This article has been Written by ELAVARASI. P from THE TAMIL NADU Dr. AMBEDKAR LAW UNIVERSITY

Table of Contents

INTRODUCTION

In Ancient India, before the introduction of the concept of money, people used ‘Barter System’. Barter system was a type of trading, where people exchanged goods and services to one another without using money. They exchanged one product with another product, that is ; receiving one product in exchange of giving another product. Money plays an important role as a mediator between people who exchanged their goods and services at present. Since ancient times, in India there’s a practice of exchange among the people. At present, the Transfer of Property Act , 1882 deals with all the matters relating to the transfer of property in India. It also deals with the concept of exchange. In this article let’s discuss about the concept of exchange under the Transfer of Property Act, 1882.

STRUCTURE

The transfer of property under Indian law is dealt under the Transfer of Property Act, 1882. It was commenced on February 17,1882 and enforced on July 1,1882. It consists of VIII chapters and 137 sections. Generally, Property can be divided into 2 types. They are ;

Tangible and
Intangible property.

Tangible property can be classified into 2 types. They are;

Immovable and
Movable property.

Transfer of Property Act deals with both movable and immovable property.

Chapter I – section (1-4 ) – Preliminaries
Chapter II – section (5-53A) – Transfer of property by act of parties
Chapter III – section ( 54-57) – Sales
Chapter IV – section (58-104) – Mortgage
Chapter V – section (105-117) – Lease
Chapter VI – section (118- 121) – Exchange
Chapter VII – section (122-129) – Gift
Chapter VIII – section (130-137) – Actionable Claims

Section (1- 4) of Transfer of Property Act, 1882, states about the preliminaries that is the interpretation clause and its definitions. Chapter II states the fundamental rules of the transfer of property by the act of parties. Chapter III to VIII mentions various types of transfers. A property can be transferred using 6 methods. They are; Sales, Mortgage, Lease, Exchange, Gift and Actionable claims.

DEFINITION

Section 118 of Transfer of Property Act, 1882 defines the term Exchange. It states that,

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 exchange.

The transfer of property in completion of an exchange can be made only in manner provided for the transfer of such property by sale.

For example :

‘A’ exchanges his dozens of apple with dozens of oranges from ‘B’.
Exchange of 2 Bajaj bikes for 1 car.
Exchange of a house for 10 cars.

(Oral exchange is not considered to be an exchange).

CHARACTERISTICS OF EXCHANGE

Ownership :

The term ownership means ‘full power over a thing’. On the basis of jurisprudence, Owner of a property shall have the ‘Right to possess, Right to use and enjoyment, Right to transfer and Right to destroy’. In a legal perspective, a person who holds the title shall be termed as the owner of the property. In exchange, there must be a transfer of ownership of the property. While transferring, the absolute interest will be transferred. The absolute interest is possessed by the owner and it shall be transferred while transferring the ownership. Here, partition of a property shall not be considered as a transfer of ownership of that property.

Movable or Immovable :

In the transfer of property through exchange, both movable and immovable properties are involved. Movable property shall be exchanged with immovable property or vice versa.

Barter :

Exchange in ancient times called as barter system, where people exchanges one movable property with another movable property. Also , the transfer of ownership takes place in barter system.

Transfer :

According to section 118 of Transfer of Property Act, the mode of transfer of property by exchange, shall be in the manner prescribed in the transfer of property by sale. Here the procedures said in section 54 must be followed. If both the properties to exchange are movable, then the delivery of possession shall be carried out without registration. If both the properties or immovable and its value is less than ₹100 then registration shall be optional, but if the value is more than ₹100 then the registration is mandatory.

ESSENTIALS OF EXCHANGE

The transfer shall be taken place only between inter-vivos. Inter-vivos simply means living persons.
The parties to the contract who wanted to transfer their property through exchange must be competent to the contract. Feed of exchange must be obtained through valid contract.
There must be a mutual consent between those who are parties to the contract.
There shall be Mutual transfer of property by the parties.
No payment of money shall takes place. Because if money involves it is sale not exchange. But If both parties exchange money then it should be called as an exchange.

SECTION 119 AND 120

Transfer of property through an exchange gives both the parties that is transfer and transferee some rights. These rights were provided to protect the interest of the parties. Section 119 and 120 talk about the rights and liabilities of the parties. If one of the parties to the exchange losses the property as a result of a flaw in other parties title then section 119 allows for a contingency.
Section 119 of Transfer of Property Act states the right of a party deprived of a thing received in exchange.
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.

In simple term if a party has deprived from the thing consideration whose ownership has been transferred in exchange due to the defective title of the other party then he shall have 2 remedies under section 120. They are ;

He can claim the return of property that is transferred by him to the other party .
He can claim for compensation for the loss that is suffered by him due to the defective title.

However, the first Remedy can be claimed only when the property is still in the possession of other party or in care of his legal agent or Transferred to another person from him without payment.

It is also noted that the participants in the exchange have the same rights and obligations as a seller and buyer in a sale. The sale of goods act 1930’s regulations may also apply if the traded in properties are movables.

SECTION 121

Section 121 of transfer of property act 1882 states about the exchange of money. It states that on the exchange of money each party must warrants the genuineness of the money given by them. the money thus given must be a genuine money and not a counterfeit currency or fake money.
Section 121 of the transfer of property acts states that if money is exchanged between the parties then the parties must assure the other party regarding the genuineness of the money he has given. Proving the given money’s genuineness is mandatory.
For Example : If ‘A’ wanted to go to America, he must have dollars with him. To obtain them he have to exchange his Indian rupees to dollars. This exchange is called exchange of money.

CASE LAWS

Jattu Ram v Hakama Singh ( 1994 )

In this case the Supreme Court of India held that the title would not be created when the patwari make an entry in the official record. So the opposing party is responsible to return the property( land) when there was a defeat in the title of the property received by one party to exchange as a result of false entries. Also the party shall be deprived of some portion of the land as per the stipulation.

Sri Hari Jena v Khetramohan Jenna (2002)

This is one of the landmark judgement case, where the court held that if the deed of exchange was signed by the parties to the contract to make a criminal proceedings then such exchange shall be considered as unlawful and invalid in the eyes of law.

Satyvan v Raghuvir (2002)

In this case it is held that whenever there is a transaction by exchange takes place, it must be registered if the immovable property is worth ₹100 or more.

Balakrishnan Bhagwanji Lodi v Prakash Sheshrao Lodi (2005)

In this case it was held that if the partition is affected by family arrangement or a deed of partition, in case of partition of joint family property then there will be severance of jointness of properties. The court also held that if a property is worth more than ₹100 in value then they could be exchanged only through registered instruments.

Hari Shankar Mishra v Vice Chairman, Kanpur Development Authority (2001)

In this case, the court held that in the exchange of properties, if one party did not get the possession of the property that he was entitled to receive in exchange then he was entitled to return the property transferred by him.

OTHER COUNTRIES

United Kingdom :

In UK the transfer of property loss our governed under the law of property act 1925. It states about the transfer of property by exchanges. In UK it is called as property exchange. According to this act the property exchange involves 2 parties who exchanges their property with the mutual concerned and mutual agreement.

United States :

In the United States of America the transfer of property through exchange are governed by state laws and not federal laws. In US the Internal Revenue Service IRS provides guidelines for the tax deferred exchanges. In US, it is called as like – kind exchange. They exchange certain properties for the taxes.

SUGGESTION :

In the present modern era the transfer of properties place a vital role in every sectors.
A property can be transferred in various forms. For example; it can be transferred through mortgage deed or a gift deed or through lease agreement or by sales or by exchange.
It is very essential to note the differences between each of the above said terms.
It is also essential to note the methods of transferring both movable and immovable property.
As we know, the concept of exchange is used in the Indian society since ancient times. It is necessary to know the evolution of concept of exchange so as to get an overall view in it.

CONCLUSION

As one of the six types of transfer of properties, Exchange plays a important role in our life. The exchange of foreign currencies also involved under this topic. The sections from 118-121 present in Chapter VI of the Transfer of Property Act gave a clear cut view on Exchange. Transfer of property Act deals with both movable and immovable property but it most specifically talks about Immovable property. Whenever any doubts arises in this transfer of property act, the interpretation clause plays a vital role in explaining the concepts. It is also necessary to have knowledge on judgements that paves new interpretations.