Transfer of Property Law

RIGHTS AND LIABILITIES OF PARTIES TO AN EXCHANGE

HIDAYATULLAH NATIONAL LAW UNIVERSITY TRANSFER OF PROPERTY LAW PROJECT ON RIGHTS AND LIABILITIES OF PARTIES TO AN EXCHANGE

SUBMITTED TO DR. KIRAN KORI SHASHWAT DUBEY SEMESTER IV ROLL NO. 139 SUBMITTED ON 24

TH

FEBRAUARY 2014

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CONTENTS

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ACKNOWLEGEMENT

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INTRODUCTION

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RESEARCH METHODOLOGY

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OBJECTIVES OF STUDY

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EXCHANGES

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WOULD A PARTITION AMOUNT TO AN EXCHANGE?

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RIGHTS OF PARTY DEPRIVED OF THING RECIEVD IN EXCHANGE

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LIABILTY OF LOSS DUE TO DEFECT IN TITLE

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RIGHTS AND LIABLITIES OF PARTIES

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EXCHANGE OF MONEY

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WARRANTY OF GENIUNENESS OF MONEY

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CONCLUSION

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BIBLIOGRAPHY & WEB REFERENCES

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ACKNOWLEDGEMENT

I would like to sincerely thank the Transfer of Propert y Act Teacher Dr. Kiran Kori for giving me this project on the “Rights and Liabilities Of Parties to an Exchange ” which has widened my knowledge on the Law related to the exchange under the Transfer of Property Act 1882. Her guidance and support has been instrumental in the completion of this project . Thank you Maám for your consistent support. I‟d also like to thank all the authors, writers and columnists whose ideas and works have been made use of in the completion of this project. My sincere gratitude also goes out to the staff and administration (HNLU) for the infrastructure in the form of our library and IT lab that was a source of great help in the completion of this project. I would also like to thank my friends who have lended me constant support through guidance and inputs which has led to the completion of this project.

SHASHWAT DUBEY SEMESTER IV

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INTRODUCTION

Before the advent of the Britishers, each communit y in India was governed by its respective customary law in matters relating to transfer of property. With the establishment of the formal litigative system and in absence of any legislation in this area, to begin with, the English judges applied the common law of England and the rules of equity, justice and good conscience with respect to disputes relating to transfer of property. The unsuitability of these provisions to the Indian conditions; the resulting conflict and the need for clarity of rules relating to this important branch of law necessitated the enactment of a legislation. Drafted in 1870, the Transfer of Property Act saw the light of the day in 1882 and provided the basic principles for transfer of both movable and immovable properties. Based primarily on the English law of „Real Property‟, it attempted to mould these principles t o suit the Indian conditions; but certain provisions of the Act remained inapplicable to Hindus and Muslims, to start with. In order to put at rest the confusion created by the conflicting decisions and exte nd the application of the Act in totality to Hindus, the Transfer of Property Act, 1882 was amended in 1929. However, till date, the provisions of Chapter II of the Act that are inconsistent with the Quranic laws are inapplicable to Muslims. Moreover, a separate enactment titled the „Sale of Goods Act, 1930‟ was passed to deal with transfer of movable property by sale.

The Transfer of Property Act, 1882 contains the general principles of transfer of property and detailed rules with respect to specific transfer of immovable property by sale, exchange, mortgage, lease and gift. The rules relating to exchanges are found in Chapter VI of the TOPA in Sections 118 to 121. The concept of an „exchange‟ is defined under Section 118 o f the TOPA as a situation where two persons transfer ownership of one thing in exchange for ownership of another mutually, neither of which is money only. This project will cover a study of rights and liabilities of parties to an exchange under the Transfer of Property Act 1882.

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OBJECTIVES OF STUDY: Understand the laws relating to „exchange‟ and enumerate the conditions that must be satisfied as well as the rights and liabilities of the parties concerned.

RESEARCH METHODOLOGY: This project work is both descriptive & analytical in approach and is based on the researches carried out to study the laws relating to exchange under the Transfer Of Property Act 1882. Books & other references as guided by faculty of Transfer of Property Act have immensely helped in the completion of the project.

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EXCHANGES

The rules relating to exchanges are found in Chapter VI of the TOPA in Sections 118 to 121. Fortunately, these rules are relatively simple compared to other forms of transfers of property.

"EXCHANGE" DEFINED

When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an "exchange". A transfer of property in completion of an exchange can be made onl y in manner provided for the transfer of such property by sale.

The concept of an „exchange‟ is defined under Section 118 of the TOPA as a situation where two persons transfer ownership of one thing in exchange for ownership of another mutually, neither of which is money only. For a transfer to be considered as an exchange, the following requirements must be fulfilled: • One person must transfer the ownership of a property in favour of another; • That other person must transfer the ownership of another property in favour of the first; • The transfer should be mutual; • Neither of the things should be money alone.

Therefore, when the shares of one company are transferred under a document in consideration of the shares of another, the transfer is an exchange. Also, in a case where a property is transferred in consideration of another property and a sum of money, it would 6

RIGHTS AND LIABILITIES OF PARTIES TO AN EXCHANGE still be regarded as an exchange falling within the ambit of Section 118 of the TOPA. This is because the section only requires that the either of the things that are exchanged should not be money only. Therefore, if money is a part of the consideration paid along with another thing, it will not amount to a sale and will remain an exchange under Section 118 of the TOPA.

: ILLUSTRATION

Rohit transfers his house in favour of Ramesh. Ramesh gives all the jewellery he has and additional Rupees Ten lakhs to Rohit. This is an exchange. Although Ramesh pays money for the house, it is not money only. It is paid along with the je wellery, and hence, it is an exchange.

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WOULD A PARTITION AMOUNT TO AN EXCHANGE? Further, an issue that arises in this context is: would a partition amount to an exchange? The answer is no. We know that for a transfer to be an exchange the two ownerships must be mutually exclusive and that is

not

the case in a partition. Each party owns a

share in the undivided properties, which is separated by a partition by

metes

and

bounds

to create exclusive ownership over theproperty. Therefore, it is not an

exchange as the two ownerships here are not mutuall y exclusive.

: ILLUSTRATION

Rohit, Raj, and Ramesh are three brothers who seek partition of the joint family property. Rohit takes the entire house, Raj takes the family jewellery, and Ramesh takes over the family business as per the terms of the partition deed. This is not an exchange. The ownership of these properties was not mutually exclusive. Each brother owned a portion of all of the properties.

Partition merely converted joint enjoyment of property to enjoyment in severalty. After understanding what an exchange is, the next major aspect ofthe transaction is the nature of the rights of the parties to an exchange. This is made clear by Section 120 of the TOPA, which states that each party has the same rights and liabilities as a seller does in respect of the property, which they give. Further, each party has the same rights and liabilities as the buyer does in respect of the property that he takes. Therefore, the rights and liabilities of the parties to an exchange are the same as those of a buyer and seller in case of a sale. The only difference here is that each party has rights and liabilities relating to both buyer and seller — the former with respect to the property it takes, and the latter in respect of the property that it gives. Therefore, in order to understand their rights and obligations, one may look to the commentaries relating to the rights of a buyer and seller under Section 55 of the TOPA .

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Another key issue in case of an exchange is: what happens if either transfer of ownership is bad? What if one of the parties to the exchange does not have a good title to the property he purports to transfer in the exchange? In such cases, Section 119 of the TOPA becomes relevant, which provides that if such a thing happens to the original part y or any other party claiming through or under him, the other party or his legal representatives are obligated to make good the loss caused thereby,

unless

a contrary intention appears in the terms of the

exchange. Otherwise, at the option of the wronged party, the other party may also be obligated to return the thing transferred to him, if he is still in possession of the property. Therefore, Section 119 of the TOPA protects the parties to an exchange from a bad transfer of ownership. However, it is subject to the terms of the exchange and if they provide otherwise, the effect of Section 119 of the TOPA may be nullified.

: ILLUSTRATION

Rohit exchanges his house with Ramesh in exchange for Ramesh‟s jewellery and cash. Later , he discovers that the jeweller y was joint family property and Ramesh had no power to transfer them. If Ramesh is still in possession of the house, Rohit can demand that he return the house back to him. Alternately, he could also ask Ramesh to make good the value of the house over and above the cash he received. Under Section 119 of the TOPA, the remedy is now available to anybody claiming through the original party including a transferee. So, the wronged party can claim return only from the original party, his legal repres entatives or from a transferee who has received the property without consideration. He cannot claim return, however, from a bona fide purchaser or a trespasse r.

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: ILLUSTRATION

In the above illustration, if Ramesh had sold the propert y to a third party who did not know of the exchange, then Rohit could not have claimed the house from such a third party. His only option in such a case would be to proceed against Ramesh or his legal representatives to make good the loss he has suffered on account of the exchange.

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RIGHT OF PARTY DEPRIVED OF THING RECEIVED IN EXCHANGE

Section 119 of the Transfer of Property Act reads thus:

If any party to an exchange or any person claiming through or under such party is by reason of any defect in the title of the other party deprived of the thing or any part of the thing received by him in exchange, then, unless a contrary intention appears from the terms of the exchange, such other party is liable to him or any person claiming through or under him for loss caused thereby, or at the option of the person so deprived, for the return of the thing transferred, if still in the possession of such other party or his legal representative or a transferee from him without consideration.

Section 119 of the TOPA provides that if one of the parties to t he exchange does not have a good title to the property he wants to transfer,and if such a thing happens to the original party or any other party claiming through or under him, the other party or his legal representatives are obligated to make good the loss caused thereby,

unless

a contrary

intention appears in the terms of the exchange. Otherwise, at the option of the wronged party, the other party may also be obligated to return the thing transferr ed to him, if he is still in possession of the property. Therefore, Section 119 of the TOPA protects the parties to an exchange from a bad transfer of ownership. However, it is subject to the terms of the exchange and if they provide otherwise, the effect of Section 119 of the TOPA may be nullified.

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LIABILITY OF LOSS DUE TO DEFECT IN TITLE This section deals with rights of party who is deprived of lawful title in property received by him in exchange. Exchange is mutual ransfer of ownership between two persons. Accordingly, both covenant impliedely to exchange ownership and perfect title in property to each other. Section 119 gives certain rights to a party who does not get pefect title in the property received by him. Where a party to exchange (or, any person claiming underhim) is deprived of the property due to defect in its title, he has following two remedies: (a) He may claim return of the property transferred by him to other party provided the property is still in the possession that party, or (b) He may claim compensation from the other party for the loss incurred due to such defective title.

This section affirms the rule that each party warrants his title to the things which he had transferred by way of exchange. It contains an implied covenants of title just as section 14 of Sale of Goods Act, 1930 provides in respect of sale of goods. The Rights available to the aggrieved party are either return of the property or if such return is not possible, to claim compensation. Thus, of the property which he is entitled to receive in exchange, he has right to claim the return of his own property transferred by him..

In Jattu Ram vs Hakim Singh1

There was a defect in the title of a land received by one party to exchange due to land as per stipulation. The Supreme Court held that entries made by patwari in the official record do not create title and the opposite party was liable to return the land to that extent.

1

AIR 1994 SC 1653

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RIGHTS AND LIABILITIES OF PARTIES

Section 120 of TOPA reads thus:

Rights and liabilities of parties.- Save as otherwise provided in this Chapter, each party has the rights and is subject to the liabilities of a seller as to that which he gives, and has the rights and is subject to the liabilities of a buyer as to that which he takes.

Section 120 provides for the rights and liabilities of the parties to exchange. But it does not specifically mention them. Under tis section the rights and duties of the parties to an exchange of immovable property are the same as that of seller and buyer given in section 55 . Sinceexchage also includes barter, i.e, exchange of movables, the rules of the Sale of Goods Act, 1930 in this regard may apply where the properties are movable. However, since there is no price or money consideration, therefore, there is no charge for unpaid price even where some money is paid to equate the value of property.

EXCHANGE OF MONEY Section 121 deals with Exhange of Money.

It reads thus: On an exchange of money, each party thereby warrants the genuineness of the money given by him.

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WARRANTY OF GENUINENESS OF MONEY

Exchange is mutual transfer of ownership in movable or immovable property. Where money is transferred in consideration of money, the transfer is exchange. For instance where a person gives a hundred rupee currency note to another and takes from him ten currency nots of ten rupees, the transaction between them is called exchange.Section 121 provided that where money is exchanged mutually between two persons there is impliedcovenant that each party warrants the other genuineness of the money. Therefore, when money of one party is counterfeit or a fake currency note, there is no valid consideration in the transaction and the exchange is void. Accordingly,the other party who is deprived of his right to get genuine money in return of his own genuine money, would be entitled to recover the money paid by him. Thus, if A givesa fake hundred rupee currency note to Bin consideration of ten genuine currency notes of ten rupees, B is entitled to recover the ten currency notes of ten which he has paid to A.

CONCLUSION Thus, we have seen that the Rights and Liabilities of Parties to an exchange are dealt in Chapter VI of the TOPA. These are contained within section 118 to 121. To summarise them, they are: Sec 118. "Exchange" defined Sec 119. Right of party deprived of thing received in exchange Sec 120. Rights and liabilities of parties Sec 121. Exchange of money

All of the above sections together define the Rights a nd Liabilities of parties to an exchange under the Transfer of property Act, 1882 as were discussed in the project.

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BIBLIOGRAPHY

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RK Sinha, Transfer of Property Act 1882, 2012, Central Law Agency, Fourteenth edition

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Sir Dinshaw Mulla, The Transfer of Property Act ,2013,11th Edition

WEB REFERENCES 

http://www.vuhelp.net/law-transfer-property/

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http://www.advocatekhoj.com/library/bareacts/transferofproperty

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www.indiakanoon.org

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Transfer of Property Law

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