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Part Performance Of Contracts At The Time Of Post Coronavirus Pandemic

The doctrine of part performance of contract has been dealt with in section 53-A of the Transfer of Property Act, 1882. It is based on the principle of equity which says that a right or liability should be equalized among all the interested parties to the maximum extent possible.

Essentials for the doctrine to be applicable are as follows[1]:

  1. There must be a written contract for transfer of an immovable property signed by the transferor. It can't be applied in case of void agreement or no agreement
  2. It must be for a consideration.
  3. The terms of the contract should be written with reasonable certainty.[2]
  4. The transferee must have taken possession as a result of this contract or continued if he was already in possession of the property.
  5. The transferee should have done some act in furtherance of the contract.[3]
  6. The transferee must have performed his part of the dealing or be willing to perform it.
Now, the act no longer acts as a substitute for registration as the section has been amended in 2001 to incorporate the same. The amended sub-section (1A) provides that the documents for the purpose of transfer of property must be registered. Or even if it is non-registered, it cannot be used as evidence.

This can be shown through the joint reading of amended section 17 and 48 of the Registration Act, 1908. In the current scenario, due to the restrictions on movement by the central government, the registration of the property may seem to be a tough job for many because of the inability to go to the sub-registrar office of their district and get their deed registered.

Now, why such a ruckus is being created over the registration of property? This is where sub-clause (v) of section 2(47) of the Income Tax Act, 1961 comes into plays which requires the property to be of the nature referred to in section 53 A (of the Transfer of Property Act) for any transaction (related to the property) to be attracted.

Then, accordingly, the payment of various taxes that comes with the Transfer of the property can be decided that may be governed by the provisions of the Payment of Taxes (Transfer of Property) Act, 1949, the Income Tax Act, 1961, etc, although relaxations related to payment of taxes have been provided by the central government (by finance minister Nirmala Sitharaman) in an effort to reduce the financial burden upon the citizens at the time of a pandemic.One of the necessary pre-conditions for section 53A of TOPA, 1882 to come into force is the willingness of the transferee to perform his part of the contract.[4]

One might very validly think of the way the transferee will show this willingness to carry forward the contract at the time of the pandemic.

Also, the section does not say that the title passes to the transferee. It only provides that the transferor should be debarred from enforcing any right in respect of the immovable property (over which the transferee has taken possession) against the transferee[5]. Ownership and possession are terms having distinct meanings. Possession is the physical custody and control of an object while ownership is the right through which something goes to someone in a legal sense.

According to section 6 of the Transfer of Property Act, the person restricting such non-transferability must prove the existence of some law or custom which restricts the right of transfer and as of now no guidelines have been provided by the central government restricting the transfer of property at the time of pandemic. Also, the Apex Court in a case held that forcible dispossession of person of his private property without following the due process of law is a human right violation and also violative of the constitutional right under article 300A of the constitution.[6]

The Case Of Landlords And Tenants

At the time of this unprecedented situation of a pandemic, our economy has come to a halt. One of the worst affected relations because of this is that of a landlord and a tenant. Generally speaking, a tenant-landlord relationship is based on the free will of the parties. Even if the contract has a force majeure clause, it doesn't include pandemic events like the present COVID-19. One of the most important conditions for invoking such a clause is whether such an event has affected the ability to perform by a party.

And even if the ability to perform has been affected, it doesn't totally absolve the party from paying rent, it just suspends. The Supreme Court in a case ruled that the concept of frustration of contracts doesn't apply to the lease deeds[7].

Taking guidance from the case laws and judgments during the swine flu of 1918, in majority of the cases it was held that epidemic did not excuse a duty to perform by the parties. The landlords can raise the point relating to the deferred payments of the EMI's by the banks for the purpose of seeking loans from their tenants.

However, what is to be kept in mind is that the term of the loan has been extendedand banks have been charging the interests limitlessly for the period of such non-payment. Almost all the state governments in India have enacted their own rent control laws whose chief objective is to protect tenants from excessive rents and random hikes. So, it is almost impossible for any landlord at the time of this pandemic to ask for increased rents from their tenants.

Even if the landlord reaches the court for the recovery of his money, there is no guarantee as to he'll win the case. Also, the Commercial Courts Act, 2015 bars direct institution of any commercial suit. According to section12A, Pre-institution Mediation and Settlement Act, a suit that doesn't call for any urgent interim relief, can be instituted unless the plaintiff is done with the remedy of pre-institution mediation.

As of now, there is no such law in India that governs the relationship between the tenant and the landlord at the time of a pandemic. The Rent Control Act, 1948 is also devoid of any such provisions. Unexpected situations also require out of the box solutions. Parties need to think on a realistic basis and try to foresee the future scenario. These can be the time to try for new solutions such as out of the court settlement- conciliation, mediation and negotiations, etc.

  1. Vasanthi v. Venugopal AIR 2017 SC 1569
  2. Ranchoddas v. Davaji AIR 1977 SC 1517
  3. Arun Kumar Gupta v. Santosh Kumar AIR 2018 ALL 11
  4. Vasanthi v. Venugopal AIR 2017 SC 1569
  5. Rambhau Namdev Gajre v. Narayan Bapuji Dhgotra (2004) 8 SCC 614
  6. Supreme Court in Vidya Devi v. state of Himachal Pradesh
  7. Raja Dhruv Dev Chand v. Raja Harmohinder Singh 1968 3SCR 339

    Award Winning Article Is Written By: Ms.Srishti Yadav
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