Tpa Project

8/2/2019 Tpa Project

http://slidepdf.com/reader/full/tpa-project 1/23

Sale of Immovable property

- A liability on seller and buyer

1.1 INTRODUCTION

'Sale1' is defined as "a transfer of ownership in exchange for a price paid or promised or

part-paid and part promised'. (Section 54, Transfer of Property Act, 1882)

A Sale, as the name suggests, involves two parties, a seller and a buyer of the goods. The

buyer agrees to pay a price as fixed mutually or by contract of sale. If the sale involves a

movable object, then with the transfer of ownership, the property also goes into possession

of the buyer but if the property is immovable, only the ownership of that immovable

property changes hands.

After every Sale, the buyer (owner) acquires all rights of ownership and possession over

the property as per the "Sale Agreement". Ideally every Sale is registered at the Sub-

Registrar Office. A verbal contract is also valid along with a written contract, though not

advisable.

Stamp duty is paid in each sale transaction, depending upon the price determined or the

sale value of the property.

Section 54 of the transfer of property act has three parts vis-a-vis (a) definition of sale, (b)

Sale how made and (c) Contract of sale.

Statement of ProblemThe proposed study intends Firstly, to study about the concept of Sale and the essentials

thereof; and Secondly, to study the rights and liabilities of the buyer & seller in Sale of

immovable property.

1 Online, www.Indiarealtylaws.com, RIGHTS OF THE BUYER, visited on 5TH October, 2008, at 3:34 a.m.

1



Hypothesis

After every Sale, the buyer (owner) acquires all rights of ownership and possession over

the property as per the "Sale Agreement".

Research Objective

• To study the concept of sale with respect to Transfer of Property Act.

• To study the essentials of Sale

• To study the Rights and Liabilities of the Parties in the sale of immovable property

i.e. the rights and liabilities of the Buyer and the Seller of the Immovable Property.

Research Methodology

The methodology used in this project is based mainly on ‘Doctrinal Method’ of research.

Further under doctrinal method the primary sources like Statutes and secondary sources

like books, articles, journals, case laws and websites have been taken into account.

1.2 Definition of Sale

“Sale” is a transfer of ownership in exchange for the price paid or promised or part-paid

and part-promised.2

Sale is defined as a transfer of the ownership. In sale there is absolute transfer of all the

rights in the property sold. The words “transfer of ownership” stand in contrast with the

words “transfer of an interest” occurring in section 58 in the definition of mortgage and

with “ transfer of a right to enjoy property” in the definition of lease. In a mortgage or in a

lease there is partial transfer of rights while in a sale all the rights of ownership which the

transferor has, pass to the transferee. A sale must be distinguished from a hire – purchase

agreement. If the transferee has to pay entire purchase price, it indicates that the transaction

is sale but where the transferee is given right to terminate the agreement, the transaction

may be a hire –purchase agreement.3

2 Section 54, T.P.A

2



The transfer by way of sale of tangible immovable property of the value of rupee one

hundred and above can be made by a registered instrument. The transfer by way of sale of

tangible immovable property of the value of less than one hundred rupees may be made

either by a registered instrument or by delivery of the property.4

"Transfer"5. This term is defined specifically under the Income-tax Act but not in

Transfer of Property Act. Although the term "transfer" would be understood in the general

sense of conveying or passing or making over the title from one person (the Owner) to

another, it is used in a much wider sense under the Income-tax Act. According to the said

definition in section 2(47) of I.T. Act, "Transfer" in relation to a capital asset includes:-

i. Sale , exchange or relinquishment of the asset; or

ii. Extinguishment of any rights therein ; or

iii. Compulsory acquisition of the asset under any law; or

iv. Conversion of the capital asset into stock-in-trade of one's own business;

v. Transaction u/s. 53 A of the Transfer of Property Act i.e. allowing

possession of any immovable property to be taken or retained in part

performance of the contract; or

vi. Any transaction e.g. by way of becoming a member of a society, company

etc. or any agreement or arrangement which transfers or enables enjoyment

of the immovable property to another person.

The words Sale, Exchange, Relinquishment or extinguishment are not defined or explained

in the Income-Tax Act, but are so explained in the Transfer of Property Act.6

1.3 ESSENTIAL ELEMENTS OF SALE ARE AS UNDER :

3 Shukla, S.N., TRANSFER OF PROPERTYACT, ALLAHABAD LAW AGENCY, , Chapter III, Of sale

of immoveable property, Comments- Definition of Sale, p.178

4 Mulla.

5 Definition of transfer, Online, visited on 2nd October 2008, at 5:15 a.m.

6 See Appendix-II.

3



1. Parties -

Individuals competent to enter into Contract as per the provisions of Section II of

the Indian Contract Law, 1872. A minor or lunatic cannot be a transferor / vendor

as he is not competent to contract under Section II of the Indian Contract Act, 1872.

However it has been held that a minor or a lunatic can be a transferee or purchaser

in the case of transfer by way of sale or mortgage, represented by his Guardian.

2. Subject matter

The concerned immovable property that is considered as saleable.Subject matter is

the transferable immovable property.

3. Price

Price is an essential ingredient for all transactions of sale and in the absence of the

price or the consideration, the transfer is not regarded as a sale. The transfer by way

of sale must be in exchange for a price. It has been held that price normally means

money. Money that is mutually agreed to by both parties to be paid/ received. An

agreement at the price is reached at, before the property changes hands. The price

can be paid fully in cash or it can be partly paid and partly promised to be paid in

future. The price can be fixed by the agreement between the parties before the

conveyance of the property. The price is to be fixed reasonably.

4. Delivery of PropertyTransfer by way of sale in the case of tangible property worth less than rupees One

Hundred can be made either by a registered instrument or by delivery of property

by putting the purchaser or the person directed by the purchaser, in possession of

property. If the consideration for the sale is more than Rs.100/- then the instrument

must be registered under the Registration Act, 1908. or by placing the buyer with

possession.

1.4 Process of a Real Estate Transaction7

7 Online, http://www.dateyvs.com/gener12.htm, SELLER AND BUYER, visited on 3rd October 2008, at

3:00 pm.

4



1. The first step is to find two parties willing to enter into a transaction. A potential

buyer either places an offer to purchase the property or the seller markets his

property for sale. This might involve a third party also (advisable), the real estate

agent who initiates communication between the two parties.

2. When the buyer decides in on a particular property, a price is fixed and terms of

sale are laid down in Sale Agreement.

3. A seller should keep his lawyer's title certificate updated.

4. A contract called "Agreement of Sale" is signed and a commitment is made. (It is

highly advisable to seek professional legal advice in drafting a sales agreement as

there can be many legal tangles involved that might need resolution before

proceeding)

5. Titles of the property are transferred from the seller to the buyer all the way

through "convincing". Generally, buyer pays 10-20% of the sales price to the seller.

6. The seller has to clear all dues linked to the property. Any other negotiation

includes tenants, associated mortgages and lessees and employees, if required.

7. Buyer completes the imbursement (of price) agreed.

8. Contracts are swapped between both parties and buyer gets possession over the

property.

9. Sale is registered with the concerned authority.10. Subsequently, the buyer/purchaser takes the physical possession of the property.

There are certain clauses that are to be included in a sale agreement.8

1.5 Contract of sale

As per Section 54 of the T. P. Act, a contract for the sale of immovable property is a

contract laying down that the 'Sale' of such property shall take place on the terms settled

between the parties in the said contract. Such contract for sale does not create any interest

in or charge on such immovable property. The contract for sale does not result in any

transfer of ownership. However a sort of obligation is created in respect of the ownership

of the property.

8 See the Appendix -I

5



Chapter II

RIGHTS AND LIABILITIES OF THE SELLER AND THE BUYER

2.1 IntroductionA buyer of property has some rights and liabilities. According to the Transfer of Property

Act, buyers of immovable property are entitled to some rights and have some

responsibilities, which they need to fulfill statutorily.9

9 Ibid., mulla

6



A buyer is bound to disclose to a seller any fact as to the nature or extent of the seller’s

interest in the property of which the buyer is aware, but of which he has reason to believe

that the seller is not aware, and which materially increases the value of such interest. An

omission to make such disclosures is fraudulent.

Also, the buyer is liable to pay or tender, at the time and place of completing the sale, the

purchase money to the seller or such person as he directs. The payment should be as per

the agreed terms and conditions. Where the property is sold free from encumbrances, the

buyer may retain out of the purchase money the amount of any encumbrances on the

property existing at the date of the sale, and should pay the amount so retained to the

persons entitled to get the encumbrances released.

In addition to this, where the ownership of the property has passed to the buyer, he has to

bear any loss arising from the destruction, injury or decrease in value of the property not

caused by the seller. The buyer becomes liable for any loss or damage to the property as

soon as the buyer becomes the owner and the seller ceases to be the owner of the property.

Moreover, where the ownership of the property has passed to the buyer, as between

himself and the seller, the buyer is liable to pay all public charges and rent which may become payable in respect of the property, the principal money due on any encumbrances

subject to which the property is sold, and the interest due later. Once the ownership has

been transferred to the buyer, the buyer is liable to pay all the statutory charges like

municipal taxes, property taxes, cess, electricity, water charges etc.

Section 55 of the T. P. Act deals with the rights and liabilities of the buyer and the seller.

In the absence of a contract to the contrary, the buyer and the seller of immovable property

respectively are subject to the liabilities and have the rights mentioned in the rules as laid

down in section 55 or such of them as are applicable to the property sold.

"seller" means a person who sells or agrees to sell goods

7



2.2 Rights and liabilities of the seller10

In the absence of the contract to the contrary, the section 55 of the transfer of the property

act provides for the provision for the rights and liabilities of the seller and the buyer. The

rights and liabilities before the completion are of sale are contractual.

2.2.1 Liabilities of the seller

The liabilities/ duties of the seller before the completion of the sale are:

(a) to disclose material defects in the property or in the seller’s title thereto[section

55(1)(a)];

(b) To produce title deeds [section 55(1)(b)];

(c) To answer questions as to title[section 55(1)(c)];

(d) To execute conveyance [Section 55(1)(d)]

(e) To take care of the property [Section 55(1)(e)]

(f) To pay outgoings [Section 55(1)(g)].

(a) Seller’s duty of disclosure

The seller is under a duty to disclose to the buyer every material defect in the propertyor in his own title thereto.

The duty arises when the seller is aware of the defects and the buyer could not with

ordinary care have discovered, that is, the duty is with regard to the latent defects but

not patent defects which the buyer could by himself discover. For example,

(1) The existence of an open right of way or the ruinous state of building is an apparent

defect while a deed is a latent defect.

(2) Similarly, an underground drain is a latent defect and if the buyer does not know of

its existence, the seller is duty bound to inform of its existence.

10 Shukla, ibid

8



Therefore, the material defect to be disclosed must be either with regard to the

property itself or the title of the seller or the vendor. The failure to disclose these

effects follows the below mentioned consequences:-

(I) If the purchaser discovers such defects before the completion of the sale the he

may:

a. Either rescind the contract, or

b. Take the property and later claim damages.

(II) If the defects are discovered after the ale is completed, the buyer is entitled to

claim damages and he may sue to set aside the sale. Although the general rule

that once a sale always a sale cannot be avoided. But in the case of the non-

disclosure of the material defects the rule is otherwise, reason being an

omission to make such disclosure is fraudulent.

Under the later half of clause (g) of Section 55 (1) of the Transfer of Property Act

where the property is not sold subject to any encumbrance, the vendor is bound to

discharge all encumbrances on the property then existing and he is bound to give an

assurance to that effect. Hence a covenant of title to the effect that the said premisesare free from all encumbrances, claims and demands occasioned or created by the

vendor, would not be in compliance with section 55 (1) (g) of the Transfer of Property

Act.11

(b) Production of title deeds.

It is the seller's duty to produce title-deeds relating to the immovable property

contracted to be sold for the inspection of the buyer in order that the buyer should

satisfy himself as to title. It is the buyer's interest to inspect the title deeds for

otherwise he may be fixed with constructive notice of matters which he would have

discovered if he had investigated the title.12

11 G. Gopala Chettiar v. N. Giriappa Gowden, (1971) 2 M.L.J. 481.

12 Section 55 (e)

9



(c) Seller's duty to answer material questions as to title.

The seller is further bound to answer all relevant questions put to him by the buyer in

respect of the property or title. The right to put questions to the seller does not affect

his duty to make disclosure as required by clause (a). The buyer's right to take

objections and to insist on proof of a title free from doubt may be lost by waiver.

Illustration: A contracts to sell a house to B. Before the execution of the deed of sale, B

enters into possession and tries to raise money on a mortgage of the house. B had

waived his right to make objections to the title to A.

(d) Seller's duty to execute conveyance.

It is the seller's duty to execute conveyance. This execution of the conveyance by the

seller and the payment of the price by the buyer is to take place, in the absence of a

contract to the contrary, simultaneously. If either party uses for specific performance,

he must show that he was ready and willing to perform his duty.

Section 55 (1) (d) of the Transfer of Property Act says that the seller is bound on

payment or tender of the amount due in respect of the price to execute a proper

conveyance of the property when the buyer tenders it to him for execution at a proper

time and place. As a matter of grammar, the word is being the latter portion of the

clause refers to the conveyance and therefore the words at a proper time and place

would refer only to the buyer tendering the conveyance to the seller for execution at a

proper time and place. In other words, there is no explicit mention of the words 'proper

time and place' in respect of the first portion of Section 55 (1) (d), namely, of payment

or tender of the amount due in respect of the price. Normally, since the payment or

tender of the amount due has to be made to the seller, it has to be made at the seller's

place; it would not be correct to contend that the normal place of payment of the

purchase-money is at the place of registration.

(e) Care of property.

10



It is the duty of the seller to take care of the property between the date of contract and

the delivery of the property to the buyer. The seller is sometimes said to be a trustee for

the buyer. His duties are, therefore, analogous to those imposed upon a trustee by

Section 15 of the Indian Trusts Act. If the seller neglects his duty, the buyer is entitled

to compensation in the event of any loss or damage to the property.13

(f) Payment of outgoings

The last duty of the seller is to pay public charges and rent, etc., up to the date of the

completion of sale. Public charges would include government revenue, municipal taxes,

etc. The seller is also under a duty to discharge all encumbrances on the property

existing at the time of the sale except where the property is sold subject toencumbrances.

2.2.2 Rights of the seller: Before the completion

Until ownership is passed to the purchaser, the seller is owner and the rents and profits

belong to him. It should be recalled that a contract of sale does not create any interest in

favor the purchaser and, therefore, he cannot claim the rents and profits until the

ownership passes to him. In case the seller refuses to execute the sale-deed as agreed, the purchaser is entitled to claim compensation from the date when the deed should have been

executed.1 On the other hand, if the buyer takes possession before the completion of the

sale, the seller is entitled to interest on the unpaid purchase-money from the date on which

the possession is taken.14

"Buyer" means a person who buys or agrees to buy goods

2.3 Buyer’s liabilities before completion of the sale:-

The Buyer’s liabilities before completion of the sale are:-

13 Clark v. Ramuz, 2 Q.B. 456., Shukla, S.N., ibid.

14 Maung Shew v. Muang Inn.(1917)44 I.A. 15, ibid.

11



(a) To disclose facts materially increasing the value of the property [section 55(a)];

(b) To pay the price [section 55(5)(b)]

(a) Duty to disclose facts

The buyer is bound to disclose to the seller any fact as to the nature or extent of the

seller's interest in the property. This duty corresponds to the duty of the seller to

disclose material defects in the property. Under the last paragraph of this section, a

non-disclosure of such fact on the part of the buyer would be fraudulent just as much as

a non-disclosure by the seller would be. The obligation of the buyer to disclose facts

extends only to the nature and extent of the seller's interest in the property: and this

obligation arises only: (i) if the buyer knows or has reason to believe that the seller

does not know the nature and extent of his interest; and (ii) if the fact materially

increases the value of the property. In an English case, Summers v. Griffith3 , an old

woman of eighty-eight, being in distress and without legal assistance, was induced to

sell to her property at one-forth of face value under the impression that she could not

make out a good title whereas the purchaser knew that she could and thus concealed

the fact from her, the court said:

“if a person comes to me and offence to sell me a property which I know to be fivetimes the value he offers it for, he being ignored of his rights and in the belief that he

could not make a good title which I know he can; and I conceal that knowledge from

him is not that a suppresio veri which is one of the elements which constitutes a

fraud?”

It has however, been held that a buyer is under no duty to disclose latent advantage of

the property although he many not make fraudulent statement.

(b)Payment of price:

Ordinarily, the obligation to pay the purchase money on one hand and the obligation to

execute the conveyance or complete the sale on the other are obligations which should

be performed concurrently. By the proviso an exception is allowed in favor of the buyer

12



who has brought property as free from encumbrances and finds that an encumbrance has

not been paid off. He may retain out of the purchase money a sum sufficient to pay a

large amount than the price, he may recover the difference by a separate suit against the

seller.15

2.3.2 Buyer’s Rights

The buyer has two rights. One of them is before the completion of the sale and other is

after completion of the sale. They are as follows: Before completion: Buyer's lien.

According to the last clause of Paragraph 6, the buyer has, on the seller failing to

complete the sale, a charge for the amount paid by him in advance on account of the

purchase money. This charge is converse of the seller's charge for unpaid price. The

charge, unlike the seller's charge, can be enforced against all persons holding the property

irrespective of the question of notice. Such charge can even be enforced against a

purchaser for consideration with or without notice of the charge.

The question whether a buyer by pre-payment can obtain a charge on the propertydepends on whether the default in completing the sale rests with him or with the seller.

The rule is that a buyer is entitled to a charge for the prepaid price and interest thereon to

the extent of the seller's interest in the property but in case he has improperly declined to

take delivery, the charge is lost.

As regards the earnest or money deposit if the contract goes off through the default of the

buyer, the seller is entitled to retain the earnest money as forfeited, but if, on the other

hand, the seller is in default, the buyer is entitled to a refund of the earnest money.

It is clear from Section 55 of the Transfer of Property Act that law has clearly laid down

that unless the buyer improperly declines to accept the delivery of the property, the amount

15 Mehtab Singh v. Collector of Saharanpur, 30 A.L.J. 556

13



of purchase money paid to the buyer in anticipation of the delivery and for interest on such

amount shall remain as a charge on the property as against the seller and all persons

claiming under him.16

Chapter- III

CONCLUSION

The Section 55 deals with the rights and liabilities of the parties to a contract for sale aswell as those of the parties to a completed conveyance. The obligations imposed by the

section are covenants and are in nature of statutory obligations rather than implied

covenants except para 2. The section sets forth the rights and liabilities of the buyer and

16 Msf. Anchi v. Maida Ram, AIR 1987 Rajasthan, 11, Jaipur Bench.

14



seller—

(1) Before completion of sale but after agreement to sell,

(2) - After completion of sale.

But here we have been dealing with the first part.

The liabilities of the seller and buyer are:

Seller Buyer

[Section 55(1)(b)];To produce title

deeds .

[Section 55(1)(c)];To answer questions

as to title.

[Section 55(1)(d)];To execute

conveyance .

[Section 55(5)(b)]To pay the price

[Section 55(1)(e)]To take care of the

property

[Section 55(1)(g)], To pay outgoings

The rights of the seller and buyer are:

Seller Buyer

Section 55 (4) (a)—To take rents and profits Section 55 (6) (b)—Charge for price

Prepaid.

15



BIBLIOGRAPHY

Books

Shukla, S.N., TRANSFER OF PROPERTYACT, ALLAHABAD LAW

AGENCY,

Tripathi, G.P., THE TRANSFER OF PROPERTY ACT, CENTRAL LAW

PUBLICATIONS, New Delhi, sixteenth edition, 2008.

Mulla, THE TRANSFER OF PROPERTY ACT, lexis Nexis, Butterworths

India, New Delhi, Tenth edition

Online Sources

The economic times, www.theeconomictimes.com, RIGHTS OF

PROPERTY BUYERS, 3 Feb, 2007, 1105 hrs IST, TNN, visited on 3rd

October 2008, at 2:35 pm.

Online, www.Indiarealtylaws.com, RIGHTS OF THE BUYER, visited on

5

TH

October, 2008, at 3:34 a.m. Online, www.bullivant.com/showarticles, RIGHTS OF SELLER, May,

2007, visited on 3th October 2008, at 2:35 pm.

Online, http://www.dateyvs.com/gener12.htm, SELLER AND BUYER,

visited on 3rd October 2008, at 3:00 pm.

16



ANNEXURE

PENDING CASE

IN THE HIGH COURT OF PUNJAB AND HARYANA

Parties:

Appellants: Hari Chand

v.

Respondent: Smt. Gulo Devi

Subject: Transfer of Property, Tenancy

Acts/Rules/Orders: Transfer of Property Act, 1882 - Section 55, East Punjab Urban Rent

Restriction Act, 1949 - Section 13;

Cases Referred:

Abid Hussain v. Roshan Dass, (1960) 62 P.L.R. 836; Mohan Lal v. Diwan Chand, 1981 (2)

R.L.R. 209; Sham Lal v. Mst. Nasib Kaur, C.R. 398 of 1972; Champaklal Dahyabhai

Natali v. Saraswatiben, A.I.R. 1977 Guj. 48; Radhabai Bapurao Shelar and Ors. v. Trimbak

Madhavrao Shirole, A.I.R. 1983 Bom. 303; Chanderasen v. Murarilal, 1976 R.C.R 554;

17



Naraindas v. Rajendra Singh, 1972 R.C R. 465; Girdharilal v. Hukam Singh, A.I.R. 1977

S.C. 129

Facts:

1. The demised premises were purchased by the land lady Smt. Krishna Mohini vide

registered sale deed dated 9-11-1972. She sought the ejectment of her tenant on the ground

of non-payment of arrears of rent at the rate of Rs. 10/- per mensem since 1-1-1965

including the house tax. The ejectment petition was tiled on 7-3-1977. The rent was

tendered from 1-11-1972 i.e. from the date of sale deed. The authorities below found that

the tenant had failed to prove that the rent prior to 1-11-1972 was paid to the vendor. It

was, therefore, held that the tender was short. Consequently, the eviction order was passed.

2. The revision petition has came up before the court, on the question whether the rent due

for a period prior to the sale can be claimed by the vendee as arrears of rent and whether

the tenant can be ejected for its non-payment on the first date of hearing when these is no

assignment of the arrears of rent to the vendee.

3. According to the petitioner-tenant submitted that there was no assignment of the arrears

of rent in favor of the vendee.

ISSUES RAISED

1. Whether the rent due for a period prior to the sale can be claimed by the vendee as

arrears of rent

2. Whether the tenant can be ejected for its non-payment on the first date of hearing

when these are no assignment of the arrears of rent to the vendee.

Arguments:

In the present case there was no assignment of arrears of rent in favor of the vendee. The

above said sale deed is silent in this regard. Section 55 of the Transfer of Property Act,

1882, which deals with the rights and liabilities of buyer and seller, provides inter-alia that

18

http://fnopenglobalpopup%28%27/ba/disp.asp','21545','1');




the seller is entitled "to the rents and profits of the property till the ownership thereof

passes to the buyer". This is in the absence of a contract to the contrary. Thus it is evident

that there being no contract to the contrary the seller is entitled to the rents and profits of

the property till the ownership thereof passes to the buyer. As observed earlier, in the sale

deed there is nothing cited as regards the arrears of rent or there is no specific assignment

of the said arrears, if any, in favour of the vendee Reference may also be made to Section

109 of the Transfer of Property Act, 1882 which provides rights of lessor's transferee. It

has been clearly provided therein that "provided that the transferee is not entitled to arrears

of rent due before the transfer, and that, if the lessee, not having reasons to believe that

such transfer has been made, pays rent to the lessor, the lessee shall not be liable to pay

such rent over again to the transferee."

Decision:

In our opinion he is ordinarily not so entitled unless there is a contract to the contrary.

There was an express contract to the contrary contained in the compromise petition which

was incorporated in the compromise decree passed by the Court". In these circumstances,

since there was no assignment of arrears of rent in favour of the vendee, the tenant could

not be ejected for non-payment of such arrears. Since in the present case there was no

assignment of arrears of rent in favour of the vendee, the second question as to whether the

rent due for a period prior to the sale could be claimed by the vendee as arrears of rent need

not be gone into in this petition. Consequently, this petition succeeds. The eviction order is

set aside and the ejectment application is dismissed with no order as to costs.

19





APPENDIX –I

Clauses to be included in a Sale Agreement

A "Sale Agreement" is prepared when any immovable property transaction is underway. It

outlines the terms and conditions that form the foundation of the sale of property. The

guidelines are based on the Transfer of Property Act, 1882. The terms of the Agreement

boils down to a handful of basic points which are stated below.

1. Full name and addresses of seller and buyer: Complete narration of the property

including location, usability and other details.

2. Price: The correct price including any tax or discounts should be clearly mentioned

here.

3. Time frame and payment mode and terms: The time period should be

mentioned. In case of payment in installments, the payment terms should be clearly

mentioned along with the due dates.

4. Taxes: Ensure that the purchaser is responsible for all sales tax.

5. Definitions of property lexicon: A lucid presentation of the terms used in the

agreement so that it is easily understandable to both parties.

6. Limited-liability claims: A typical clause for liability states that the seller's

maximum amount of liability is equal to the purchase price. The seller can include

a sentence that states he is not responsible for consequential damages, punitive and

speculative damages, or lost projects.

20



7. Requirements for the payment of Stamp Duty and Registration Charges.

8. A clause stating that the signed agreement is the only legally binding agreement

and no other agreement, whether oral or written is acceptable after the agreement is

signed.

9. A clause stating that both parties must acknowledge any changes or additions to the

agreement, in writing. (Also, how each party must deliver changes to the signed

Sale Agreement or any notices related to the agreement.)

10. State whose laws will govern the Agreement.

APPENDIX -II

(A) EXCHANGE

As per Section 118 of the T. P. Act, exchange is defined as under :

"when two persons mutually transfer the ownership of one thing for

ownership of another, neither thing or both things being money only, the

transaction is called an exchange".

"A transfer of property in completion of exchange can be made only in

manner provided for the transfer of such property by sale".

A transfer of a house for money only cannot be called exchange. If X exchanges his house

worth Rs.10.00 Lakhs with B's house worth Rs.15.00 Lakhs and also pays him Rs.5.00

Lakhs in cash, the transaction is that of exchange only. So the payment of Rs.5.00 Lakhs

can be made as a part of exchange. The real difference between sale and exchange is in the

nature of the consideration for transfer of the property. In sale, the consideration is a price

where as in the case of transfer by way of exchange the consideration is acquisition of

ownership of some other thing.

21



(B) RELEASE

Release is also a kind of transfer of property. Release implies an interest in property which

is intended to be given up or released. It may amount to a conveyance or gift or an

exchange. If a person releases his vested right or interest in a property for a consideration,

it would be considered as a conveyance or sale. If he releases his vested interest without

consideration, but only for natural love and affection, it will amount to a gift, If he releases

his interest in one property in favour of another in consideration of that other person

releasing his interest in another property in favour of the former, the transaction amounts to

exchange or partition.

Some times a deed of release is executed even if a person has no interest in the property.

This is done when his claim to property is disputed or as a matter of caution.

(C) RELINQUISHMENT

It means extinction of rights or interest in property. It may not amount to transfer of

property if it is in favour of a person having interest in property. It amounts to transfer if it

is in favour of a person who has no interest in the property.

(D) SURRENDER

Surrender is also an act of extinction of a right on the part of the person surrendering the

property. It results in merger of lesser estate with a greater estate and as such it does not

amount to transfer. For example surrender of lessee's interest is not considered as atransfer.

Sub-Clauses (iv) to (vi) of section 2(47) of the I.T. Act regarding the definition of Transfer

do not really relate to transfer in the general sense as explained above. These clauses were

added to bring to charge certain acts which were used to avoid or postpone the payment of

22



capital gain tax. These are being discussed in details while considering the taxation aspect

of the transfer of immovable property.

Tpa Project

Documents

Transcript of Tpa Project