WHAT IS EXCHANGE;
SECTION 118 OF TRANSFER OF PROPERTY ACT, 1882 defines as “when two persons mutually transfer ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an “Exchange”.
From above we understand that for being an “Exchange”;
i. There must be two person transferring ownership of one thing for the ownership of another;
ii. Neither thing or both things being money only.
We are aware that transfer of any property against consideration is called “Sale”, and transfer without consideration is called “Gift”. Now when a property has been exchanged with another property it is called “Exchange”.
There may be both immovable or movable property, which can be transferred through exchange. In some cases where transfer of ownership of a property along with some money against some ownership of another property happen, it also comes under definition of exchange.
Example: Suppose Mr. A is transferring his residential property in Banaras, valued Rs. 20.00 Lakhs against property of Mr. B in Lucknow of Rs. 17.00 Lakhs. Now in this case Mr. B is transferring ownership of his property and giving cash of Rs. 3.00 Lakhs against ownership of property belong to Mr. A. This case also falls under definition of “Exchange”, and not “Sale”.
Note: Oral exchange is not permissible in view of the amendment of Section 49 of the Registration Act, 1908 brought about by Act No. 21 of 1929 , which by inserting in Section 49 of the Registration Act, 1908 the words” or by any provision of the Transfer of Property Act, 1882” , has made it clear that the documents of which registration is necessary under the Transfer of Property Act, 1882 but not under the Registration Act, 1908 fall within scope of Section 49 of the Registration Act, 1949. And if not registered they are not admissible as an evidence of any transaction affecting any immovable property comprised therein and do not affect any such immovable property.
Transaction by Exchange which requires to be affected through registered instrument is if it was to affect any immovable property worth of Rs. 100 or more. [ Satyvan Vs. Raghuvir, AIR 2002 P&H (2002) (3) ICC112(Punj)LR467].
FEATURES OF EXCHANGE;
1. Transfer of ownership; Exchange involves transfer of ownership in some existing property. In transfer of ownership, absolute interest of the owner is transferred. A partition of immovable property is not considered as exchange.
2. Property need not be immovable property; In Exchange properties may be immovable or movable. An immovable property can be transferred against a movable property and vice versa.
3. Exchange includes “Barter”; Exchange of one immovable property with another immovable property is known as “Barter” and same in case of transfer of one movable property against another moveable property.
4. Mode of Transfer;
i. Section 118 provides that a transfer of property in completion of an exchange can be made only in a manner prescribed for transfer of such property by “Sale”. The formalities of Section 54 (dealing with sale of properties) will be complied with;
ii. Where both properties are of movable, then exchange may be affected by delivery of properties and registration is not essential;
iii. Where properties are immovable, but value is less than Rs. 100, then registration is optional;
iv. Where the properties exchange are immovable properties and their value are more than Rs. 100/- then registration of exchange of ownership through instrument is necessary.
Note:
1. it is necessary that Deed of Exchange is a valid contract and not void under Contract Act. Suppose persons are exchanging ownership of their properties to hide act of crime or financial crime or benami properties then the instrument of exchange become void. [ Srihari Jena Vs. Khetramohan Jena, AIR (2002) Orissa 195; 2002 (4) Civ LJ 279].
2. When in an exchange of properties one party did not get possession of the property he was entitled to receive in exchange, he was held entitled to return property transferred by him. Hari Shankar Mishra Vs. Vice Chairman, Kanpur Development Authority, AIR 2001 All 139 ;2001(42) ALL LR 839.
3. Balakrishnan Bhagwanji Lodi Vs. Prakash Sheshrao Lodi, AIR 2005 NOC 89(Bombay); it was held that in case of partition of joint family property, once partition is affected, whether by way of family arrangement or deed of partition, there is severance of jointness of properties. Two brothers thereafter exchanged properties which were held by them seperately. The properties being worth more than Rs. 100/- in value. They could exchange them only through registered instruments.
LET’S CONSIDER DIFFERENCE BETWEEN EXCHANGE AND PARTITION;
1. Exchange is mutual transfer of ownership by two persons of different two properties.
A partition is mere an arrangement by which the several co-owners hold property seperately, which they held in common pool previously.
2. Exchange is brought about a contract between the parties.
The right of partition is a natural right and there is not need to enter into a contract.
3. In an Exchange the parties exchanging their properties has not interest prior to exchange in each other properties.
In a partition each party has as much interest in the entire property as the other. There is no exclusive ownership under partition.
LET’S CONSIDER RIGHT OF A PARTY DEPRIVED OF THING RECEIVED IN EXCHANGE; [ Section 119 of the Transfer of Property Act, 1882]
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 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 thing transferred , if still in the possession of such other party or his legal representative or a transferee from him without consideration.
From above we understand that if a party has deprived from the thing, whose ownership has been transferred in exchanged due to defective title of other party, he has two remedies under Section 119;
i. He can recover for compensation for loss suffered to him;
ii. He can take back thing transferred by him.
Note: Second remedy is available only in below mentioned cases;
i. Where property is still in possession of other party, or
ii. In possession of his legal representatives, or
iii. A transferee from him without consideration.
Jattu Ram Vs. Hakama Singh, AIR 1994 SC 1653; 1994 where there was defect in title of land received by one party to exchange due to false entries made by patwari and party was deprived from some portion of land as per Deed of Exchange. It was held by Supreme Court that entries made by patwari in the official records do not create title, therefore the opposite party was liable to return land(property) to the extent.
Note:
i. The provisions of Section 119 are applicable only in cases, where one party in an Exchange has been deprived of the thing/property transferred due to defect in title of other person transferring that thing /property.
ii. The provisions of Section 119 of the Transfer of Property Act, 1882 cannot be invoked in a case where a person has been forcefully disposed by another person from the property /thing acquired by him by exchange.
Example: Lets’ suppose Mr. A and Mr. B was transferred ownership of their residential properties and Mr. C brother of Mr. A has forcefully disposed Mr. B for taking possession of residential property, whose ownership was transferred under exchange to Mr. B.
RIGHTS AND LIABILITIES OF PARTIES TO THE EXCHANGE; [ Section120 of the Transfer of Property Act,1882]
Section 120 does not specifically mention the rights and liabilities of the parties to the Exchange. It provides only that each party has the rights and is subject to the liabilities of a seller as to that he gives and has rights and is subject to the liabilities of a buyer as to that which he takes. Therefore, the rights and liabilities of parties in case of exchange are the same as in case of sale. In Exchange, one thing is given and another thing has been taken, so parties play role of seller as well as a buyer, both. In case of movable properties, the provisions of Sale of Goods Act, 1930 are applicable in exchange also.
EXCHANGE OF MONEY [ Section 121 of the Transfer of Property Act, 1882]; “On an exchange of money, each party hereby warrants the genuineness of the money given by him”. In this case the money transferred must be genuine money and not be a counterfeit currency or fake money.
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Property is at City in Rajasthan 100% ownership by lady,,,,her husband n herself having property in Maharashtra , jointly held,,,,utual consent lady transfer her 100%right to husband n in exchange husband transfer /release his share in Maharashtra property…can it be possible n where they shall go for registration. And what n how stamp duty will be calculated