The Author, Anugrah is a practicing advocate at Supreme Court of India & Delhi High Court. Currently he is associated with Sanghi & Co. & International Trade Law Consultants, New Delhi, mainly dealing in Arbitration Laws and Commercial Litigation pan India.
Whether the sale deed would be valid when sale deed recites that the price had been paid but in fact the Court finds that the consideration for sale deed is not actually paid?
Section 54 of the Transfer of Property Act, 1882 defines the 'sale' as 'sale' is a transfer of ownership in exchange for a price paid or promised or part paid and part promised. Section 54 of the Transfer of Property Act, 1882 reads as under:-
"54. "Sale" defined.--"Sale" is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.
Sale how made.--Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.
In the case of tangible immovable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.
Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.
Contract for sale.--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."
Section 55(4)(b) of the Transfer of Property Act, 1882 reads as under:-
"(4) The seller is entitled--
(b) where the ownership of the property has passed to the buyer before payment of the whole of the purchase-money, to a charge upon the property in the hands of the buyer, [any transferee without consideration or any transferee with notice of the non-payment], for the amount of the purchase-money, or any part thereof remaining unpaid, and for interest on such amount or part [from the date on which possession has been delivered.]"
On perusal of the aforesaid provisions, it is clear that the seller is entitled where the ownership of the property has passed to the buyer before payment of the whole purchase money to a charge upon the property in the hands of the buyer.
In the case of Baijnath Singh vs. Paltu and others, (1908) ILR 30, Allahabad Page 125, Division Bench of this Court observed that if the sale deed recites that the sale consideration was paid but it is found by the court that no sale consideration passed, the non-payment of purchase money does not prevent the passing of the ownership of purchased property from the vendor to the purchaser and the purchaser, notwithstanding such non-payment, can maintain a suit for possession of the property.
In another case Chandrashankar Manishankar vs. Abhla Mathur and others, AIR (39) 1952 Bombay 56, it was held that it may be that the recital in the document stating payment of the consideration is not true. But that does not invalidate the document. To support a sale it is not necessary that the whole of the price should be paid. The price may be paid or promised wholly or in part. it was also held that if according to the tenor of the document, the consideration was not actually paid, but the document shows that there was an intention to pay, then in that case the document is not rendered invalid on account of the non-payment of the consideration. If, on the other hand, the intention was not to pay any consideration, then the document is of no effect.
In another case Sukaloo and another vs. Punau, AIR 1961 MP 176, it was held that it is the intention of the parties which has to be looked into to decide whether the sale-deed operated as a transfer of interest from the vendor to the vendee on the date of its execution. If this was the intention, then it does not matter whether the whole of the consideration or part of it remained unpaid. Further, where a registered deed of sale purporting to operate as a conveyance on the face of it exists, the burden of proving that it was not so intended is on the party who asserts this fact.
A similar question came up for consideration before the Hon'ble Supreme Court in the case of Vidhyadhar vs. Manikrao and another, (1999) 3 SCC 573. The Hon'ble Supreme Court after considering of Section 54 of the Transfer of Property Act observed that actual payment of full price at the time of execution of sale deed is not a sine-qua-non for completion of sale. The real test of sale is intention of the parties. It was held that:-
"36. The definition indicates that in order to constitute a sale, there must be a transfer of ownership from one person to another, i.e., transfer of all rights and interests in the properties which are possessed by that person are transferred by him to another person. The transferor cannot retain any part of his interest or right in that property or else it would not be a sale. The definition further says that the transfer of ownership has to be for a "price paid or promised or part-paid and part-promised". Price thus constitutes an essential ingredient of the transaction of sale. The words "price paid or promised or part-paid and part-promised" indicate that actual payment of the whole of the price at the time of the execution of sale deed is not a sine qua non to the completion of the sale. Even if the whole of the price is not paid but the document is executed and thereafter registered, if the property is of the value of more than Rs 100, the sale would be complete.
The real test is the intention of the parties. In order to constitute a "sale", the parties must intend to transfer the ownership of the property and they must also intend that the price would be paid either in praesenti or in future. The intention is to be gathered from the recital in the sale deed, the conduct of the parties and the evidence on record."
In another case Kaliaperumal vs. Rajagopal (2009) 4 SCC 193, it was held:-
"17. It is now well settled that payment of entire price is not a condition precedent for completion of the sale by passing of title, as Section 54 of the Transfer of Property Act, 1882 ("The Act", for short) defines "sale" as "a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised". If the intention of parties was that title should pass on execution and registration, title would pass to the purchaser even if the sale price or part thereof is not paid. In the event of non-payment of price (or balance price as the case may be) thereafter, the remedy of the vendor is only to sue for the balance price. He cannot avoid the sale. He is, however, entitled to a charge upon the property for the unpaid part of the sale price where the ownership of the property has passed to the buyer before payment of the entire price, under Section 55(4)(b) of the Act."
Thus, what can be culled out from the aforesaid decisions that the mere fact that a sale deed recites the payment of consideration which is not true cannot render the document invalid. To support a sale, it is not necessary that the whole of the price should be paid. The price may be paid or promised wholly or in part. If according to the tenor of the document the consideration was not actually paid, but the document shows that there was an intention to pay, then in that case the document is not rendered invalid on account of the non-payment of the consideration.
On the other hand, if the intention was not to pay any consideration or the document is without any consideration, the document is of no effect. There is a distinction between a sale where the consideration is intended to be paid and is not paid, and where the consideration is not intended to be paid at all by both the parties. In the former case, the title passes to the purchaser, and in the later case though the vendor is tricked into going through the form of execution and registration of the document, the sale deed is void as a colourable transaction. It is not necessary that the whole of the price should be paid. The price may be paid or promised to be paid wholly or in part.
In case the vendor has executed the sale deed with an intention of transferring the property in question but the consideration has not actually passed to him but he still had intention of transferring the property in question, in such a case the provisions of Section 55 of the Transfer of Property Act, 1882 will be applicable where unpaid amount shall remain a charge on the property. But the title of the property will be transferred to the vendee. The appellants have no right to challenge the sale deed as without consideration.
