Exchange according to the Transfer of Property Act

Section 118 of the Transfer of Property Act defines ”exchange” as follows:

”When two persons, mutually transfer the ownership of one thing in exchange for the ownership of another, neither thing or, both things being money only, such a transaction is called an ”exchange”.”

The definition of exchange is not limited to immovable property. Exchange is, therefore, not only the exchange of lands, but also the barter of goods. If one of the items that is transferred is money, the transaction is not an exchange but a sale because the price is money, only. However, money, in one form, may be exchanged for money in another form. So, also, an exchange of one stamp for another is not a sale. A sale should, always, be for a price. On the other hand, in the case of an exchange, the transfer of ownership of one thing is not completed by paying a price or a promise thereof, but, only by a transfer of another thing, in return. So, a transaction, where the consideration for the transfer of certain properties is shares in a limited company, is considered to be an exchange. [Commissioner of I-Tax vs. Motor and General Stores (P) Ltd AIR 1968 SC 200 supra]

The ownership of one party must be exclusive of the ownership of the other. Therefore, a partition is not an exchange. A transfer by a husband to a wife, in discharge of her claim to maintenance, is not an exchange, as the wife transfers no ownership in anything.

If the lessee surrenders a lease and, the landlord grants him the lease of another property, the transaction is not an exchange. If both parties are not the same there cannot be an exchange.

Illustration: ”A” transfers to ”B”, a house worth Rs.1, 500, and ”B” transfers to ”A”, a field worth Rs. 1,000, and Rs. 500, cash. The transaction is an exchange.

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4 Comments

  • saravanan says:

    A and B jointly own a building worth Rs.20,00,000/- whereas A , B and C jointly own a building worth Rs.30,00,000/- Can they exchange these properties so as to C gets the first building worth Rs.20,00,000/- and A and B jointly get the second building worth Rs.30,00,000/-

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  • Sudhir says:

    A owns a floor in the residential house and B owns another floor in the same house. Both A and B want to exchange their
    floors. A will charge some amount in money in addition to surrender of his floor in exchange to B. How it can be effected.

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  • Ila says:

    A owns a plot of land. B is constructing an apartment complex. A and B agree to exchange Plot of land for Flat respectively. The Flat will take 15 months to be completed. A and B register Exchange Deed, whereby A hands over ownership and possession on date of the Deed. B agrees to hand over ownership of the Flat under construction to A, but can only hand over possession of completed Flat after 15 months. A is agreed to that and recorded in Deed. Question – DO the exclusive ownership rights of B over the plot of land exchanged by A become complete and effective from the date of Registration of the Exchange Deed (in which A has given his consent to the same) OR irrespective of this consent, the Exchange Deed will become effective ONLY when after 15 months B transfers the finished Flat to A, irrespective of different dates of handing over possession and giving full ownership rights mentioned in the Deed?

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  • Sridhar says:

    A and B enter into an exchange of land agreement agrees to register the deed of exchange later at a specific period. The land has been immediately exchanged on signing the agreement. When B approaches several times to execute registration of deed of exchange before the limitation period, since he avoids finally legal notice also served to fulfil the condition of agreement. This agreement of exchange is not registered. Whether B can file a case against A under specific performance Act. Whether the said agreement is admiied as evidence in the court. What is remedy otherwis. Pl reply.

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