Sale Deeds Without Consideration – Void

Jojy George Koduvath.

Sale Deeds Without Consideration – Void

According to Sec. 54 of the 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.

If a sale deed is executed without payment of price, it is not a sale. It is of no legal effect. Therefore, void (Kewal Krishnan v. Rajesh Kumar, AIR  2022 SC 564; Sujan Singh v. Lalsahab, TK Thommen, J., 1993 JLJ 552). It could be ignored.  In the light of these legal principles it was found in Kewal Krishnan v. Rajesh Kumar, AIR  2022 SC 564, that that the respondent-purchasers had no earning capacity and no evidence was adduced by them about the payment of the price mentioned in the sale deeds; and hence, the sale deeds were held as void.

A void deed need not be challenged by claiming a declaration

It was also held by the Apex Court in Kewal Krishnan v. Rajesh Kumar, AIR 2022 SC 564, that a void deed need not be challenged by claiming a declaration; and that a plea thereof can be set up and proved even in collateral proceedings.

Price constitutes an Essential ingredient of Sale

The Supreme Court held in Vidhyadhar v. Mankikrao,1999-3 SCC 573, that the sale under Sec. 54 of the TTP Act, being a transfer of ownership in exchange for a price paid or promised, in order to constitute a sale there must be exchange of a price. It is held as under:

  • “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 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 presenti or in future. The intention is to be gathered from the recital in the sale deed, conduct of the parties and the evidence on record.”

The Supreme Court in Kaliaperumal v. Rajagopal, 2009 4 SCC 193, held that payment of entire consideration is not a condition precedent for completion of sale and passing of title. In such a case the vendor cannot avoid the sale, though he is entitled to a charge upon the property for the unpaid part of the sale price, under Section 55(4)(b) of the Act. It was further pointed out that the true test of passing of property is the intention of parties. The Apex Court held as under:

  • “Such intention is primarily to be gathered and determined from the recitals of the sale deed. When the recitals are insufficient or ambiguous the surrounding circumstances and conduct of parties can be looked into for ascertaining the intention, subject to the limitations placed by Section 92 of the Evidence Act.”

It is noteworthy that the 1st proviso to Section 92 of the Evidence Act enables to give proof on ‘want or failure of consideration’ which would ‘invalidate the document’.

In Jant Ram Satnami v. Daya Das Satnami,  2019-2 CGLJ 168, 2019-1 Civ LJ 914, it was held that whether the vendor really intended to transfer the ownership by execution and registration, or contracted to do so only after receipt of the consideration as a condition precedent, would depend upon the terms of the contract.

Completion of “Sale” and Transfer of “Ownership”

Notwithstanding any recital of “sale” in a deed, it shall be open to show that a “ownership” was not transferred.

  • Sec. 55(4)(a) of the TP Act says – “The seller is entitled – (a) to the rents and profits of the property till the ownership thereof passes to the buyer ….”.
  • Sec. 55(5)(b) of the Act reads – “The buyer is bound – … (b) “pay or tender, at the time and place of completing the sale, the purchase money to the seller …”;

Admission of Consideration before Sub Registrar can be Withdrawn

Admission about receipt of consideration that is made before the Sub Registrar can be withdrawn under Sec 31 of the Evidence Act (Nagubai, AIR 1956 SC 593, Sujan Singh v. Lalsahab, TK Thommen, J., 1993 JLJ 552). The admission only shifts the onus. (Kishorilal, AIR 1959 SC 504).

Execution of a Registered Sale Deed is not Conclusive

It is pointed out in Sujan Singh v. Lalsahab, TK Thommen, J., 1993 JLJ 552, that the execution of a registered document is ‘not conclusive’ in the light of sub-Sec. (4) (a) and (5)(b), Sec. 55 of the TP Act, as shown above. If the “price” was not paid, the seller has the legal right to retain possession of the property and to enjoy “its rent and profits”. Law permits continuation of “ownership” on vendee notwithstanding any recital of “sale” in a deed. And, title will not stand legally passed on the execution of the document.

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Read in this Cluster  (Click on the topic):

Book No, 1 – Civil Procedure Code

Power of attorney

Title, ownership and Possession

Principles and Procedure

Admission, Relevancy and Proof

Land Laws/ Transfer of Property Act

Evidence Act – General

Sec. 65B

Law on Documents

Contract Act

Easement

Stamp Act & Registration

Will

Arbitration

Divorce

Book No. 2: A Handbook on Constitutional Issues

Religious issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India

Published by sajikoduvath

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