There are various modes
for transfer of property like sale, gift, and mortgage; similarly one of the
modes is exchange of properties, which is a species of transfer of property
akin to the barter system which use to be a common mode of carrying out day to
day commercial transactions.
In
barter system movable and immovable properties are exchanged based on the
requirements of both the transacting individual. For example a cow was exchange
for food grains, spices was traded for gold and so on and so forth.
Section 118 of Transfer of
Property Act deals with Exchange, which is defined as a transaction where two
persons mutually transfer the ownership of one thing, for the ownership of
another.The definition encompasses the exchange of both movable and immovable
and the only condition being that one of the two properties to be exchanged
should not be for money.
To simply define, it is a
mutual grant of equal interest, the one in consideration of the other. Exchange is different from sale. Section 54
of the of property deals with sale, which is defined as transfer of ownership
in exchange for a price paid, part paid or part promised.The word “price” is defined in sale of goods
act as money consideration.As for as
exchange; the money cannot be transferred, for any other property.Thus the distinguishing factor is the mode of
payment of consideration, i.e., money in the case of sale where as in case of
exchange, it is paid in kind. Out concern at present is exchange of one immovable
property with another immovable property.If the values of both properties are not equal, then the difference in
the value has to be paid by money.
Section
119 of the Transfer of property provides for remedy for defective titles of the properties in exchange.For example A
and B exchange properties later on ‘A’ finds that the title of the property
received from B is defective. The ‘B’ is bound to make good the loss suffered
by ‘A’, even if ‘A’ so desires to return the property received from ‘A’ canceling
the exchange transaction.This liability
extends to the legal heirs of B and also to the transferees, who have received
the property exchanged without monetary consideration like Gift. However, the liability does not bind the
bonafide purchaser.The procedure is similar to that of sale, where first an
agreement of exchange is drawn. Section
120 of the Transfer of property provides that each party to the deal has rights
and liabilities as that of seller as to what he give and that of purchaser as to
what he takes.Thus the rights and
liabilities of the seller and purchaser as dealt in section 54 and 55 of
transfer of property act will apply subject to the terms of agreement of
exchange.
The
transaction is complete only, when mutual delivery of possession of respective properties is completed as evidenced by deed of exchange. When a party to an
exchange has not been put in possession of the property, which he is entitled;
then he is entitled for a return of the property transferred by him provided
the property is still in possession of the other party or his legal
representatives or a transferee without consideration.
Registration
of Exchange Deed is compulsory and the stamp duty and registration changes are
as per the respective State laws.In Karnataka
exchange of property attracts stamp duty as that of conveyance based on the
market value of the property with the greater value amongst the two properties,
which are the subject matter of exchange.
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