Disputes relating to property

Disputes relating to property, particularly immovable property like Flat and land is not uncommon these days. Main reasons for dispute relating to immovable property are poorly drafted documents relating to transfer of property, complication in property laws and ignorance of basic laws among general public. Sometimes a person, who has purchased the property even after conducting reasonable due diligence, finds himself in legal dispute. Usually this happens when the the title of a person, who has sold the property to buyer, gets questioned by a third party.

Transfer of Property Act, 1882 which primarily deals with transfer of immovable property provides protection to such bona fide buyers. In this Article I have tried to throw some light on right of such bona fide buyers and related aspects:


What is sale and how it can be effected?

As per Section 54 of Transfer of Property Act, 1882, sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Transfer on immovable property of the value of one hundred rupees and upwards, can be made only by a registered instrument.

What is contract for sale and how is it different from sale deed?

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.

On the other hand, Sale Deed is present in nature and by virtue of its execution between the parties can creates right, title, interest in the property.

After terms and conditions of contract for sale are fulfilled and complied with, buyer should immediately insist for execution of sale deed by the owner.

Can a property be transferred pending a suit relating thereto?

Answer to this question lies in section 52 of Transfer of property Act, 1882, which says that during the pendency of any suit in relation to any immovable property, said property cannot be transferred or otherwise dealt with by any party to the suit or proceeding except under the authority of the Court and on such terms as it may impose. Section 52 is reproduced below for reference:

Section 52 - Transfer of property pending suit relating thereto

During the pendency in any Court having authority within the limits of India excluding the State of Jammu and Kashmir or established beyond such limits by the Central Government of any suit or proceeding which is not collusive and in which any right to immoveable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.

Explanation. -For the purposes of this section, the pendency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the institution of the proceeding in a Court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has been obtained, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force.

What are the rights available to bona fide purchaser of an immovable property, when title of seller of such property is questioned?

Section 41 of the Transfer of Property Act, 1882 protects the interest of bona fide purchaser. It is an exception to the rule of “nemo dat quod non habet” (no one gives what he doesn't have). As per this section if a person after being satisfied that seller is the owner of property and purchases the property for consideration, the transfer shall not be violable on the ground that the transferor was not authorised to make it. Section 41 is reproduced below for reference:

Section 41 - Transfer by ostensible owner

Where, with the consent, express or implied, of the persons interested in immoveable property, a person is the ostensible owner of such property and transfers the same for consideration, the transfer shall not be violable on the ground that the transferor was not authorised to make it:

Provided that the transferee, after taking reasonable care to ascertain that the transferor had power to make the transfer, has acted in good faith.

What will happen when an unauthorised person sells the property and later acquires interest in the same property?

As per Section 43 of the Transfer of property Act, 1882, if an unauthorised person represents that he is the owner of the property and transfer the said property for consideration, the buyer shall, at his option, have interest in the property, if such unauthorised person later on acquire any interest in the said property.

For example, if Mr. A, claiming that he is the owner of the property which actually belong to Mr. B, sold that property to Mr. C for consideration. Mr. A later on buys the property from Mr. B. Mr. A cannot claim that sale of property to Mr. C is not valid as when he sold him the property he was not the real owner.

Section 43 is reproduced below for reference:

Section 43 - Transfer by unauthorized person who subsequently acquires interest in property transferred

Where a person fraudulently or erroneously represents that he is authorized to transfer certain immovable property and professes to transfer such property for consideration, such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists.

Nothing in this section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.


Why Documents involving sale or transfer or immovable property, gift, leave and license and lease should be registered?

Registration Act, 1908 deals with laws relating to registration of documents. The purpose of the Registration Act, 1908 is the conservation of evidence, assurance, title, publication of documents and prevention of fraud. Registration of some documents like sale deeds of immovable property, is compulsory.

Registered documents carry a certificate of registration which is endorsed by the registering officer and is signed, sealed and dated by him. Endorsement by sub-registrar on a registered document is prima facie proof of its valid execution or consideration. Registered documents are admissible as evidence in a court of law since they have evidentiary value in the eyes of the law.

Registered documents safeguard the interest of a buyer since it takes effect in respect of the said property as against every unregistered document relating to the same property.

Registration of a document is also a notice to the general public regarding the transaction in question.
Registration can normally be done only after payment of proper stamp duty. Registered documents serve as proof of payment of proper stamp duty. {However, the court has held that the sub-registrar cannot refuse acceptance of document for registration despite the fact that the proper stamp duty has not been paid. The reason being that a sub-registrar is not a collector who can impound the documents.}

Although the Transfer of Property Act provides protection to the buyer of property, the buyer cannot ignore his responsibility of undertaking due diligence before buying the property. After all, there is a golden rule "Caveat Emptor" i.e. buyer beware.

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