
SELLER’S RIGHT AFTER SALE-
• Charge upon Property for Unpaid price [S. 55 (4) (b)]
• The seller is entitled- If property delivered to buyer before payment of unpaid money, Seller
acquires a charge over the property in the hands of the buyer/transferee without
consideration.

LIABILITIES OF SELLER
Duties on the seller before completion of Sale – before passing of title- six duties to be
performed before passing of ownership
1. Disclosure of material defects of property. 55(1)(a)
2. Allowing the buyer to examine documents. 55(1)(b)
3. To answer queries of the buyer. 55(1)(c)
4. To execute a proper conveyance in buyer’s favour. 55(1)(d)
5. To take care of property and related documents in between the date of contract to sell and
actual execution of sale deed. 55(1)(e)
6. To pay public charges due till date of sale. 55(1)(g)

• Duty to disclose all latent material defects in property or in title to the buyer. -S. 55 (1) (a)
• Latent-hidden- which the buyer cannot discover with ordinary care.
• Material defect- which may affect decision to buy the property.
• (e.g.- Underground drain- latent - Non-disclosure amounts to fraud- buyer can avoid the
contract and claim damages.
• A agreed to purchase a property with B. the Buyer finds out that under a decree for partition,
a portion of the property sold was allotted to some third person. This fact was not disclosed
by seller to buyer- fraud- buyer can set aside the sale and claim damages. (Latent material
defect).
• Easements are regarded as material latent defects- hinders full enjoyment of property. Must
be disclosed.
• If buyer discovers the defect before sale- can rescind the contract and claim damages.
• What is a material latent defect- is a question of fact. –depends upon facts of each case.
• 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.
Duty to produce all documents of property for examination- at the request of the buyer.
S. 55 (1) (b)
• To produce all title deeds for inspection on demand within reasonable time. Demand is
necessary. Buyer can only inspect. If fails to produce- buyer can rescind the contract and
demand earnest money with interest.
• If deeds not in possession – but within his power- he must make arrangement for inspection.
(e.g. deeds are with bank).
• Buyer must not omit: would amount to constructive notice of the fact contained in the title
deeds.
Duty to answer all the relevant questions relating to property as put to him by the
buyer. S. 55 (1) (c)
• To answer all questions asked by the buyer relating to property and title thereof.
• If answers falsely- fraud. If does not answer- buyer can repudiate the contract for sale.
Duty to take care of the property and the title-documents between the date of contract
and the actual delivery of property. (S. 55 (1) (e).
• Between the date of contract and delivery of property.
• In between these dates- risks do not pass to the buyer – seller is responsible for any damage
to the property or the title deed. Buyer can claim compensation.
• Duty to take reasonable care.
• Personal obligation in nature of a trust.
On payment of amount, duty to execute a proper conveyance deed on price being
tendered by the buyer. (S. 55 (1) (d)
• To execute the title deeds- on payment or tender of price by buyer for execution of sale
deed.
• Writing of deed, stamp duty, registration
• Reciprocal duties- payment of price and execution of sale deed.
• Place and time may be stipulated in the contract of sale. Time can be made essence of the
contract.
To pay all public charges (municipal taxes, govt. dues), rent accruing up to the date of
sale as the Seller continues to be the owner until ownership passes to the buyer.
S. 55 (1) (g)
• Government dues, Municipal Taxes, revenue, water and electricity bills, development
charges, maintenance charge etc.
• Before completion of sale- seller continues to be the owner so his duty to pay.
• Seller’s duty to deliver the property free from encumbrances (liabilities).
• If seller does not pay and buyer pays – the buyer can recover the same from seller. (S. 69,
ICA, 1872-Reimbursement of person paying money due by another, in payment of which he
is interested.)
Liabilities of Seller - After completion of Sale –
Duty to give possession of property to the buyer or his agent, whenever desired by the
buyer. - S. 55 (1) (f)
• On demand by buyer- give possession to buyer or his agent.
• Actual-constructive- symbolic possession.
Implied Covenant for Title [S.55 (2)] - The seller shall be deemed to contract with the buyer
that the interest which the seller professes to transfer to the buyer subsists and that he has
power to transfer the same.
Duty to deliver the title deeds of the property to the buyer on receipt of the whole price.
S. 55 (3)
• After receipt of the whole purchase money- shall deliver the title deeds to buyer.
• After completion of sale- buyer is entitled to the title deeds.
• Till the price is paid fully- he can exercise lien over title deeds.
RIGHTS AND LIABILITIES OF BUYER
RIGHTS OF BUYER
Buyer’s right before sale-
• Section 55(6) (a) - The buyer is entitled to (Unless he improperly declines to accept the
delivery of property)
• A charge over property for the purchase money paid by him in anticipation of delivery of
property.
• Interest on such purchase money.
• And where he properly declines to accept the delivery-
• The earnest money and
• Any cost awarded to him by Court in a suit for specific performance of the contract or to
obtain a decree for recession of contract.
Buyer’s right after Sale-
• Section 55 (6) (a) - Buyer is entitled to receive any benefit of any appreciation of the
property or increase in its value and to the rents and profits thereof.
LIABILITIES OF BUYER
Duties of Buyer before Sale:
• The buyer bound to disclose, facts which materially increases the value of property, Section
55(5) (Duty to disclose all facts relating to Seller’s interest in property, within the knowledge
of the buyer and not within the knowledge of the seller and which may materially increase the
value of property.
• Such non-disclosure is fraudulent- Seller may avoid the contract for sale or get the sale deed
set aside if already completed.
• To pay the purchase money to seller.
• Section 55(5) (b).- Buyer is bound to pay the price of property to Seller.
Duties of buyer after Sale :
• Section 55 (5) (c) - The buyer is bound to bear any loss arising from the destruction, injury
or decrease in value of the property not caused by the seller where the ownership of the
property has passed to the buyer.
• Section 55(5) (d) - The buyer is liable to pay the outgoings, e.g., Government dues, rents,
revenue or taxes.
DRAFT OF SALE DEED.
Sale deed is a legal document that records the sale and transfer of ownership of property from
the seller to the buyer. Under Indian law, the sale deed is a critical document in real estate
transactions and must comply with various legal requirements to be valid and enforceable.
Key Elements of a Sale Deed:
  Title and Parties : The sale deed must clearly title the document and identify both the
seller and buyer.
 Property Description : A detailed description of the property, including location,
dimensions, and identifiers like plot or survey numbers.
 Consideration Clause : The sale amount agreed upon by both parties and the mode
of payment.
 Transfer of Ownership : Specifies the date and manner of transferring ownership
from the seller to the buyer.
 Encumbrance Clause : The seller declares the property is free from any legal
disputes or encumbrances.
 Indemnity Clause : Protects the buyer from future claims regarding the property.
 Delivery and Possession Clause : Details the transfer of possession to the buyer.
 Witnesses : Requires signatures from at least two witnesses.
 Signatures : Must be signed by both the seller and the buyer.
Legal Requirements for a Valid Sale Deed:
Stamp Duty and Registration : The sale deed must be executed on a non-judicial stamp
paper of the appropriate value and registered with the Sub-Registrar of Assurances.
Due Diligence : The buyer should verify the seller's title and ensure the property is free from
encumbrances.
Drafting and Execution : A legal professional should draft the sale deed to meet all legal
requirements.
Important Considerations:
• Legal Verification of Title : The buyer should verify the seller’s ownership and the
property’s legal status.
• Encumbrance Certificate: Obtained from the Sub-Registrar’s office to confirm no
encumbrances.
• Mutation of Property : Post-registration, the buyer should update the municipal records to
reflect ownership change.
• Possession : Ensure possession is handed over as agreed in the sale deed.

56. Marshalling by subsequent purchaser.—If the owner of two or more properties

mortgages them to one person and then sells one or more of the properties to another person,
the buyer is, in the absence of a contract to the contrary, entitled to have the mortgage-debt
satisfied out of the property or properties not sold to him, so far as the same will extend, but
not so as to prejudice the rights of the mortgagee or persons claiming under him or any other
person who has for consideration acquired an interest in any of the properties.]
• A is the owner of two properties and mortgages both of them to one person X. Later, he sells
one or more of the properties to another person, B. B is in the absence of the contract to the
contrary entitled to have the mortgage debt satisfied out of mortgage to him and he can
require X to satisfy his debt from the property which has not mortgaged to B.
• Further A mortgages his properties X,Y and Z in favour of B for a loan of Rs. 50,000/-. A
later sells property X to C for a consideration of Rs. 50,000/-. A does not repay the loan to B
and B causes the property to be sold with the help of the court. Here C can claim that the B
should recover his debt first from Y & Z property and the property X should not pass to B as
the subject matter of sale, if his debt is satisfied out of the two other properties Y & Z, even
the property X was also the security kept with the mortgagee.
Essential Ingredients of Section 56 of TPA, 1882:
• The owner must have two or more properties;
• There must a common mortgagor or debtor between two or more mortgagees;
• Marshalling in transfer of property act dictates that the owner must sell one or more
properties out of those properties to a purchaser after mortgaging them to the mortgagee;
• The doctrine of marshalling will not be applied to prejudice the rights of third parties.
Effects of section 56 Transfer of Property Act, 1882
• The subsequent purchasers have been conferred with a power to make the mortgagee satisfy
his debts out of the properties which are not sold to the purchaser.
• If a mortgagee obtains a foreclosure decree, then he is entitled for the protection of the said
law.
Exceptions to Section 56 of TPA, 1882 Section 56 does not apply in the following cases –
• Auction Sale
• Leases
• Purchases subject to prior encumbrance
• 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.
Discharge of Incumbrances on Sale
57. Provision by Court for incumbrances and sale freed therefrom.
Application of Section 57:
• Applies to the sale of immovable property subject to any incumbrance (whether
immediately payable or not) when the property is sold by the Court (in execution of a decree)
or out of Court.
• Court's Role in Discharging Incumbrances:
• The Court may direct or allow payment into Court on the application of any party to the
sale.

Types of Payments:
• For an Annual or Monthly Sum Charged on the Property:
• The amount to be paid into Court is determined by the Court, which should be sufficient to
cover the charge by investing it in securities of the Central Government.
• For a Capital Sum Charged on the Property:
• The amount paid into Court should be enough to meet the incumbrance and any interest
due.
• Additional Payment:
• An additional amount, as determined by the Court, should also be paid to cover possible
contingencies (e.g., further costs, expenses, interest) except depreciation of investments. Not
more than 1/10 amount of original
c.) Court's Power to Free Property from Incumbrance:
• After payment into Court and notice to the incumbrancer (if not dispensed with), the Court
may declare the property freed from the incumbrance.
• The Court can make necessary orders for conveyance or vesting and direct the retention and
investment of the money in Court.
• Distribution of Funds:
• After serving notice on persons entitled to the money in Court, the Court may direct
payment or transfer to those entitled to receive it.
• The Court can also give directions on the application or distribution of the capital or
income.
d.) Right to Appeal: (An appeal shall lie from any declaration, order or direction under
this section as if the same were a decree)
• An appeal can be made against any declaration, order, or direction under this section as if it
were a decree.
e.) 'Court’ Includes:
• High Court (ordinary or extraordinary original civil jurisdiction),
• District Judge's Court (within whose jurisdiction the property is located),
• Any other Court declared by the State Government as competent to exercise jurisdiction
under this section.

• When immovable property subject to an encumbrance (such as a mortgage or charge) is

sold, either through a court order or outside of court, the court has the authority to manage the
payment of the encumbrance to ensure the property can be sold free of it.
• The court may direct that a sufficient amount of money be paid into the court to cover the
encumbrance, including any interest and potential future costs. For instance, if a property has
a monthly charge, the court may require a sum to be invested in government securities to
cover this charge.
• Once the required payment is made, and notice is given to the encumbrancer (unless the
court decides to dispense with the notice), the court can declare the property free from the
encumbrance. This allows the property to be sold without the encumbrance affecting the
buyer's title.
• The court may also issue orders for the transfer or vesting of the property to complete the
sale, and subsequently, distribute the funds to those entitled.
• For example, if a house with an outstanding mortgage is sold through court, the court can
direct the payment of the mortgage amount into court, freeing the property from the
mortgage, allowing the buyer to obtain clear title.
• Mr. A, owns a piece of land that has a mortgage with Bank X. Mr. A decides to sell the land
to Mr. B. However, the mortgage is an encumbrance on the property, meaning Mr. B would
inherit this debt if he bought the land without it being cleared.
• If the sale is taking place through a court (perhaps because of a legal dispute), the court can
step in to ensure the sale is fair and clear of this encumbrance. The court might order that a
sufficient amount of money, equal to the outstanding mortgage amount plus any accrued
interest, be paid into the court. This payment can be made by Mr. A, Mr. B, or from the
proceeds of the sale itself.
• Once the payment is made, the court can declare that the property is now free of the
mortgage. This means Mr. B can purchase the land without worrying about the debt. The
court would then manage the funds, ensuring that Bank X is paid what it is owed, and any
remaining funds might be returned to Mr. A or distributed according to any agreements or
legal obligations.
• Kerala High Court, in M.P. Varghese v. Annamma Yacob (2020), elaborated in great depth
on Section 57. The Court discussed the aims and objectives of this Section as well as
thoroughly explained its procedural mechanism. In this case, the property was divided among
the siblings through a partition deed with a clause stating that the brothers must pay Rs. 500
each to their sister within a year. If they fail to do so, the sister will acquire a charge over the
property. The brother, who is the appellant in this case, entered into a contract of sale with
someone.
• He contends that the respondent, in this case, the sister, is refusing to accept the payment
because of which the property is burdened with the charge, and consequently he is not able to
execute the sale deed. The respondent failed to show any reasonable cause for refusal of
payment apart from personal reasons. The Court noted that the amount of Rs. 500 alone
stands charged on the property as a capital sum, and the appellant has no further obligation
whatsoever. Thus, it was held that the appellant is entitled to a declaration under Section 57.