Section 54: "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 immovable 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 immovable 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 immovable 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 immovable 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.

Meaning

Sale is a transfer of ownership in exchange for a price that may be paid or promised or part-
paid and part-promised. In sale all the ownership rights are transferred to other person for a
consideration. This section is not talking about limited rights as in lease and mortgage. Price
should be mentioned in the sale deed. Adequacy or inadequacy of price is not relevant to
validate a transaction but becomes relevant if challenged on the ground of fraud,
misrepresentation, undue influence or mistake of facts. Moreover validity of transfer will not
be affected even if the consideration is inadequate, or paid in instalment or never paid by the
purchaser.

Essentials

The essential elements of a sale are:

(i) parties to a sale should be competent.

(ii) subject matter of sale should be immovable property.

 (iii) price it may be paid, promised to pay, partly paid and partly promised to
pay.

(iv) mode of executing a sale.

Parties to a Sale

The parties to a sale are the seller, and the buyer. The seller should be a person competent to
contract, i.e., he must be a major and of sound mind, and should not be legally disqualified to
transfer the property. A minor or a person of unsound mind is incompetent to transfer his own
property.

The person who has been declared as an insolvent are also not competent to enter into the
contract so they cannot be the seller of the property.

Subject Matter of Sale

Subject matter under section 54 is immovable property.

Price

The other most important essential of the sale is price. It may be paid or promised or part-paid
and part-promised.

In Kaliyaperumal v. Rajagopal 1 it was held that sale is defined as being a transfer of ownership
for a price. In a sale there is an absolute transfer of all rights in the properties sold. No rights
are left in the transferor. The price is fixed by the contract antecedent to the conveyance. Price
is the essence of a contract of sale.

Mode of Transfer

There is only one mode of transfer by sale in regard to immovable property of the value of Rs.
100 or more and that is by a registered [Link] is also reiterated that payment of entire
price is not a condition precedent for completion of the sale by passing of title, as Section 54
of the Transfer of Property Act, 1882 (“the Act”, for short) defines “sale” as “a transfer of
ownership in exchange for a price paid or promised or part-paid and part promised.”

1(2009) 4 SCC 193.

If the intention of parties was that title should pass on execution and registration, title would
pass to the purchaser even if the sale price or part thereof is not paid. In the event of non-
payment of price (or balance price as the case may be) thereafter, the remedy of the vendor is
only to sue for the balance price. He cannot avoid the sale. He is, however, entitled to a charge
upon the property for the unpaid part of the sale price where the ownership of the property has
passed to the buyer before payment of the entire price, under Section 55(4) (b) of the Act.”

How Sale can be Executed?

By Registered Deed: In the case of tangible immovable property of the value of one hundred
rupees and upwards, or in the case of a reversion or other intangible thing, the transfer can be
made only by a registered instrument. In Ghanshyam Sarda [Link] Jha, Director, M/s.
JK Jute Mills Co. Ltd. & Ors2., it was held that date of registration of document which is crucial
inasmuch as the transfer is effected and the title passes only upon registration.

In Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana3, it was observed that any contract of
sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall
short of the requirements of Sections 54 and 55 of the TP Act and will not confer any title nor
transfer any interest in an immovable property (except to the limited right granted under
Section 53-A of the TP Act). According to the TP Act, an agreement of sale, whether with
possession or without possession, is not a conveyance. Section 54 of the TP Act enacts that
sale of immovable property can be made only by a registered instrument and an agreement of
sale does not create any interest or charge on its subject-matter.”

In S. Chattanatha Karayalar v. The Central Bank of India Ltd. and Ors4, the Supreme Court
held that "The principle is well established that if the transaction is contained in more than one
document between the same parties they must be read and interpreted together and they have
the same legal effect for all purposes as if they are one document". It was held in State of U.P
v. District Judge & Ors.5 It was held that As per Section 54 of the Transfer of Property Act,
the property in the land gets conveyed only by registered Sale Deed. It is not in dispute that the
lands sought to be covered were having value of more than Rs.100/-. Therefore, unless there
was a registered document of sale in favour of the proposed transferee agreement holders, the

2 2016 SCC OnLine SC 1288.

3 (2012) 1 SCC 656.
4 AIR 1965 SC 1856.
5 1997 (1) SCC 496.
title of the lands would not get divested from the vendor and would remain in his ownership.
There is no dispute on this aspect. In S Rambhau Namdeo Gajre vs Narayan Bapuji Dhotra
(Dead)6 it was held that section 54 specifically provides that a contract for sale of immovable
property is a contract evidencing the fact that the sale of such property shall take place on the
terms settled between the parties, but does not, of itself, create any interest in or charge on such
property. It is not disputed before us that the suit land sought to be conveyed is of the value of
more than Rs. 100. Therefore, unless there was a registered document of sale in favour of the
Pishorrilal (proposed transferee) the title of the suit land continued to vest in Narayan Bapuji
Dhotra (original plaintiff) and remain in his ownership.

By Delivery: In the case of tangible immovable 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 immovable property takes place when the seller places the buyer,
or such person as he directs, in possession of the property.

Sale and a Hire-purchase Agreement

A transaction of a sale is different from a hire-purchase agreement. A hire purchase agreement

may become a sale after the entire payment. In hire-purchase agreement the transferor has the
right to rescind the agreement and take back the possession of his property, if instalment is not
purchased on time. Secondly, the terms of payment of consideration in a sale are dependent
upon the agreement between the parties but payment through instalment is an accepted feature
of hire-purchase agreement.

Sale and Exchange

Sale is the transfer of ownership in a property in exchange for a price that is money, but in an
exchange there is a transfer of ownership in exchange for something that is not money. It is the
classical example of barter system. A, sells a house to B for Rs 1,50,000. This would be a sale
and right immediately will pass to the buyer through registered document. But, if A exchanges
his house for the house of B, this would be an exchange.

Contract for Sale

Section 54 of TP Act makes it clear that a contract of sale, that is, an agreement of sale does
not, of itself, create any interest in or charge on such property. In Narandas Karsondas v. S.A.

6 2004 (8) SCC 614.

Kamtam and Anr7, it was observed that a contract of sale does not of itself create any interest
in, or charge on, the property. This is expressly declared in Section 54 of the Transfer of
Property Act.

It is thus clear that a transfer of immoveable property by way of sale can only be by a deed of
conveyance (sale deed). In the absence of a deed of conveyance (duly stamped and registered
as required by law), no right, title or interest in an immoveable property can be transferred.

Difference between Contract for Sale and Sale

In Hardip Kaur vs Kailash & Anr 8. Section 54 of the Transfer of Property Act, 1882. Where
the seller has received the sale consideration in pursuance of the agreement to sell and has
delivered the possession to the purchaser, the purchaser would have interest in the property.
The purchaser would though not be the classical owner of the suit property as would an owner
be under a duly registered sale deed, but surely he would have better rights/entitlement of
possession of the suit property than the plaintiff. A right to possession of an immovable
property arises not only from a complete ownership right in the property but having a better
title or a better entitlement/right to the possession of the property than qua the person who is in
actual physical possession thereof.

In Mian Pir Bux Mohamed Tahar9 it has been held that an agreement for sale does create an
obligation on the vendor. It creates an obligation arising out of a contract and is annexed to the
immovable property. It does not amount to an interest in the property and it has been held that
such an obligation can be enforced against the transferee with notice of the contract or a
gratuitous transferee affected thereby. A contract for sale, therefore, does not create an interest
in land, but creates a personal obligation of a fiduciary character which can be enforced by a
suit for specific performance not only against the vendor, but also against a volunteer and a
purchaser for consideration with notice. A contract of sale (as provided by last two paragraphs
of s 40) creates an obligation annexed to ownership of property.

A reading of sections 40 and 54 of the TP Act and s 91 of the Indian Trusts Act, 1882 makes it
clear that the subsequent transferee with notice stands in a fiduciary capacity and holds the
property in trust to the prior agreement holder, but the prior agreement holder cannot

7 (1977) 3 SCC 247.

8 193 (2012) DLT 168.
9 AIR 1934 PC 235.
automatically become the owner by seeking declaratory relief, and has to necessarily file a suit
for specific performance impleading both the vendor and the subsequent transferee.

In Narayana Pillai Chandrasekharan Nair v. Kunju Amma Thankamma 10, it was held that It is
clear from the ultimate paragraphs of Ss.54 and 40, [Link] that a contract for sale of
immovable property though does not, of itself, create any interest in or charge on such property,
it creates an obligation arising out of the contract and annexed to immovable property, not
amounting to an interest in the property. Such obligation could be enforced against a transferee
with notice of the contract or a gratuitous transferee affected thereby.

In Devarapalli Venkara Narasimharao v. Pilla Ramayyamma11, it was held that the agreement
for sale does not create any right, title or interest in the property under Section 54 of the
Transfer of Property Act, but it creates an interest in the property by operation of 2nd paragraph
of Section 40 of the Transfer of Property Act, and this right prevails by operation of Order 38
Rule 10 CPC. The agreement of sale thereby is not void and the attachment before judgment
does not prevail over the contract for sale."

Intention of the Parties

In Bhoju Mandal v. Debnath Bhagat12, it was held that the question, to which category a
document belongs presents a real difficulty which can only be solved by ascertaining the
intention of the parties. It also depends upon the intention of the parties that when the ownership
will be passed from seller to buyer. Generally on registration ownership devolves upon
transferee but if the intention of the parties are that ownership will devolve upon the transferee
on payment of price then the deed would be void if price is not paid in a fixed time. In the same
way if the sale is conditional then ownership will devolve upon the transferee only on the
fulfilment of the condition. Where the intention cannot be gathered from the document or
appears ambiguous, extraneous evidence is admissible for clarity.

Consequences of Lack of Registration

If there is no registration of the sale deed the ownership rights will not devolve on the transferee
and the transfer will not be considered as a valid transfer. 13 The law gives no protection to a

10 AIR 1990 Kerala 177.

11 1987 (1) ALT 718.
12 1963 AIR 1906, 1963 SCR Supl. (2) 82.
13 Numaanab v . Hara Prasad , (1913) 17 Cal WN 1161; Kaliram v . Dula Ram , AIR 1933 Cal 544 .
person claiming a right under an unregistered alleged sale 14. Before amendment, an
unregistered sale deed can protect a limited right of possession as provided under section 53-
A. In Shrimant Shamrao Suryavanshi & Anr. v. Pralhad Bhairoba Suryavanshi15, that if there
is a contract to transfer for consideration of any immovable property in writing and signed by
the transferor, or by someone on his behalf and the writing must be in such words from which
the terms necessary to construe the transfer can be ascertained and the transferee must in part
performance of the contract take possession of the property, or of any part thereof, then there
is an equity in favour of the proposed transferee who can protect his possession against the
proposed transferor even though a registered deed conveying the title is not executed by the
proposed transferor. In such a situation equitable doctrine of part performance provided under
Section 53-A comes into play and provides that "the transferor or any person claiming under
him shall be debarred from enforcing against the transferee and persons claiming under him
any right in respect of the property of which the transferee has taken or continued in possession,
other than a right expressly provided by the terms of the contract. The conditions to exercise
this right are that the transferee must have done some act in furtherance of the contract and
must have performed or be willing to perform his part of the contract." In the absence of any
conditions mentioned above the transferee will not be entitled for any protection although
unregistered sale deed is accompanied by a money receipt stating that the transferor had
received a specific amount as consideration for the land that he had sold to transferee.

In Ramesh Chand Ardavatiya v. Anil Pangwani 16 the owner of a piece of land entered into an
agreement for its sale with B . On payment of the advance amount, he handed over the
possession to B but failed to execute a sale deed in his favour. B constructed a boundary wall,
but this land was encroached upon by the trespassers on behest of A . B filed a suit in a court
of law for a declaration that he was in peaceful possession of the property and sought a
permanent injunction from the court restraining the tresspassers from interfering with his
peaceful possession of the property. The court held that B was entitled to protect his possession.
They directed that A should assert his title through due process of law and was restrained from
taking the law in his own hands.

14 Nachhitar Singh v . Jagir Kaur , AIR 1986 P&H 197.

15 AIR 2002 SC 960; 2002 (3) SCC 676.
16 AIR 2003 SC 2508, 2003 (4) ALD 10 SC, 2003 (3) AWC 2511 SC.