Definition of Mortgage -

Definition of mortgages given under Section 58(a) : 'mortgage' , 'mortgagor', 'mortgagee' , '
mortgage- money' and mortgage-deed -
A mortgage is the transfer of an interest in a specific immoveable property for the purpose of
securing the payment of money advanced or to be advanced by way of loan, an existing or
future debt, or the performance of an engagement which may give rise to a pecuniary
liability.
Mortgagor -
The transferor is called a mortgagor.
Mortgagee -
The transferee a mortgagee.
Mortgage-money -
The principal money and interest of which payment is secured for the time being are called
the mortgage-money.
Mortgage-deed -
The instrument (if any) by which the transfer is effected is called a mortgage-deed.
1) What is mortgage

The term 'Mortgage' consists of two words 'Mort' and 'Gage'. Mort which means ' a place
of public sale and 'Gage' means 'A pledge'. In this way, mortgage means a pledge made at a
place of public sale.

2) Definition of mortgage -

Section 58(a) of the Transfer of Property Act 1882 defines Mortgage as "A
mortgage is the transfer of an interest in specific immovable property for the purpose of
securing the payment of money advanced or to be advanced by way of loan, an existing or
future debt, or the performance of an engagement which may give rise to a pecuniary
liability.

The transferor is called a mortgagor, the transferee a mortgagee; the principal money
and interest of which payment is secured for the time being are called the mortgage-money,
and the instrument (if any) by which the transfer is effected is called a mortgage-deed.

3) Essentials of mortgage -

There are three essentials of Mortgage which are as follows -

(a) There must be a transfer of interest.

 There is no transfer of ownership but the transfer of interest only for the purpose of
securing payment of money by way of loan. The right of the mortgagee is only an accessory
right, which is intended merely to secure the due payment of Debt. A mortgage is simply a
transfer of the interest in the immovable property while the ownership still remains with the
mortgagor.

(b) There must be specific immovable property intended to be mortgaged.

The immovable property must be distinctly specified. The description of the property in the
mortgage deed must be sufficient to identify the property.

(c) The transfer must be made to secure the payment of a loan or to secure the performance of
a contract. an existing or future debt or the performance of an engagement which may give
rise to pecuniary liability.
4) Registration of Mortgage Deed
Property Act, 1882-

i) In case of Simple Mortgage, the principal money is irrelevant, and the mortgage deed
must be registered duly signed by the mortgagor (The transferor is called a mortgagor.) and
attested by at least two witnesses.
ii) In case of Equitable Mortgage or Mortgage by deposit of title deeds, the principal money
is irrelevant, and the mortgage deed is not required to be registered. The parties have the
option, for example, it may be either by registration of Deed or only by deposit of title deed.
iii) in case of any other kind of mortgage, if the principal money is 100 rupees or more, the
mortgage deed must be registered duly signed by the mortgagor and attested by at least two
witnesses; and if principal money is less than 100 rupees the mortgage deed not required to
be registered.The parties have the option, for example, it may be either by registration of the
deed or by delivery of possession of the property.
Kinds of mortgage
There are 6 kinds of mortgage.
1) Simple mortgage
2) Mortgage by conditional sale
3) Usufractuary mortgage
4) English mortgage
5) Mortgage by deposit of title-deeds
6) Anomalous mortgage.
A) Simple mortgage S.58(b)
Where, without delivering possession of the mortgaged property, the mortgagor binds himself
personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the event
of his failing to pay according to his contract, the mortgagee shall have a right to cause the
mortgaged property to be sold and the proceeds of sale to be applied, so far as may be
necessary, in payment of the mortgage-money, the transaction is called a simple mortgage
and the mortgagee a simple mortgagee.
Essentials of simple mortgage
1) There must be a transfer of specific immovable property.
2) The position position of the property is retained by the mortgagor.
3) as the posssession of the property is not given to the mortgagee, mortgagor has right to
usufruct e.g. enjoyment of the property.
4) The title is not given to the mortgagee.
5) Mortgagor binds himself to pay mortgage money by Personal security.
6) Mortgagor has a right to sale on execution of decree against the mortgagor ,
7) Mortgagee has no right of foreclosure.
B) Mortgage by conditional sale section 58(c)
Where, the mortgagor ostensibly sells the mortgaged property-
on condition that on default of payment of the mortgage-money on a certain date the sale
shall become absolute, or on condition that on such payment being made the sale shall
become void, or
on condition that on such payment being made the buyer shall transfer the property to the
seller,the transaction is called a mortgage by conditional sale .
provided that no such transaction shall be deemed to be a mortgage, unless the condition is
embodied in the document which effects or purports to effect the sale.
Essentials of mortgaged by conditional sale -

1) Mortgagor ostensibly sells the immovable property by a sale. It is only ostensible and not
real .
2) The Mortgagor has given title and possession to the mortgagee and hence mortgagee gets a
right to usufruct property.
3) on default of payment of mortgage-money the sales
Shall be absolute.
4) In case mortgagor repaid the loan , the sale shall become void .
5) that mortgagor is entitled to get the property transferred on such payment.
6) No Personal security and right to sale is given to the mortgagee.
7) Mortgagee gets a right to foreclose the property
C) Usufructuary Mortgage Sec 58(d)
Where the mortgagor delivers possession or expressly or by implication binds himself to
deliver possession of the mortgaged property to the mortgagee, and authorises him to retain
such possession until payment of the mortgage-money, and to receive the rents and profits
accruing from the property or any part of such rents and profits and to appropriate the same in
lieu of interest or in payment of the mortgage-money, or partly in lieu of interest or partly in
payment of the mortgage-money, the transaction is called a usufructuary mortgage and the
mortgagee a usufructuary mortgagee.
Essentials of Usufractuary mortgage
1) No title is given to the mortgagee.
2) Mortgagor has given possession and hence mortgagee enjoy a right to usufruct.
3) Mortgagor has not given any personal security a right to sale a foreclosure toy the
mortgagee.
D) English Mortgage S 58 (e)
Where the mortgagor binds himself to repay the mortgage-money on a certain date, and
transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he
will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the
transaction is called an English mortgage.
Essentials of English mortgage.
1) The mortgagor has given title , possession, right to usufruct to the mortgagor ;
2) The mortgagor bind himself to repay the mortgage money on a certain day.
3) The mortgagee is not given the right to foreclosure.

E) Mortgage by deposit of title-deeds Sec .58 (e) -

Where a person in any of the following towns, namely, the towns of Calcutta, Madras, and
Bombay, and in any other town which the State Government concerned may, by notification
in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of
title to immovable property, with intent to create a security thereon, the transaction is called a
mortgage by deposit of title-deeds.
The requisite essential –
1) Debt ;
2) Deposit of title deeds ;
3) An intention that the deed shall be security for the debt ; the documents of title to
immovable property with intend to create a security thereon . This mortgage can only be
made in any of the following towns namely Calcutta , Madras, Bombay , Lucknow,
Allahabad & Kanpur and in any other town which the state Government concern may specify
on this behalf .
F) Anomalous mortgage - Sec. 58(f)
A mortgage which is not a simple mortgage, a mortgage by conditional sale, a usufructuary
mortgage, an English mortgage or a mortgage by deposit of title-deeds within the meaning of
this section is called an anomalous mortgage.
It does not fit in above five mortgages , which is a combination of two or more of above
mentioned type mortgage.
RIGHTS OF MORTGAGEE :-
Following are the important rights of mortgagee :

1. Selling Right :-
If borrower fails to return the loan in time then the mortgagee has the right to sell the property
of the mortgagor. But it will be sold and getting decree from the court. Property will be sold
by auction.

2. Shortage Of Money Case :-

After selling the property if amount is less then the loan, the balance can be recovered from
the person by getting the decree from the court.

3. Usufructuary Case :-
In this case mortgagee has no right to sell the property and to obtain the decree from the
court. The banker can retain the possession till the recovery of the loan.

4. Refusal Of Debt :-
If a borrower refuses to return the loan or he is unable to pay the debt then the lender can get
a foreclosure decree from the court.

5. Adjustment Of Payment :-
The banker has a right to distribute the payment received after the sale of property according
the principal amount, interest and other charges.

6. Joint Suit :-
If the mortgagor are more than one person then suit will be filed against all of them if the
loan is not returned

7. Sale Of Private Property :-

In case of private property the mortgagee will issue at least 3 months notice to the mortgagor
before selling the property.

LIABILITIES OF MORTGAGEE :-
When property is in the possession of the mortgagee then it has the following duties or
liabilities :
1. Property may not be damaged.
2. No alteration is allowed in property.
3. The property must be insured.
4. Property must be kept secured.
5. Rent of the property must be collected.
6. Govt. Revenue must be paid.
7. Property must be kept clear from all dues.
RIGHTS AND LIABILITIES OF MORTGAGOR :-
1. Redeem Of Property :-
As the loan is returned then a mortgagor has a right to redeem the property. All documents
and the mortgage deed should be returned to the borrower.

2. Right To Claim Damages :-

If the property is damaged during the possession of the mortgagee then the mortgagor has a
right to claim the damages from the mortgagee.

3. Partial Redemption :-
If mortgagee wants to acquire a share in the mortgaged property through inheritance or
purchase the mortgagor has the right of partial redemption.

4. Right Of Lease :-
If the possession of the property is in the hands of mortgagor then he can make lease of this
property for the ordinary period.

5. Follow The Agreement Deed :-

The mortgagor will observe all the conditions contained in the agreement deed. He will also
defend the title of property if the property is in his possession.

6. Recovery Of Possession :-
When the mortgagor returns the loan then he has a right to recover the possession of the
property from the mortgagee.

7. Liability Of Taxes :-
If property is in the possession of the mortgagor then the liability of all types of taxes will be
on the mortgagor over of Modarba certificates is not impressive. Now the ratio of equity is
very high in relation to debt financing.

8. Control Of Modarba Companies :-

There are many checks on the Modarba companies to regulate the modarba. The state bank,
religious board, corporate law authority and registrar of modarba are responsible to regulate
the modarba company.

9. Appointment Of Auditor :-
It is very necessary that modarba company should appoint the auditor. Auditor should be
qualified charted accountant approved by the registrar. The auditor should certify the
objectives and accounts of the modarba.

10. Audit Report Of The Company :-

Auditor verified balance sheet and profit and loss report about the company must be given to
the modarba certificate holders with in six month of the closing accounts period.
 SALE OF IMMOVABLE PROPERTY

Section 54 of the price Transfer of Property Act defines “Sale” as “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 case of tangible immovable property of the value of one
hundred rupees and upwards or in the case of revision or other intangible things, can be made
only by 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 of by delivery of the property.

Delivery of tangible immovable property takes place when the seller place the buyer or such
person as he directs, in possession of the property.”

Essentials of a Valid Sale

According to Section 54, following are the essentials of a valid sale—

i. the parties, i.e., the seller and the purchase, must be competent. They are also called vendor
and vendee, respectively. They must be competent to contract, i.e., must of sound mind and
have attained the age of majority. The seller must also have right to sell the property and
purchase may be any person not disqualified to purchase a property under any law enforced in
India.

ii. There must be a subject-matter of sale. Transfer of Property Act deals with sale of
immovable property. The transfer of ownership of immovable property is dealt with under this
Act while sale of movable are dealt with under the Sale of Goods Act, 1930.

Immovable property may be either tangible, such as land, house, things attaches to earth, etc.,
or it may be intangible immovable property, such as right of ferry or fisheries, or right to a
mortgage debt etc. But the immovable property must be in existence on the date of execution
of sale.

iii. Price or money consideration—Price is an essential ingredient of a sale. A sale is a transfer

of ownership in exchange of money. Payment of price is not necessary for completion of the
transfer but its reference is necessary. It may be paid at the time of execution or promised to
pay or same part of it may paid at the time of execution and rest may be promised to be paid in
future.
iv. Conveyance—In sale, property must be transferred from seller to purchaser. According to
Section 54 there must be a registered conveyance in the case of—

(a) tangible immovable property of the value of Rs. 100 and upwards; or

(b) a reversion of an intangible thing of any value.

In case of tangible immovable property of a value less than Rs. 100, there must either be,

(a) a registered conveyance, or

(b) delivery of property.

Sale and Contract for Sale

Section 54 of the Act defines ‘sale’ as a transfer of ownership in exchange for a price Paid or
promised or part paid and part promised.

Section 54 also defines ‘contract for sale’ as, “a contract for the sale of immovable property B
a contract that a sale of such property shall take place on terms settled between the parties,”

Thus a sale may be preceded by a contract for sale. A contract for sale is merely a document
creating a right to obtain another document namely, a duly executed sale deed. On the Other
hand, a sale of immovable property is a transfer of ownership.

A sale passes an absolute interest in the property to the purchaser, but a contract for sale does
not of itself create any interest in, or charge upon the property in favour of the buyer. It does
not convey any little to the purchaser.

A sale must be registered, if it deals with the conveyance of tangible immovable property of
the value of Rs. 100 or more, or a reversion or any intangible things.

A contract for sale need not be registered at all.

Sale and Exchange

According to Section 54 of the Act, a sale is a transfer of ownership in a property in exchange

for a price. On the other hand exchange is a transfer of ownership in property in exchange of
ownership of another property. Section 118 of the Act defines exchange as, “when two persons
mutually transfer the ownership of one thing for the ownership of another, neither thing or both
thing being money only, the transaction is called exchange.

Thus in both, there is transfer of absolute interest in the property, but real difference is that in
sale, the consideration is money, whereas in exchange, it is another property or anything of
value.

Sale and Gift

In both sale and gift, there is transfer of ownership of an immovable property. However the
difference between the two is that where in sale, the ownership is transferred in exchange for a
price, in gift, the immovable property is transferred with any consideration.

In sale, if the valuation of immovable property is Rs. 100 or more, than it is to be effected only
by registered instrument. But in case of a gift of an immovable property, it must be made only
by registered instrument irrespective of the valuation of the property.

RIGHTS AND DUTIES OF SELLER

a) Duties of seller:

The seller is bound

i) to disclose to the buyer any material defect in the property, which the seller is aware and
which cannot be discovered with ordinary care by the buyer, (caveat emptor). Otherwise it
becomes fraudulent.

ii) to produce to the buyer all documents of title relating to the property.

iii) to answer all relevant questions relating to the title etc. of the property.

iv) to execute a sale deed when the buyer renders the price.

v) to take care of the property from the date of agreement until the date of the sale.

vi) to give possession to the buyer.

vii) to pay all public charges and rents due upto the date of the sale: he should also discharge
encumbrances, if any, unless the sale is made subject to any encumbrances.
viii) There is a warranty that the seller has the power to transfer and also professes that interest
which he is transferring.

ix) When the sale price is fully paid-up the seller is bound to deliver all the documents of title,
to the buyer.

b) Rights of the seller :

i) He is entitled to all the rents and profits of the property till the ownership passes to the buyer.

ii) Vendor's lien:

a) When the buyer has become the owner and

b) When the sale price has not been fully paid, the Vendor gets a charge over the
property for amounts unpaid by the buyer.

RIGHTS AND DUTIES OF BUYER

(a) Buyer's duties.

The buyer is bound

i) To disclose to the seller any fact which would materially enhance the value of the
property; otherwise it becomes fraudulent.

ii) To pay or tender the price at the time and place to complete the sale. He may adjust
pre-paid or earnest money if any.

iii) Where the property has passed to the buyer, the buyer becomes liable for any loss
or destruction to the property. Further as between the seller & buyer, the buyer should
pay public charges and rents which may become payable.

(b) Rights of the buyer

i) The buyer is entitled to any benefit and increase in the value, rents etc, after the
property has passed on to him.

ii) The buyer has a charge on the advances made in anticipation of the delivery and for
interest on such advances.
Definition of lease Under Section 105 of Transfer of Property Act :

A lease of immovable property is a transfer of a right to enjoy such property, made

for a certain time, express or implied, or in perpetuity, in consideration of a price paid or
promised, or of money, a share of crops, service or any other thing of value, to be rendered
periodically or on specified occasions to the transferor by the transferee, who accepts the
transfer on such terms.

Lessor, lessee, premium and rent defined :

1) Lessor : The transferor is called the lessor,

2) Lessee: The transferee is called the lessee,

3) Premium : the price is called the premium, and;

4) Rent : the money, share, service or other thing to be so rendered is called the rent.

Essentials of the Valid Lease :

1) The Lessor must be a competent

2) The Lessee must be a competent and capable to taking the thing demised.

3) The subject matter of lease must be an immovable property.

4) Immovable property must be transferable Property.

5) There must be Transfer of right to enjoy such property.

6) Lease must be made for a certain time, express or implied or in perpetuity.

7) The Consideration which may be premium a rent or both.

8) The lessee must accept the transfer.

9) In lease there is a separation of ownership and possession

10) The lease must be created as per the provisions prescribed in Section 107 of Transfer of
Property.

A lease to a minor is void.

Procedure of forming a lease agreement:
Lease of immovable property for one year, or term exceeding one year, can only be made by
registered instrument. All other leases may be made by unregistered instruments or oral
agreements.
Where there is no contract or local law governing the execution of a lease deed then lease of
immovable property for agricultural or manufacturing purpose shall be deemed to be on
yearly basis and terminable on the part of either lessor to lessee by giving 6 months notice.
On the other hand a lease of immovable property for any other purpose shall be for monthly
basis, terminable by either lessor or lessee by giving 15 days notice.
In the absence of a lease agreement in writing or the existing agreement is silent on the rights
and liabilities of lessor or lessee then section 108 of the Transfer of Property Act sets down
the guidelines to be followed for a working relationship in a lease arrangement. Once the
lessor transfers the property leased to the lessee, the lessee in the absence of contract to the
contrary shall possess all the rights and will also be subject to all the liabilities of the lessor as
he is the owner of it. For computing the time for a lease of immovable property, if time is
expressly mentioned then the lease of immovable property will commence from that
particular day and where no time is mentioned the lease begin from the day when it was
entered into.
Where the time is limited and the lease can be terminated before the expiration, but the lease
deed omits to mention at whose option it is terminable. In such a case the lessee will have the
option to determine the lease.
The Right of Possession:
A lease of an immovable property can be determined through 8 modes and it is only by one
of these methods that the lease stands determined and the lessor gets back right of possession
of the property;
By efflux of time limited thereby;
where the interest of the lessor terminates on happening of an event;
the interest of the lessor terminates on, or his power to dispose of the same extends to the
happening of any event;
in case the interest of lessor and lessee becomes vested;
express surrender before the term is over;
implied surrender;
forfeiture;
When the lessee renounces his character
The prerequisites of the agreement:
Holding over comes into play when even after the determination of lease the lessee remains
in possession of the property and the lessor or his legal representatives accept the rent and
assent to the continuing possession by the lessee. In such a case the lease stands renewed year
after year or month after month according to the purpose for which the property is leased.
Where lease of immovable property has been determined by forfeiture for non-payment of
rent and the lessor files a suit to evict the lessee. If the lessee at the hearing of the suit pays to
the lessor rent in arrear with interest, full cost of suit or provides sufficient security within 15
days, the court may pass an order to relieve the lessee from forfeiture and allow him to hold
on to the property.
Lease and License:
Lease and license are two different aspects of transferring property and to ascertain whether
the transaction is a lease or license it has to be ascertained whether parties had intended to
create a lease or a license; if the document creates an interest in the property, it can be
referred as lease and if it permits a person to use a property and the legal possession remains
with the owner or the original lessee it is called a license.
The Stamp Duty Act 1899:
The Stamp Duty Act 1899 enumerates the value of stamp duty payable on different lease
documents. A lease agreement can be stamped as an ordinary agreement under article 5 of the
Indian stamp act and corresponding provision of the state stamp duty act. If an agreement of
lease amounts to a demise it is required to be stamped under article 35 of the Indian stamp act
which also includes a sub lease or an agreement to let and sublet. Under article 35, duty
charged is on the average annual rent which is multiplied by the number of years according to
the length of the lease period.
Therefore, while entering into a lease, lessor and lessee have to act according to the
provisions mentioned under Transfer of Property Act, registration, amount payable on
account of stamp duty and other terms and conditions so mentioned in the lease deed.
Net Lawman:
Net Lawman documents comply with the legal requirements when dealing with the concept
of Lease.Some examples of all time best legal documents pertaining to Lease are as follows:
Deed of Lease for Commercial Property
Deed of Lease for Residential Property
Notice for termination of lease by Landlord
 DIFFERCENCE BETWEEN LEASE AND LICENSE

Lease License

transfer of an interest mere permission to do something without any transfer

of interest

both transferable and heritable neither transferable nor heritable

Comes to an end only in accordance with the terms can be withdrawn at any time at the pleasure of the
and conditions stipulated in the contract grantor

entitled to any improvement or accession made to Not so entitled

the property

unaffected by the transfer of the property by sale in comes to an end immediately if the property is sold to a
favour of third party and continues third party

lessee has the right to protect the possession in his A licensee cannot defend his possession in his own
own right name as he does not have any propriety right in the
property

does not come to an end either by death of the comes to an end with the death of either grantor or the
grantor or the grantee grantee

Rights and Liabilities of Lessor

Following are rights and liabilities of lessor

(i) Material Defect in Immoveable Property

Lessor is bound to disclose to lessee any material defect in leased-property especially when
lessor is and lessee is not aware of such defect.

(ii) Delivery of Possession of Immoveable property

On lessee’s request, lessor is under obligation to deliver lessee possession of leased-property.

(iii) No interruption into possession of Immoveable property

If lessee pays rent according to lease, and performs those contracts, which are binding into
lessee’s possession of leased-property during lease.
(iv) Repairing of leased-property
Lessor is bound to make arrangements to save leased-property from damage during lease. Even
it is duty of lessor to repair leased-property particularly when leased-property is damaged
during lease.

(v) Rights of heirs of deceased lessee

If lessee dies during lease and his rights of lease are transferred to his heirs, lessor is bound to
protect such rights and perform his duties regarding heirs of deceased lessee.

Rights and Liabilities of Lessee

Following are rights and liabilities of lessee;

(i) Accession to Leased property

If any accession is made to leased-property during continuation of lease and if such accession
is according to that law, which is in force and which relates to alluvion, lessee is entitled to
enjoy such accession.

(ii) Expenses for Repairing of Leased-property

Within reasonable time after notice, if lessor neglects to make any repairs, which he is bound
to make to leased-property, lessee can make such repairs himself, and can deduct expense of a
such repairs with interest from rent or can recover if from lessor.

(iii) Destruction or unfitness of lease-property

If fire, tempest, flood, violence of any army violence of a mob or violence of other irresistible
force causes complete destruction or permanent unfitness to any material part of leased-
property, lease becomes void at option of lessee. However, if act or default of lessee causes
such injury, he is not entitled to make lease void.

(iv) Taking of things attached to earth

Lessee can take all things, which he has attached to earth, by leaving leased-property in that
state in which he has received it.

(v) Disclosure of Fact

Lessee is bound to disclose to lessor any fact, when such fact is about nature or extent of that
interest, which lessee is about to take, and when such fact increases value of such interest.

(vi) Payment of Premium or Rent

At proper time and palace, lessee is to pay or tender premium or rent to lessor or his agent.

(vii) Notice of Defect

Lessee should give lessor notice of any defect regarding condition of leased-property. And
when such defect has been caused by any act or default of lessee, his servants or agents, he is
bond to make it good after such notice.

(viii) Entry into leased-property

At all reasonable times during term of lease, lessee should allow lessor and his agents enter
upon leased-property.

(ix) Notice
Lessee should give lessor a notice about proceeding for recovery of leased-property, about
enchroachment against lessor’s rights in leased-property or about interference with lessor’s
rights in leased-property.

(x) Use of leased-property

Lessee should use leased-property and its products as a person of ordinary prudence. In short,
lessee should not commit any act, which can be destructive or injurious to leased-property.

EFFECT OF HOLDING OVER

16. If a lessee or under-lessee of property remains in possession thereof after the
determination of the lease granted to the lessee, and the lessor or his legal representative
accepts rent from the lessee or under-lessee, or otherwise assents to his continuing in
possession, the lease is, in the absence of an agreement to the contrary, renewed from year to
year, or from month to month, according to the purpose for which the property is leased, as
specified in section 106.

Illustrations
(a) A lets a house to B for five years. B underlets the house to C at a monthly rent of Tk. 100.
The five years expire, but C continues in possession of the house and pays the rent to A. C's
lease is renewed from month to month.
(b) A lets a farm to B for the life of C. C dies, but B continues in possession with A's assent.
B's lease is renewed from year to year.
Exchange under the Transfer Property Act, 1882

It is given under ‘CHAPTER VI: OF EXCHANGES’ and “Exchange” is defined

under section 118 as-

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 the completion of an exchange can be made only in the

manner provided for the transfer of such property by sale.

Section 119: Right of party deprived of thing received in exchange-

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 120: 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 121: Exchange of money

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

Scope:

Since the Transfer of Property Act, 1882 is not a complete code of transfer of
property; we can say its scope is limited. The Act does not apply to all the transfers
taking place in India. So, we can say that the scope of Exchange under the Transfer
of Property Act is also limited and the definition of exchange is not limited to
immovable property. An exchange is, therefore, not only the exchange of lands but
also the barter of goods. If one of the items that are transferred is money, the
transaction is not an exchange but a sale because the price is money, only.

However, money, in one form, may be exchanged for money in another form. So,
also, an exchange of one stamp for another is not a sale. A sale should, always, be
for a price. On the other hand, in the case of an exchange, the transfer of ownership
of one thing is not completed by paying a price or a promise thereof, but, only by a
transfer of another thing, in return. So, a transaction, where the consideration for the
transfer of certain properties is shared in a limited company, is considered to be an
exchange. [Commissioner of I-Tax vs. Motor and General Stores (P) Ltd AIR
1968 SC 200 supra]

The ownership of one party must be exclusive of the ownership of the other.
Therefore, a partition is not an exchange. A transfer by a husband to a wife, in a
discharge of her claim to maintenance, is not an exchange, as the wife transfers no
ownership in anything.

If the lessee surrenders a lease and, the landlord grants him the lease of another
property, the transaction is not an exchange. If both parties are not the same there
cannot be an exchange.

Illustration: ”A” transfers to ”B”, a house worth Rs.1, 500, and ”B” transfers to ”A”, a
field worth Rs. 1,000, and Rs. 500, cash. The transaction is an exchange.

Exchange of Property

A transaction wherein parties trade goods, or commodities, for other goods, in contra
st with a sale or trading of goods for money.

An exchange of property is a type of barter contract, applicable only to agreements r

elating to goods and services, not to agreements involving land.

Exchange of property is one of the various modes to transfer ownership rights in a

property (both movable and immovable). Other popular and widely used modes for
transfer of immovable property are Sale, Gift, Will etc.

“Sale of immovable property” is defined under section 54 of “Transfer of Property

Act, 1882” as “transfer of ownership in exchange for a price paid or promised or
partly paid and part promised”. The essential features for a transfer to be termed as
“Sale” are:-

1. The subject matter of such transaction must be immovable property.

2. The property must be transferred absolutely.
3. There must be at least two parties – the seller and the buyer.
4. There must be a consideration in terms of money only.
5. Stamp duty must be paid on such transaction.
6. The transaction must be registered if the consideration amount is Rs.100/- or
more

However, under the provisions of “Transfer of Property Act, 1882” transactions in an

immovable property can be carried on by exchange of one property for another. After
due completion of the process of exchange, as required under law, the transactions
acquire the sanctity of “transaction under sale”.

Section 118 of the said Act defines “Exchange” as “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”.
Difference between “exchange of movable property” and “exchange of immovable
property “ is that the former is known as “barter” and is subject to the Indian Contract
Act, 1872, whereas the latter is known as “exchange” and is subject to the “Transfer
of Property Act, 1882.”

Explain the mode of transfer by exchange?

Section 118 provides that an exchange can be made only in the manner provided for
the transfer of such property by sale.

Since a sale of immovable property can only be effected by a registered

conveyance, an exchange of tangible, immovable property of the value of Rs. 100
and more must be made by the registered instrument. In the case of immovable
property, an exchange is, usually, made by mutual conveyances. However, it is not
necessary that there should be two separate deeds.

A party receives a thing in exchange. However, he is deprived of such thing

due to the defective title of the other party. What are the remedies available to
the deprived party?

In case a party, receiving a thing in exchange, is deprived of such thing due to a

defective title of the other party to the exchange transaction, such deprived party can
avail of the remedy that is stated in section 119 of the Act. The deprived party in
such a case is entitled to get back the thing that has been given to the other party
during the transaction, provided it still lies in the possession of the other party.

However, if any contrary expression appears, the party is not entitled to such
remedy.

Difference between Exchange and sale:

The difference between a sale and an exchange is that in a sale the price is paid in
money while in an exchange it is paid in another property by way of barter. The sale
is always for a price, which means money or the current coin of the realm while no
price is paid in an exchange, there is only a transfer of one specific property for
another. And although payment of price may be made in addition to the transfer of
property, by way of equality of exchange, such payment does not make the
exchange lose its character as such.
127. Onerous gifts

Where a gift in the form of a single transfer to the same person of several things of which one is, and
the others are not burdened by an obligation, the donee can take nothing by the gift unless he accepts
it fully.

Where a gift is in the form of two or more separate and independent transfers to the same person of
several things, the donee is at liberty to accept one of them and refuse the others, although the former
may be beneficial and the latter onerous.

Onerous gift to disqualified person: A donee not competent to contract and accepting property burdened
by any obligation is not bound by his acceptance. But if, after becoming competent to contract and
being aware of the obligation, he retains the property given, he becomes so bound.

Illustrations

(a) A has shares in X, a prosperous joint stock company, and also shares in Y, a joint stock company
in difficulties. Heavy calls are expected in respect of the shares in Y. A gives B all his shares in joint
stock companies. B refuses to accept the shares in Y. He cannot take the shares in X.

(b) A, having a lease for a term of years of a house at a rent which he and his representatives are bound
to pay during the term, and which is more than the house can be let for, gives to B the lease, and also,
as a separate and independent transaction, a sum of money. B refuses to accept the lease. He does
not by this refusal forfeit the money.