AN ANALYSIS OF SALE AND GIFT AS MODES OF TRANSFER OF PROPERTY
Author: Drishti Jain, III year of B.A.,LL.B from Symbiosis Law School, Hyderabad.
Property has become a basic necessity of common men. Every individual is struggling hard to acquire property so as to get the societal status of being a person of good class. In laymen language the word property means anything physical that can be acquired. The word property is derived from the Latin word Proprietat and equivalent French word Proprius. Jurist such as Salmond and Austin have defined Property. Salmond defined Property as – “a proprietary right in rem”. Austin explained the word property in a similar fashion. He said, “Property means availing the right against the world.”
The Supreme Court of India has defined the term property in mainly two cases –
RC Cooper v/s Union of India- The court has held that property includes corporeal and incorporeal property.
Nanubhai Kocher v/s State of Gujarat- the court has held that property defined under Article 300(A) of the Indian Constitution is a constitutional right and not a fundamental right. The court also held that only the authority of the law i.e. State Legislature and the Parliament have the powers to occupy property for public use.
The property is divided in two categories:-
Corporeal property- tangible property
Incorporeal property – intangible property
Jura in re aliena
Jura in re propria
TRANSFER: MEANING AND COMPARISION
The word transfer according to English Law means ‘Convey’. The word transfer is defined under Section 205 (1) (ii) of Law of Property Act, as the person have powers to transfer interest with regard to Mortgage, Charge and lease. Under Indian law, the meaning of transfer is used in the widest sense. It includes transfer of ownership.
DISTINCTION BETWEEN ENGLISH LAW AND INDIAN LAW
Under English law, scope of transfer has been used in a very narrow and restricted sense. The person has powers to transfer interest with regard to Mortgages, charge and lease.
Under Indian law, the word transfer in the act has been defined in reference with the word “convey”. The word transfer is as such not defined under the act.
CONCEPTS RELATED TO PROPERTY
The words Ownership and possession differs in meaning and cannot be used interchangeably.
The word Possession is the prima facie evidence of ownership. Possession is of two types; Corpus( physical right) and Animus( legal right). According to Salmond, possession is defined as “ possesion means there is a relationship between men and things.”
According to Hibbert, Ownership includes four rights within itself. These are-
Right to use the property
Right to exclude others from using the property
Right to destroy the property
Right to sale or transfer the property.
Ownership is of two types; Dominiun ( absolute ownership) and Possessio( only posession)
WHAT MAY BE TRANSFERRED (SECTION 6)
Section 6 of the act provides for what kind of property can be transferred under the act. It also provides for exceptions. It states that property of any kind can be transferred except those provided by the present act or by any other law for the time being in force. The exceptions to Section 6 are provided fron clauses (a) to (i).
These are folowing:-
The chance of an heir- apparent secceeding to an estate, the chance of a relation obtaining a legacy on the death of a kinsman, or any other mere possibility of a like nature, cannot be transferred;”
A mere right to re-entry cannot be transferred;
An easement right cannot be transferred except the dominant heritages;
All interest in the property restricted in iyts enjoyment to the owner personally cannot be transferred;
(dd) Right to future maintenance cannot be transferred;
Mere right to sue cannot be transferred;
Neither public office nor can salary of a public officer can be transferred ;
“Stipends allowed to armed forces of india i.e. military, naval, air-force and civil pensioners of government and political pensions cannot be transferred;”
No transfer can be made
Transfer opposed to the nature of the interest affected thereby
Transfer for an unlawful object or consideration (section 23 of the indian contract act, 1872)
Transfer to a person legalluy disqualified to be transferred;
“Nothing in this section shall be deemed to authorise a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate, under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee.”
SECTION 7: PERSONS COMPETENT TO TRANSFER
“Section 7 of the act states that -Every person competent to contract and entitled to transferable property, or authorised to dispose of transferable property not his own, is competent to transfer such property either wholly or in part, and either absolutely or conditionally, in the circumstances, to the extent and in the manner, allowed and prescribed by any law for the time being in force””
Competent To Contract :
Section 11 of the Indian Contract Act, 1872 provides for the person competent to contract. It provides for 3 conditions-
The person should be major
The person should be of sound mind
The person should not be disqualified by any law
Competent To Transfer
Section 6 (h)(3) of the transfer of property act, 1882 provides
Any person can be a transferee, unless legally disqualified.
A transferor must be –
The person should be Competent to contract
The person should have title to the property, or authority to transfer the title.
SECTION5: TRANSFER OF PROPERTY DEFINED
Section 5 of the act defines the word “transfer of property” an act by which a living person conveys property, in the present or in future, to one or more other living persons, or to himself, or to himself and one or more other living persons is said to perform transfer.
Living person means and includes a company or aasociation or body of individuals, whether incorporated or not. “
SALE AS A MODE OF GIFT
In layman language the word sale means to sell something. Section 54 of the Transfer of Property Act, 1882 defines sale. It defines as “transfer of ownership in exchange for a price paid or promised or part- paid and part – promised.” In sale, there are two parties. The person who is executing the contract of sale is called seller and the person to whom the property is sold is called the buyer. Both the parties have rights and obligations to perform both during the sale and after the sale is completed. A sale of a tangible immoveable property of value less than 100 rupees is made by delivery whereas; tangible immovable property of value more than 100 rupees is made only by a registered instrument. A contract of sale means a contract executed between two parties for a sale of property. There are four essential of a valid sale. These are –
Parties to the sale – there should be two parties, seller and buyer/ purchaser. Any person can be buyer. he should not be subjected to a legal disqualification. A minor can be transferee in transaction of sale. For a person to be seller,(a) he must be competent to enter into a contract and (b) he must be the owner of the property or authorized by the owner to sell the property. In the case of Anu Dutta vs. Lolit Kalita, the court has held that any sale deed executed by any other person then the owner id not valid. In another case, Church Of Christ Charitable Trust And Educational Charitable Trust Vs. Ponniamman Educational Trust, the court has held that if a guardian of a minor person sells the property without the prior permission of the court, such sale is not valid.
Subject matter – the subject matter of the contract of sale must be immovable property and not movable property as the later is dealt under Sale of Goods Act. it can be both tangible and intangible property. Also, the property to be transferred must be sufficiently indentified. In the case of Ram Jiwan Rai vs. Deoki Nandan Rai, the issue before the court of was whether the property to be transferred is sufficiently identified or not. The court held that all the information was written on the sale deed and the mistake in plot number should not be treated as non – identification of the property.
Price or consideration: the term price is not defined in the act. the usage of the term is similar to that of the Indian Contract Act. in the case of Surinder pal vs. M/S Rainbow Promoters Pvt Ltd, the court has held that any amount fixed by the contract antecedent to the conveyance is the essence of a contract of sale. A sale would be valid in case where the consideration is in money but not specific. A decretal amount, a compromise, an agreement to protect and defend the property at the purchaser or an advanced made by one person to another is considered as good consideration for a sale. In the case of Ram Charan vs. Giriga Nandani, the court has held that family settlement is a valid consideration for the contract of sale. Price is mandatory for a contract of sale. In thye case of Bombay Tramways Co. vs. Bombay Municipal Corporation, the court has held that price forms the essence of contract for sale.
Mode of execution: execution of a sale deed is an important part completion of the sale. Section 54 of the act lays down the procedure for execution. For execution of a sale deed, three formalities should be adhered to ;
(a) The transfer must take place with the help of a validly executed sale deed in writing;
(b) Should be properly attested and;
(c) It should be registered
All the three above mentioned requirements are necessary only if the value of the property so being transferred is more than 100 rupees. But, if the value of the property is more than 100 rupees but it is being sold in less price than all the three requirements is necessary.
Rights and liabilities of Buyer and seller
Section 55 of the act provides for rights and liabilities of buyer and seller. “It states as – “ 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 next following or such of them as are applicable to the property sold:
Duties of the Seller
The duties of the seller consist of six duties before the delivering of the ownership and one after transfer of ownership:
To disclose material defects: the seller is required to disclose all the material facts both in the property and the title of which is buyer is not aware but the seller is. Such defects are necessary to disclose which the buyer, with ordinary prudence cannot discover. The duty of the seller ceases if the buyer knows about such defects or using reasonable prudence can discover as held in the case of Godrej& Boyce manufacturing Co. Ltd Vs. state of Maharashtra. A failure to do on the part of the seller shall be treated as fraudulent or intentionally omitted.
In the case of Lalubhai Rupchand vs. Mohanlal Sarkarchand the court has held that if the seller fails to perform his duty of disclosing material facts, the buyer has a right to refuse to complete sale.
In Hiralal vs. Mulchand the court has held that there is no duty to disclose such defects of which the buyer has actual or constructive notice. Material defects means defect which can change the decision of the buyer. A defect in title, non disclosure of a street alignment or right to way is a material defect.
In Ratanlal vs. Nandbhai, the primary duty of the seller is to convey a good title to the buyer and therefore, he is required to disclose a defect in title if any. The onus of proving a failure to disclose a defect in title is on the purchaser.
Allowing the examination of documents: . the seller should allow the buyer to examine all the documents related to the property.
To answer all queries: it is the duty of the seller to answer reasonable questions raised by the buyer with or without inspection of the document related to sale. In Lakshmidas vs. DJ Tata, the court has held that the contract may give a power even to the seller to expressly rescind the contract if such questions are put to him that he is unwilling to comply with yet the duty to make –up his title is attached to him.
To execute a conveyance: it is the duty of the seller to execute the sale deed it is his signature that is to be attested properly. In Nilamadhav vs. Horaprasad, the court has held that the execution of the conveyance and the payment of purchase money are presumptively contemporaneous acts.
To take care of property : once the contract of sale is executed, it is the duty of the seller to take care of the property till the time the possession is transferred. In Royal Bristol permanent Building Society vs. Bomash, the court has held that the seller must keep the property in reasonable repair and protect it from injury by trespassers. The court in the case of Hombay vs. Matcham, held that the duty to protect extends not only to property but title deed as well.
To give possession once all the formalities from buyer’s side is completed, the seller has to give the possession of the property to the buyer or any person so directed by the buyer. the court in one of the cases held that it is the duty of the seller to give the possession to the buyer and he should not leave it to the buyer to get the possession himself. In Barisal loan Officer vs. Satesh Chandran, the court has held that in cases where the sale is made by the court, the court has to ensure delivery of possession of property even if there was no prayer by the buyer.
To pay all the charges: the seller is required to pay all the public charges and rent that are due in respect of the property to be transferred up to the date of the sale or up to the date of the possession. Public charges mean financial or other liabilities such as tax liabilities to the statutory authorities, municipal taxes and government revenue. In the case of State of Gondal vs. Gobindram, the court has held that unless there is a contract to contrary, the duty of the seller to pay all public charges is absolute in nature.
RIGHTS OF THE SELLER
There are two rights of the buyer. These are following:
Right to rent and get profit till the passing of ownership: It is the right of the seller to yield money by renting the property till the time possession is not transferred. In National Insurance co. vs. Life InCorpn the court has held that possession is to be given to the buyer only when ownership is transferred. If the buyer takes the possession of the property before the completion of the sale, he will be entitled to take rents and profits, has to pay interest on the unpaid purchase money as held in the case of Moung shwe Goh vs. Maung Inn.
Right to get the payment in case where the ownership passes before the payment: it is the right of the owner/ seller to get the payment in case where the ownership pases before the payment.
The payment should be done within a reasonable time unless it is specifically mentioned in the contract. In such cases the seller is entitled to a charge upon the property. This rule is not applicable in cases of oral sales or lease.
DUITES OF THE BUYER
Following are the duties of the buyer:
To disclose material facts, increasing the value of the property: the buyer is bound to disclose material facts 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. If the buyer is aware of the increased property value, he is entitled to report the same to the seller.
To pay purchase money : one of the main duties of the buyer is to pay considerations. He is required to pay the amount within reasonable time. In the case of Raghukul Tillak vs. Pitam Singh, it was held that if the seller refuses to accept the consideration, the buyer can deposit the money in the court.
Bear loss or destruction of property: any loss arising out the property after the ownership is transferred, it becomes the duty of the buyer to bear loss. The relevant time for shifting of the liability to bear loses is the passing of ownership of the property and not its delivery of possession.
To pay charges and rent due on property once the ownership is passed: the obligation to pay public charges also shifts from seller to buyer with the transfer of ownership. In Kunjikavu Asmma vs. Janaki Amma, the court has held that once the sale is complete, the seller is not entitled to receive any benefit from the property.
RIGHTS OF THE BUYER
Benefits of improvements: a seller cannot demand a higher price If the price of the property increases in between when the ownership has passed but the price is not paid by the buyer. In Rani Kaniz vs. Murtaza the court has held that the seller cannot participate in any benefit that purchaser derives from his purchase.
Charge for pre- paid purchase money : this rule embodies the principal of equity, Justice and Good conscience. The buyer is entitled to charge on the property in such cases”
GIFT AS A MODE OF TRANSFER
Section 122 of the act defines gift as – “ Gift” is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person called the donor, to another, called the donee, and accepted by or on behalf of the donee. The acceptance must be made during the lifetime of the doner.” Such gift will be void where the done dies before accepting it.
The provisions of gift are contained in Chapter VII of the transfer of property act.
The essentials elements of gift are –
Absence of consideration and voluntarily
Subject matter ‘
Transfer & Acceptance
Gift Under Mohammedans : The gift transactions between Mohammedans are governed by the Mohammedan Law. They are not governed by the Transfer of Property Act. Under Mohammedan Law, writing is not essential for a valid gift transaction. Also, there is no compulsion of registration under the law contrary to the Transfer of Property Act.
In the case of Deba Prasad Basu vs. Ashrukana Das it was held by the court that “A deed of gift properly conveyed, transferred and exchanged as a consequences of a family arrangement is a deed of gift, even though the done agrees to re- convey the property for a specified sum if called upon by the donor to do so within 10 years as held in the case” .
Allan Gangadhara Rao vs Gollapallo Ganga Rao, “the Andra Pradesh High Court has held that since the father is under an obligation to maintain a daughter which includes the reasonable expenses of her marriage and therefore any property any property given to her at the time of marrioage is not a gift under s 122.”
The word Dan in literal sense means a gift. In the case of Debi sharan vs. Namlal Chaubey, the court has held that for all the material purposes, the dan is governed under the transfer of property act.
Voluntarily And Without Consideration
Accoding to blackstone, “ gifts are always gratuitous, grants are upon some consideration or equivalent
The word “Voluntarily” used in the section is used in the general sense meaning “donating with unfettered will” and not in the technical sense. To prove that the gift deed was executed with free and voluntarily consent, it is required to prove that the done was physically present and had the mental element i.e. the intention.
The word ‘consideration’ used means monetary consideration and does not include natural love or affection. If the consideration is a nominal amount of money, or the property is grossly undervalued, even then the transfer will be considered as sale and not gift.
In Deba Prasad Bam vs. Ashrukana Das, the court has held that a gift deed by which property is conveyed as a consequence of a family arrangement is a deed of gift.
Two parties : there should be two parties doner and donee. In the case fo Kamlakanta Mohapatra vs. Pratap Chandra Mohapatra, the court observed that a gift deed executed by the a daughter who is not a coparcener without consulting any of the family member would be considered as valid. A public or an unregistered society cannot be a done. A gift can be made for one or more donees.
Transfer and Acceptance
Acceptance becomes the pivotal requirement of a valid gift. It should be accepted during the lifetime of donor. In pallayya Vs. Rama Yadhanulu, the cort has held that it is not necessary for acceptance should be in writing as the section does not provide for it.
Gift is a transfer of property and transfers the ownership as well. In Kuppuswamy Chettiar vs. Arumugam, the court has held that the terminology used does not matter and a transfer is a gift even if it stayed as a release when made without considerartion in a person in a having no right, title or interest in the subject matter.
The subject matter of the gift should be existing movable or immovable property which has a capacity to be transferred. In Renu Devi Vs. Mahendra Singh, the court has held that even a gift of property that is obtained after a preliminary decree of partition is passed by the court is valid.
CONCLUSION AND SUGGESTIONS
From the analysis above, it can be concluded that both sale and gift as modes of transfer of property are distinguishable and in most cases sale is the most used way of transfer.
Fundamentally, in sale and gift, ownership is transferred but the difference arises on the point that in case of sale, the ownership is transferred in lieu of some consideration. While in gift, consideration is not necessary. If gift is done with consideration it will be considered as sale and not gift. For a valid sale, it is necessary to have consideration, while for a valid gift, consideration should not be there.
This is the main difference between sale and gift as a mode of transfer. The legislators must pay close attention to gift as mode of transfer. There are several factors in gift as mode of transfer which affect the successful completion of the transfer. The provisions of minors and lunatics person as one of the parties should be explained in clearer sense.