Explain the rights and liabilities of buyer and seller.

Section 55 of the Transfer of Property Act, 1882 is the legislative heart of the law of sale. It is the section that governs all that flows from the moment a contract of sale is formed to the point when ownership finally vests in the buyer and beyond. The section opens with the important phrase — "in the absence of a contract to the contrary" — which tells us immediately that all the rights and liabilities it lays down are default rules, capable of being modified by the express agreement of the parties. With that foundation in mind, the rights and liabilities can be understood in two distinct phases: before the completion of the sale, and after.

Liabilities of the Seller

Before Completion of Sale

The seller's first and most critical pre-sale obligation is the duty to disclose all material defects — whether in the property itself or in his title — that he is aware of and which the buyer could not discover by ordinary care. As Tindall CJ put it in Flight v. Booth (1834 1 Bing NC 370), a material defect is one of such a nature that, if the buyer had known of it, he might not have entered into the contract at all. Hiding an underground drain that weakens foundations, concealing that one holds only a trustee's title, or suppressing a pending acquisition notice — each of these is a material defect, and omission to disclose any of them is declared fraudulent by the section itself. The seller's duty to disclose, however, does not extend to facts of which the buyer already has actual or constructive notice.

The second pre-sale duty is to produce all documents of title in his possession or power for the buyer's inspection, when the buyer so requests. If the buyer does not demand them, the seller need not volunteer them, but if a buyer fails to inspect the title deeds, the courts will fix him with constructive notice of any defect that such inspection would have revealed. Closely linked to this is the duty to answer all relevant questions about the property or the seller's title to the best of his information — whether about encumbrances, pending litigation, or the income the property yields.

There is also the duty to execute a proper conveyance once the buyer tenders the price. The obligations under this clause are reciprocal — when the buyer makes the payment, the seller must execute the deed at a proper time and place. Unreasonable delay by the seller after tender of price entitles the buyer to give a notice making time the essence of the contract, as was affirmed in Jamshed v. Burjorji (AIR 1934 Bom 1).

Perhaps less discussed but equally important is the seller's duty to take care of the property — both physically and in respect of title documents — between the date of the contract and the date of delivery. During this interregnum, the seller stands in the position of a trustee for the buyer. He must keep the property in reasonable repair, protect it against trespassers, and safeguard the title deeds. If he neglects this duty and the property deteriorates, the buyer is entitled to claim compensation.

Finally, before the completion of sale, the seller is bound to pay all public charges, rent, taxes, and interest on encumbrances due on the property up to the date of sale and, unless the property is sold subject to encumbrances, to discharge all encumbrances then existing. This obligation is absolute unless expressly contracted away. As the Privy Council held in Nathu Khan v. Burtonath Singh (AIR 1922 PC 176), where the seller fails to discharge encumbrances and the buyer subsequently discharges them, the buyer is entitled to be reimbursed.

After Completion of Sale

Once ownership passes, the seller has three residual obligations. He must give possession of the property to the buyer or to the person the buyer directs, as its nature admits. If the property is in the occupation of a tenant, only symbolic possession can be given; if it is in the seller's own possession, vacant possession must be handed over.

The section also casts upon the seller an implied covenant for title under sub-section (2). By operation of law — without anything needing to be written in the deed — the seller is deemed to covenant that the interest he professes to transfer actually subsists, and that he has the power to transfer it. This covenant runs with the land and enures to the benefit of every subsequent purchaser in whom the interest vests. If the seller had no saleable interest and the buyer is dispossessed in consequence, the seller is liable in damages even if he was not guilty of fraud — this was settled in Gajapathi v. Alagia (1886 9 Mad 89). However, where the sale is in a fiduciary character, such as by a guardian or trustee, the implied covenant is modified: the seller only warrants that he has done no act whereby the property has become encumbered or he is hindered from transferring it.

Once the buyer has paid the entire purchase money, the seller must also deliver all documents of title relating to the property to the buyer. If the seller retains part of the property, he may retain all the documents but must permit the buyer to inspect and take copies at the buyer's cost.

Rights of the Seller

Before the ownership passes, the seller is entitled to collect all rents and profits of the property. He continues to be the owner during this period and is entitled to enjoy the fruits of the property. However, if the buyer takes possession before the completion of the sale, the seller cannot claim both the enjoyment of the property and simultaneously keep the purchase money — the rule is that the seller's right to rents and profits, and the buyer's obligation to pay interest on unpaid purchase money, are correlative and mutually exclusive.

After ownership passes, the seller gets one powerful financial protection: a statutory charge upon the property for the unpaid purchase money. Where the buyer has received the property but has not paid the full price, the seller holds a non-possessory lien — he cannot retain possession, but he can enforce his charge by filing a suit for sale of the property under section 100 of the Act. This charge binds not only the buyer but also any transferee without consideration and any transferee with notice of non-payment. In Videocon Properties Ltd v. Dr. Balchandra Laboratories (AIR 2004 SC 1787), the Supreme Court confirmed the statutory and transferable nature of this charge — it is an actionable claim and can even be assigned to a third person through a registered instrument.

Liabilities of the Buyer

The buyer's obligations mirror the seller's. Before the sale is complete, the buyer is bound to disclose to the seller any fact materially increasing the value of the seller's interest — a fact the buyer knows, but has reason to believe the seller does not. In Summers v. Griffiths (1866 35 Beav 27), a buyer who knew that the old lady's rights in the property were absolute but allowed her to sell at a much lower price in the mistaken belief that her rights were limited, was held liable for fraud and the sale was set aside. This obligation is the precise counterpart of the seller's duty of disclosure — both sides of the bargain owe each other good faith.

The buyer's primary obligation is to pay the purchase money at the time and place of completing the sale. Where the property is sold free from encumbrances but the buyer discovers an encumbrance before completion, he may retain from the purchase price the amount needed to discharge it and pay that directly to the person entitled. The duty to pay is personal in nature and if the seller refuses to accept it, the buyer may deposit the money in court.

After the ownership passes, the buyer must bear any loss arising from the destruction, injury, or decrease in value of the property that is not caused by the seller. The shifting of risk tracks the shifting of ownership — the relevant date is not the date of possession but the date on which ownership passes. The buyer must also, once ownership vests in him, pay all public charges and rents that become payable thereafter, and bear the interest on any encumbrances subject to which the property was sold.

Rights of the Buyer

Once ownership passes, the buyer becomes entitled to all the benefits of improvement — any increase in the value of the property, any improvements made to it, and all rents and profits flowing from it. Even if the seller makes repairs or improvements after completion but before delivery, the benefit of those improvements goes to the buyer.

Before the completion of the sale, if the buyer has made a part payment or advance in anticipation of the conveyance, he is entitled to a statutory charge on the property for the amount so paid, along with interest. This charge is the mirror image of the seller's charge for unpaid price. In DDA v. Skipper Construction Pvt. Ltd. (AIR 2000 SC 573), the Supreme Court held that if the property is charged and then converted into another form, the charge fastens on the converted property or money. If the buyer properly declines to accept delivery — because the seller has refused to give a clear title, for instance — the buyer's charge extends further to cover earnest money paid and costs of a suit for specific performance or rescission.

The interlocking system of rights and liabilities under section 55 reflects a carefully calibrated legislative design: both parties are held to a standard of good faith, and both are given protective financial remedies in the form of statutory charges — the seller to secure his unpaid price, and the buyer to secure his advance payment. Together, these provisions attempt to ensure that a transaction of sale, which is the most complete form of property transfer known to the law, is conducted with fairness and transparency on both sides.