Transfer of Property Act (TPA)
Exchange under Sections 118 to 121: Essentials, the Mode of Transfer, and the Rights of the Parties
An exchange is a sale in both directions. Two people transfer the ownership of one thing for the ownership of another, and because each of them is at once a seller and a buyer, the Act gives each of them the rights and liabilities of both. The only structural difference from a sale is the consideration: in a sale the consideration is money, in an exchange it is property. The chapter is short, and it does three further things — it fixes the mode of transfer, it protects a party who is evicted by a defect in the other's title, and it deals with an exchange of money.
1. Section 118: The Definition and the Mode
Section 118, TPA '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.' |
1.1 The essentials
- Two persons, each transferring to the other.
- A mutual transfer of ownership. Nothing less than ownership will do: a mutual grant of possession, or of a limited interest, is not an exchange.
- Of one thing for another, and the things may be moveable or immoveable, or one of each.
- Neither thing, or both things, being money only. If one side gives money and the other property, the transaction is a sale. If both give money, it is an exchange of money, dealt with by section 121.
- And the mode of transfer is that of a sale. For tangible immoveable property of ₹100 or more, and for a reversion or an intangible thing, the transfer can be made only by a registered instrument; below that value, by a registered instrument or by delivery.
The last point catches many transactions. Two owners who 'swap' plots by handing over possession and nothing more have not exchanged them at all where the value is ₹100 or upwards; the ownership has not moved, because the mode section 54 prescribes has not been followed.
2. Exchange Distinguished
2.1 Exchange and sale
Point | Sale | Exchange |
|---|---|---|
The consideration | A price — money paid or promised | Property given by each side for the property of the other |
Number of transfers | One — from seller to buyer | Two, mutual and reciprocal |
Position of the parties | One is seller, the other buyer | Each is both — section 120 |
Mode of transfer | Section 54 | The same mode — section 118 adopts it |
Where money is partly involved | Wholly money — a sale | Property plus some money as equality of exchange may still be an exchange, so long as the consideration is not money only on either side |
2.2 Exchange and partition
Point | Exchange | Partition |
|---|---|---|
What happens | Ownership of one thing is transferred for ownership of another | Joint enjoyment is turned into enjoyment in severalty; each co-owner already had an antecedent title |
Is it a transfer? | Yes — it is a transfer within section 5 | No — nothing moves from one person to another; there is no transferor and transferee |
The parties | Two owners of separate properties | Co-owners of one property |
Formalities | The mode prescribed for a sale | Governed by its own law; a document recording a partition may require registration under the Registration Act |
Where they overlap | Where co-owners of two properties agree that each shall take one absolutely, the transaction may in substance be an exchange rather than a partition, and the mode prescribed for a sale must then be followed | — |
3. Section 119: The Party Deprived of What He Received
Section 119, TPA '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.' |
Element | Content |
|---|---|
Who may claim | A party to the exchange, or a person claiming through or under him |
The event | He is deprived of the thing, or part of it, received in exchange |
The cause | A defect in the title of the other party — not any other cause of loss |
The remedy | Compensation for the loss caused; or, at his option, the return of the thing he transferred |
The limit on the return | The thing transferred can be recovered only if it is still in the possession of the other party, of his legal representative, or of a transferee from him without consideration — a purchaser for value is protected |
Displaced by | A contrary intention appearing from the terms of the exchange |
4. Section 120: The Rights and Liabilities of the Parties
Section 120, TPA '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.' |
The whole of section 55 is thus imported into an exchange, applied twice over. As to what he gives, each party must disclose material defects, produce and answer as to title, execute the conveyance, take care of the property, and pay the outgoings up to the transfer; and he carries the implied covenant for title, and a charge for anything remaining due to him. As to what he takes, he must disclose facts materially increasing the value of what he receives, bear the loss after ownership passes, and pay the outgoings from that date, and he has the benefit of improvements and of the rents and profits.
5. Section 121: Exchange of Money
Section 121, TPA 'On an exchange of money, each party thereby warrants the genuineness of the money given by him.' |
- The warranty is of genuineness, not of value: each party guarantees that the money he hands over is genuine currency.
- It arises by force of the section, and needs no express stipulation.
- And it explains the words in section 118. An exchange of money for money is within the definition because both things are money; what is excluded is a transaction where one side alone gives money, which is a sale.
6. The Four Sections in Outline
Section | Subject | Substance in a line |
|---|---|---|
118 | Exchange defined, and how made | A mutual transfer of ownership, neither or both things being money only; the mode is that prescribed for a sale |
119 | The party deprived | Where a defect in the other's title deprives him of what he received, he may claim compensation or, at his option, the return of what he gave |
120 | Rights and liabilities | Each party is a seller as to what he gives and a buyer as to what he takes |
121 | Exchange of money | Each party warrants the genuineness of the money he gives |
7. Related Topics and Provisions
- Sale, Section 54 — the mode of transfer that section 118 adopts
- Rights and Liabilities of Buyer and Seller, Section 55 — imported into an exchange by section 120
- Transfer of Property by Act of Parties — and why a partition is not a transfer
- Gifts, Sections 122 to 129 — the transaction with no consideration at all
- Section 5, TPA — the definition of transfer, which an exchange satisfies twice
- Execution vs Registration of a Sale Deed — the formalities an exchange must also satisfy