Definition of sale

Sale is transfer of ownership for money consideration. Section 54 defines sale as a transfer of
ownership in exchange for a price paid or promised to be paid. Accordingly, the elements which
are necessary to constitute a sale are as under:

a) Transfer of ownership; and

b) Money consideration.

Transfer of ownership – Sale is a transfer of ownership. Ownership is absolute interest in the

property. Therefore, in a sale there is a transfer of all the rights in the property sold; no rights in
respect of property are left with the transferor (seller). Ownership means bundle of all the rights
and liabilities of property. So, when ownership is transferred, there is a transfer of all the rights
in property by transferor to transferee. In other words nothing less than ownership or absolute
interest may be transferred by sale. In Amar Chand v. Madan Lal1, the vendor (plaintiff) was in
need of money, he sold his land for money consideration. The sale deed as executed by him was
registered by him. The transaction was a sale, and the plaintiff, being no longer the owner, could
not interfere in the buyer’s (defendant) possession. Lease is also a transfer of property but, there
is transfer of only partial interest (right of use or enjoyment of property).

Money consideration – The ownership in the property must be transferred in exchange of

money. That is to say, the transferor must receive some money from the transferee in return of
the transfer of ownership of his property. Te money in exchange of ownership is called ‘price’.
However, for a valid sale the amount of money is an irrelevant factor. T may or may not be
adequate sum of money as compared to the market value of property. For example, transfer of
ownership in a property valuing one lac rupees in consideration of only one hundred rupees is a
sale, although the price is negligible or grossly inadequate.

When ownership is transferred in exchange of ownership of some other property, the transaction
is exchange. When ownership is transferred without any consideration, the transaction is called
‘gift’. And, when the ownership is transferred for money consideration, the transaction is called
‘sale’. It must be noted however, that under this section, the money consideration need not be

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AIR 2008 NOC, 1648 (HP)
paid immediately at the time of transfer. It may be partly be paid immediately, and the remaining
later, or it may be paid later altogether.

Essentials of a sale

1. The parties, i.e., the seller and the purchaser are competent.
2. The subject matter, i.e., the property is in existence.
3. The money consideration, i.e., the price has been fixed or referred.
4. The conveyance, i.e., the transfer has been made as prescribed under the law.

1. The Parties: Seller and Purchaser: Competence – there are two parties in a sale, the transferor
is called seller and the transferee is called the purchaser. Seller and purchaser are also known
as vendor and vendee.
Seller and purchaser both must be competent on the date the when the sale is being made, the
seller must be competent to contract, i.e., must be of sound mind and must have attained the
age of majority. Competency alone is not enough. The seller must have the right to sell the
property, i.e., the seller must be the owner of the property at the time of effecting the sale. A
tenant is not competent to sell the property under his tenancy because he has o no absolute
interest in the property. It has been held in Ramdas v. Sitabai, that the property must also be
transferable property within the meaning of this act. A seller has no right to transfer a non-
transferable property.
The purchaser may be any person, provided that he/she is not disqualified to purchase a
property under any law enforced in India.
In Ratanbai v. Basantibai, two sisters, who were the only legal heirs of their deceased father,
inherited property being Class I heirs. The husband of one them purchased the property from
their widowed mother taking advantage of her old age. It was held that the widow alone had
no right to sell the property. The sale was not binding on the Class I heirs to the extent of
their share.
Seller and buyer both may be either human persons or juristic persons. Thus, property may
be sold by a corporation or registered firm or any other legal person. Similarly, purchaser can
also be juristic person.
2. Subject Matter: Immovable Property – Sale is transfer of ownership in some property. This
act deals with sale of only immovable property. The subject-matter of sale under section 54
is, therefore, immovable property. The subject matter of the sale may be any kind of
immovable property as defined in Section 3 of the Transfer of Property Act. Accordingly, the
immovable property which may be subject matter of sale means lands, benefit arising out of
land and the things attached to earth. Things attached to earth include things embedded to
earth, things attached to what is so embedded to earth and all the things rooted in the earth.
But standing timber, growing crops and grass are movable properties.
An immovable property is either tangible or intangible. Lands, houses, gardens, etc. are
tangible immovable properties. Beneficial interests such as right to collect rent, right of
fisheries or right to extract minerals etc. are intangible immovable properties and may be
sold. Mortgage-debts are intangible immovable property and can be sold within the meaning
of Section 54. Reversion is also intangible property and is subject-matter of sale.
However, the immovable property whether it is tangible or intangible must be in existence on
the date of execution of sale. Further, the property must be owned by seller and must also be
a transferable property within the meaning of Section 6 of this Act.
3. Money Consideration: The Price – price is an essential element in the transfer by way of sale.
The money consideration which is called ‘price’, is an essential element of a sale. The price
must be fixed or referred on the sale-deed. Its payment is not necessary for completion of the
transfer but its reference is necessary. The price may be paid at the time of execution of sale
deed. It may be paid in advance or after execution of the deed. Some part of it may also be
paid at the time of execution and the rest may be promised to be paid in future. If no price
has been mentioned or ascertained in the sale deed then even a registered sale deed may not
be regarded as sale. ‘Price’ has not been defined in Section 54, but it has been held that under
this section it is used in the same sense as it has been defined in the Sale of Goods act and
means the money consideration.
In Subreunnissa v. Sabdu Sheikh, it was held that under Muslim Law, wife’s claim of her
dower is regarded as a debt. Where a Muslim husband makes gift of a land in lieu
(consideration) of her unpaid dower, the transfer is not a gift but a sale because ownership is
transferred in consideration of dower which is money debt. Such transaction is known under
Muslim law as Hiba-bil-Ewaz having all the legal incidents of a sale.
Inadequacy of money consideration is not any relevant factor for the validity of a sale. Even
where the price is found to be less than the market value of the property, the sale is valid. At
the same time, if the price money is too less or illusory, there might be an apprehension of
fraud, coercion or mistake of fact, and if any such thing is proved in court, the sale may be
invalidated.
It must be noted however, that every valuable thing may not be regarded as price. Thus in
Ghulam Muhammad v. Tek Chand, where a land was transferred for work done in cleaning a
piece of land and digging a well, it was not regarded as sale, because although work done
was of some value, it was not money.
4. Conveyance: Mode of Trasnfer – Sale is transfer of ownership of an immovable property.
Property therefore must be transferred from seller to purchaser. There are two modes of
transfer of property, as mentioned under Section 54:-
a) Delivery of Possession – where the property is tangible immovable property of a
value less than rupees one hundred the sale may be made by delivery of possession.
Writing and registration is not essential. However, if the parties so desire, they may
get the sale deed registered. Delivery of possession here means, giving physical
control of the property to buyer. Where the actual physical possession is not possible
due to nature or kind of property, anything done by seller which amounts to change in
possession from seller to buyer is deemed to be a delivery of possession. For
example, possession of house can be given by seller either by allowing the purchaser
to reside in it or handing over its keys to him. Similarly, in case of land the possession
is delivered to purchaser when he goes to the land or otherwise shows his physical
control over it. Where the purchaser is already in possession of property declarations
and acts so as to change the previous possession into that of the purchaser is
sufficient. In other words, if the vendee is already in possession of the property sold
to him, it is not necessary that there should be any formal taking over of the
possession. A direction is sufficient to constitute delivery of possession.
 b) Registration of Sale-deed – In all cases, other than the ones mentioned above,
registration is compulsory. Registration is necessary to complete the sale in the
following cases:
i) Where tangible immovable property is of the value of Rs. 100 or more; and
ii) Where the property is intangible immovable property of any valuation.

When ownership is deemed to be transferred?

In the case of sale of tangible immovable properties valuing less than Rs. 100, the title passes
on to the buyer when he gets possession of the property. When the sale is to be completed by
registered instrument, the ownership is deemed to pass on to the buyer on the date of
execution of the sales deed, not on the date when the deed was registered. In other words,
although in cases of sales where registration is compulsory, the sale is not complete until
registration but once registration is made it will relate back to the date of execution and title
would e deemed to have passed on that date. Registration does not create a new title but only
affirms the title which was created by sale deed.

In Laxmi Narain Barnwal v. Jagdish Singh, the Patna High Court has rightly observed that
the question as to whether on the execution of the sale deed, title passes to vendee or not
depends upon the intention of the parties. The court has further observed that the title of the
vendor passes to the vendee on registration of deed irrespective of the fact as to whether
consideration in whole or in part, has been paid by the vendee to the vendor or not subject, of
course, to the contrary intention of the parties to the said transaction. Registration is the
prima facie proof of the intention of the seller that he wanted to transfer the ownership on the
date of execution. But, when some condition has been laid down in the deed itself the title
shall not pass on to the buyer until that condition is fulfilled.
CONTRACT OF SALE

Section 54 defines also ‘contract of sale’. According to this section, a contract sale of immovable
property is a contract that sale of the property shall take place on terms settled between the
parties. in every sale there is a preceding contract of sale. Upon due execution of the contract, the
property is transferred from vendor to vendee. Thus the sale is completed in furtherance of that
very contract.

But, ‘contract for sale’ is a different thing. Sometimes, the parties are unable to execute the sale
deed at present but they intend that sale would take place between them in future. In order to
have an evidence and permanent proof of their intention, they enter into an agreement that the
property would be sold to the other contracting party and to nobody else. This agreement is
called ‘contract for sale’. In a contract for sale, the intension of the parties is not to effect an
immediate transfer of ownership but to agree to do the same in future or on the terms settled
between them.

The last paragraph of Section 54 clearly says that a contract for sale does not itself create any
interest or charge on the property. No title or interest in respect of the property is therefore,
created in favor of the purchaser on the basis of such contract. Under English Law, a contract for
sale creates a equitable ownership, in favor of the purchaser and the vendor hold property from
him as a trustee. But the doctrine of equitable estate is not recognized in India. Therefore, the
contract for sale creates neither legal estate nor equitable estate in favor of the transferee
(purchaser). Accordingly, even if the purchaser has paid the consideration and had taken
possession on the basis of such contract, he cannot get ownership unless a sale deed is duly
executed in his favor.

The contract for sale is purely a contract within the meaning of the Indian Contract Act. A person
who enters into such a contract does not become entitled to any interest in the land for the sale of
which the contract was made. So, he cannot apply to restrain or set aside the execution of a sale
deed of the same land to another person. In Jagan Nath v. Jagdish Rai, there was an agreement to
sell an immovable property with a person (P1). Subsequently, the owner entered into another
agreement to sell the same property to another person (P2). It was established that the subsequent
purchaser was a bona fide purchaser for value without notice of earlier agreement. The Supreme
Court held that the person (P1) with whom the owner made first agreement of sale would not be
entitled to relief of specific performance against the subsequent purchaser (P2).

Hire-Purchase Agreement – Hire-purchase agreements are not sale. The ownership of the
property is not transferred to the transferee on the basis of such agreements. Normally, the
practice is that there is an agreement between seller and purchaser under which the purchaser
takes possession of the property and agrees to pay the consideration in installments. The payment
of full consideration is made in several installments. But these installments are not ‘price paid in
future’. In the mean time, there is an option with the purchaser to refuse the sale. The seller has
also a right to terminate the sale. Thus, unless all the installments have been paid as agreed upon
between the parties, the agreement to purchase the property itself is not completed.

In K.L. Jauhar & Co. v. Dy. Commercial Tax Officer, the Supreme Court held that a hire
purchase agreement has two aspects. First, the purchaser takes the property subject to payment of
consideration in installments and secondly, the installments become price when the purchaser
exercises his option to purchase by making full payment. Further, in Jaya P. Hamarajani v. Rose
Elvina D’ Souza, it was held that if the agreement for sale provides that the seller would have the
option to repudiate the contract on breach of any condition specified by him, the contract may be
repudiated by him upon such breach. The distinction between sale and hire-purchase agreement
is that if the transferee has to pay the entire price, it is indicative of sale whereas if the transferee
is give the right to terminate the agreement before full payment, the transaction is a hire purchase
agreement.

Distinction between sale and contract of sale

Both the expressions “sale” and “contract of sale” are defined in section 54. The points of
difference are as follows:-

1. A sale is the transfer of ownership in exchange for a price paid or promised. In a contract
of sale, on the other hand, there is a contract that sale shall take place on terms settled
between the parties.
2. Since, a sale is transfer of ownership; it vests ownership in the transferee with immediate
effect. A contract of sale, on the other hand, does not create any interest in, or charge on,
the property in question, which is the subject matter of contact of sale.