In previous issues we dealt with transactions like, sale, and gift, mortgage that are different modes of transfer of property. Now, in this issue we will discuss about exchange. This is also a type of transfer of property akin to the age old barter system.
In barter system movable and immovable properties were exchanged based on the requirements of the transacting individuals. For example, a cow was exchanged for food grains and so on.
Section 118 of the Transfer of Property Act defines the term ‘exchange’. It defines exchange as transaction when two persons mutually transfer the ownership of one thing, for the ownership of another, neither the thing nor both being money only. The definition encompasses the exchange of both movables and immovable including money. The only condition is that one of the two properties to be exchanged should not be money.
Thus an immovable property may be exchanged for another immovable or movable property but not for money. However transfer of money for money is also exchange.
To simply the definition, it is a mutual grant of equal interest; the one in consideration of another.
Exchange is different from sale. Section 54 of the transfer 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 far as exchange is considered, the money cannot be transferred for any other property. Thus, the distin-guishing factor is the mode of payment of consideration; money in case of sale where as in case of exchange, it is paid in form of kind. Our 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 Act provides the remedies for defective titles of the properties in exchange. For example, A and B exchange properties and later on ‘A’ finds that the title of the property received from B is defective. Now, ‘B’ is bound to make good, the loss suffered by ‘A’ and if ‘A’ 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 exchange property without monetary consideration like Gift. 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 gives 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 failed to obtain the possession of the property which he is entitled; then also he is entitled for return of the property transferred by him provided the property is still in possession of the other party or his legal representatives or transferee without consideration.
Registration of exchange deed is compulsory. The stamp duty and registration charges 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 of the greatest value which is the subject another of exchange.
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