AGREEMENT OF SALE — SUBSEQUENT ATTACHMENT — Need of Amendment of Section 64 and Order 38 Rule 10 of the CPC, Section 40 of the T.P.Act and Section 91 of the Indian Trust Act

By Sri Y. SRINIVASA RAO , Principal Senior Civil Judge, Tirupati .

TABLE OF CONTENTS:

  1. Introduction
  2. Contract of sale is a jus in rem
  3. Contract for sale is a jus ad rem
  4. Sections 40 and 54 of the Transfer ofProperty Act
  5. The rigour in section 64 of CPC
  6. Vannarakkal Kallalathil Sreedharan‘s case
  7. Conclusion


Introduction:-

A contract of sale denotes a transfer of property in goods by mutual consent. Such a transfer of ownership must be in relation to transfer from one person to another. The consideration would be a price in the form of money. Only when the consideration for transfer consists of other goods, it may be an exchange or barter, Dhampur Sugar Mills Ltd. v. CTT, (2006) 5 SCC 624. Agreement for sale means an agreement entered into between the promoter and the allottee, Section 2(c), Real Estate (Regulation and Development) Act, 2016.

Contract of sale is a jus in rem:— Contract of sale differs from contract for sale. In fact, a contract of sale is a jus in rem. It means that it is executed contract. To say explicitly, a contract of sale passes ownership immediately. See. Shib Lal v. Bhagwan Das, (1889) 11 All 244 DB.

Contract for sale is a jus ad rem:— As it is said that contract of sale is an executed contract, a contract for sale which is a jus ad rem means that it is an executory contract. To say in short, a contract for sale means that it it creates only an obligation attached to the ownership of the property. See. Shib All’s case (supra).

Before passing the enactment of Transfer of Property Act 1882, in India, principle was such that an agreement for purchase of property is considered as creating an equitable interest in the purchaser, as in English law..Even in Indian, this principle of law was in force before Transfer of Property Act ,1882 was passed. The legal position was changed after passing of Transfer of Property Act ,1882.

Sections 40 and 54 of the Transfer ofProperty Act:—

Under section 54 of T.P.Act,  a contract for sale of immovable property “does not of itself create any interest in or charge on such property”. Further, section 40 of T.P.Act is also to be looked into for better understanding of the legal position. Section 40 of the Act says as follows:

40. Burden of obligation imposing restriction on use of land.—Where, for the more beneficial enjoyment of his own immoveable property, a third person has, independently of any interest in the immoveable property of another or of any easement thereon, a right to restrain the enjoyment in a particular manner of the latter property, or

Or of obligation annexed to ownership but not amounting to interest or easement.—Where a third person is entitled to the benefit of an obligation arising out of contract and annexed to the ownership of immoveable property, but not amounting to an interest therein or easement thereon, such right or obligation may be enforced against a transferee with notice thereof or a gratuitous transferee of the property affected thereby, but not against a transferee for consideration and without notice of the right or obligation, not against such property in his hands.

Illustration A contracts to sell Sultanpur to B. While the contract is still in force he sells Sultanpur to C, who has notice of the contract. B may enforce the contract against C to the same extent as against A.

The rigour in section 64 of CPC:-

Now, 64 of CPC, it reads as follows:

64. Private alienation of property after attachment to be void. Where an attachment has been made, any private transfer or delivery of the property attached or of any interest therein and any payment to the judgment-debtor of any debt, dividend or other monies contrary to such attachment, shall be void as against all claims enforceable under the attachment.”

Vannarakkal Kallalathil Sreedharan‘s case:-
In Vannarakkal Kallalathil Sreedharan v. Chandramaath Balakrishnan , (1990) 3 SCC 281, the scope of sec.91 of the Indian Trust Act was discussed. In this case, Hon’ble Apex Court held that “the transferee with notice of an existing contract of which specific performance can be enforced must hold the property for the benefit of the party to the contract.

Now, combined readings section 54 and 40 of T.P. Act and sections 64 and Order 38 Rule 10 CPC and Section 91 of Indian Trust Act to understand the rigour in section 64 of CPC. To say in short, Section 40 of the T.P. Act, Section 91 of the Trusts Act and Or. 38, Rule 10 of CPC whittles down the rigour of Sec. 64 of CPC. See. The Article of His Lordship Hon’ble S.A.Kader, reported in (2007) 2 LW (JS) 25 ( Contract for Sale of Immovable Property — Its Effect on Subsequent Attachment of the Said Property) and also see. Madanmohan De Sarkar v. Rebati Mohan Poddar, AIR 1916 Cal 927 (DB) – (After a contract for sale of property has been made by the debtor in favour of the defendant, the plaintiff attached the property before judgment and the property was then sold to the defendant in a suit for specific performance of the contract. It was held by Their Lordships that the defendant’s purchase must prevail against all claims of the plaintiff enforceable under the attachment).

Although there are conflict of opinions on this point, Supreme Court in Vannarakkal Kallalathil Sreedharan v. Chandramaath Balakrishnan, (1990) 3 SCC 291,  clarifies the legal position holding that an agreement for sale of immovable property entered into prior to attachment ofthe land in execution of decree obtained by a third party will prevail over the attachment.

Thus, a contract for sale ofimmovable property prevails over subsequent attachment of that property by a creditor. 
See also V.K.Sreedharan vs. Chandramaath Balakrishanan (1990) 3 SCC 291; Hamda Ammal v. Avadiappa Pathar, (1991) 1 SCC 715; Rajender Singh v. Ramdhar Singh, (2001) 6 SCC 213; Kaushaliya v. Jodha Ram, (2019) 20 SCC 277.

Conclusion:- Although Section 49 of the Registration Act 1908 and Sec. 53A of the Transfer of Property Act 1882 were amended withdrawing the benefit of the doctrine of part performance embedded in Sec. 53A of the Transfer of Property Act to unregistered documents. Section 64 and Order 38 Rule 10 of the Code of Civil Procedure, Section 40 of the Transfer of Property Act and Section 91 of the Indian Trust Act are still not amended. Such amendments are essential to ensure that an agreement for sale in order to supersede the subsequent attachment must be one executed and registered before the attachment. If not, Sec. 64 CPC gives some scope for conflicting of decisions.

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