SUBMITTED TO
DR. KIRAN KORI
SHASHWAT DUBEY
SEMESTER IV
ROLL NO. 139
SUBMITTED ON 24TH FEBRAUARY 2014
CONTENTS
ACKNOWLEGEMENT
INTRODUCTION
RESEARCH METHODOLOGY
OBJECTIVES OF STUDY
EXCHANGES
WOULD A PARTITION AMOUNT TO AN EXCHANGE?
RIGHTS OF PARTY DEPRIVED OF THING RECIEVD IN
EXCHANGE
LIABILTY OF LOSS DUE TO DEFECT IN TITLE
RIGHTS AND LIABLITIES OF PARTIES
EXCHANGE OF MONEY
WARRANTY OF GENIUNENESS OF MONEY
CONCLUSION
BIBLIOGRAPHY & WEB REFERENCES
ACKNOWLEDGEMENT
I would like to sincerely thank the Transfer of Property Act Teacher Dr. Kiran Kori for giving
me this project on the Rights and Liabilities Of Parties to an Exchange which has widened
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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
Mam for your consistent support.
Id 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
INTRODUCTION
Before the advent of the Britishers, each community 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
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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 to 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 extend
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 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.
This project will cover a study of rights and liabilities of parties to an exchange under the
Transfer of Property Act 1882.
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.
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 only 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
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 jewellery, and hence, it is
an exchange.
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 .
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 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 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 Rameshs jewellery and cash. Later,
he discovers that the jewellery 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 representatives or from
a transferee who has received the property without consideration. He cannot claim return,
however, from a bona fide purchaser or a trespasser.
ILLUSTRATION:
In the above illustration, if Ramesh had sold the property 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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Section 119 of the TOPA provides that if one of the parties to the 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 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.
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..
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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.
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:
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All of the above sections together define the Rights and Liabilities of parties to an exchange
under the Transfer of property Act, 1882 as were discussed in the project.
BIBLIOGRAPHY
RK Sinha, Transfer of Property Act 1882, 2012, Central Law Agency, Fourteenth
edition
Sir Dinshaw Mulla, The Transfer of Property Act ,2013,11th Edition
WEB REFERENCES
http://www.vuhelp.net/law-transfer-property/
http://www.advocatekhoj.com/library/bareacts/transferofproperty
www.indiakanoon.org
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