The Transfer of Property Act, enacted in 1882, may seem like another in a long line of stuffy legislations that have no modern day relevance at first glance. It is certainly true that it was implemented a very long time ago, and despite subsequent amendments, there are parts of it that are still out of touch with the needs of the day.
But the truth is that the provisions of the Transfer of Property Act are being used on a daily basis for the most basic transactions. It lays down the basic requirements for sale deeds and other similar instruments that facilitate the transfer of property. It is the basis for most medium to large scale commercial transactions that take place every day.
Sale through Transfer of Property Act
- Chapter III of the Transfer of Property Act discusses the sale of immovable property.
- Section 54 of the Transfer of Property Act defines what a “sale” is, how it should be made and what a contract for sale is.
- The Transfer of Property Act defines a “sale” as “a transfer of ownership in exchange for a price paid or promised or part-paid or part-promised.”
- This is a very useful definition as it helps identify whether a particular transaction is a sale or not by checking what was given in exchange for the transfer of ownership.
- The Transfer of Property Act also specifies that for immovable property with a value of more than Rs. 100, the transfer of ownership must take place through a registered instrument.
- Lastly, Section 54 of the Transfer of Property Act defines a “contract of sale” and clarifies that the existence of a contract of sale does not create any interest in, or charge on, the property being discussed.
- Section 55 of the Transfer of Property Act gives a detailed analysis of the rights and liabilities of the buyer and the seller. It places the following obligations upon the seller:
- The seller is bound to disclose any material defect in the property of which the seller is aware, and which the buyer could not discover through ordinary diligence.
- The seller is obligated to present all documents related to the title upon the buyer’s request.
- The seller has an obligation to answer all questions from the buyer honestly and to the best of his knowledge.
- Similarly, the seller is vested with many more obligations along these lines to ensure that their conduct in the transaction is honest.
- The seller is also given certain rights through the Transfer of Property Act, such as the right to collect rent until the ownership is transferred.
- The buyer is also entrusted with certain obligations as a result of the Transfer of Property Act, chiefly the obligation to apprise the seller of circumstances that could contribute to the estimated value of the property increasing.
- The buyer is also obligated to bear any losses arising out of a decrease in property value not resulting from the seller’s actions.
- The buyer’s entitlements under the Transfer of Property Act includes all benefits from an increase in property value, among other things.
Section 6 of the Transfer of Property Act
Section 6 of the Transfer of Property Act is, perhaps, the most important provision in the entire Act. It enlists the types of property that may or may not be transferred. It is through Section 6 of the Transfer of Property Act that any transfer of property is legitimised. Its provisions are as follows:
- Firstly, it states that any kind of property may be transferred unless its transfer is explicitly prohibited under the Transfer of Property Act, or any other law. The rest of the provisions of Section 6 of the Transfer of Property Act are dedicated to stating exceptions to this rule.
- Section 6(a) of the Transfer of Property Act states that property cannot be transferred on the basis of a chance that it will be in the seller’s possession at a later date, due to the provisions of a will deed or a similar instrument.
- An easement cannot be transferred under the Transfer of Property Act, apart from the dominant heritage.
- A public office cannot be transferred.
- The right to sue cannot be transferred.
- Although there are several other provisions relating to what kind of property can be transferred, the most important one that remains can be found in Section 6(h) of the Transfer of Property Act.
- Section 6(h) provides that a transfer cannot be made if the consideration that is being received in exchange for it is unlawful in nature, or if it is made to a person who is incapable of having property be transferred to them.
This last provision raises an important question. Who is capable of transferring and receiving property?
Who can engage in a transfer of property?
Section 7 of the Transfer of Property Act discusses who is capable of transferring property.
- This provision states that every person who is competent to enter into a contract, or authorized to dispose of transferable property that is not their own, is competent to transfer property.
- The Indian Contract Act, 1872, elaborates upon who is competent to enter into a contract. To put it briefly, anyone who is not a minor and is not of unsound mind is competent to enter into a contract.
- Moreover, the transfer of property allowed under Section 7 includes whole or partial, and absolute or conditional transfers. Section 7 is further qualified by the requirement that it will be subject to any other laws in force that govern the capacity to transfer property.
The Transfer of Property Act is still very important today. Sale deeds, will deeds and other important instruments that aid us in transferring property owe their authority to the Transfer of Property Act. Section 6(h) of the Act is particularly relevant, as it prevents the transfer of property in exchange for unlawful considerations. However, the Act does not provide adequate safeguards to ensure that the unlawful consideration is not masked under another transaction. This is one of the many lacunae present in the Transfer of Property Act.