What the Seller Must Disclose About Title Under Section 55

What does Section 55 require the seller to disclose?

Section 55 of the Transfer of Property Act, 1882 sets out the rights and liabilities of buyer and seller in the absence of a contract to the contrary. Among the seller's obligations, Section 55(1)(a) requires disclosure to the buyer of any material defect in the property or in the seller's title of which the seller is aware, and which the buyer is not aware of and could not discover with ordinary care.

Section 55(1)(b) requires the seller to produce the documents of title in the seller's possession or power for the buyer's examination on request. Section 55(1)(c) requires the seller to answer, to the best of the seller's information, all relevant questions put by the buyer about the property or the title.

The section also deals with money. The seller must pay all public charges and rent accrued up to the date of sale, and, where property is sold free of encumbrances, discharge encumbrances existing at that date. Separately, Section 55(2) treats the seller as having contracted that the interest the seller claims to transfer actually exists and that the seller has power to transfer it.

The final paragraph of the section is the one most buyers never see: it provides that an omission to make the disclosures required by Section 55(1)(a), and the buyer's corresponding disclosure under Section 55(5)(a), is fraudulent. That language matters if a dispute later turns on what the seller knew.

Can an as-is-where-is clause override Section 55?

Sale agreements frequently contain a clause stating that the buyer has inspected the property and satisfied itself as to title, and that the sale is on an as-is-where-is basis. That language is doing work: it is displacing defaults that would otherwise assist the buyer.

Because Section 55 operates in the absence of a contract to the contrary, the parties can vary much of it. But there is a difference between a clause that allocates the risk of unknown problems and one that is used to cover up known ones. The Indian Contract Act, 1872 treats active concealment of a fact by a person who knows it as fraud under Section 17, and Section 19 makes a contract obtained by fraud voidable at the option of the party deceived. Courts have generally been reluctant to let a contract clause shield a party from the consequences of its own fraud.

So an as-is clause is likely to protect a seller against a defect neither side knew about. It is far less likely to protect a seller who knew about a pending partition suit, did not mention it, and then pointed to the clause. Exactly how a court reads a particular clause depends on its wording and the facts.

In a genuine as-is transaction, typically a distressed sale or a bank auction, that allocation may be exactly what the parties intend and the price reflects it. In an ordinary sale at market price, accepting a full disclaimer means taking on risk without a corresponding price reduction.

What the buyer owes, and what the buyer gets

Section 55 is not one-sided. Section 55(5)(a) requires the buyer to disclose any fact about the nature or extent of the seller's interest that the buyer knows of, the seller does not, and which materially increases the value of that interest. For example, a buyer who knows that an old lease burdening the property has already ended, while the seller believes it is still running, is expected to disclose it. The duty is narrow: it concerns the seller's interest, not general market information such as a likely rise in prices.

The section also gives the buyer a useful protection. Under Section 55(6)(b), unless the buyer has improperly declined to accept delivery, the buyer has a charge on the property for purchase money properly paid in advance of delivery, with interest. In plain terms, if you have paid an advance and the deal falls through without your fault, your claim to recover it is secured against the seller's interest in the property, not merely a personal claim against the seller.

What to ask for in the agreement

• An express warranty of clear and marketable title, rather than silence or a disclaimer.
• A disclosure schedule listing encumbrances, mortgages, pending or threatened litigation, unpaid dues, unauthorised construction and any notices received from any authority.
• An undertaking to produce the full chain of title documents for examination before the balance is paid.
• A covenant to answer title questions in writing, which creates a record.
• An indemnity for loss from defects in title arising from matters within the seller's knowledge, stated to survive registration of the sale deed.
• Sample wording: "The Vendor confirms that, save as set out in Schedule C, the Vendor is not aware of any defect in title, claim, litigation, encumbrance, notice or dues affecting the Property, and shall indemnify the Purchaser against all loss arising from any such matter within the Vendor's knowledge on the date of this Agreement."

A worked example

A buyer agrees to purchase a flat for ₹1.2 crore and pays ₹25 lakh on signing. Three weeks later, the buyer's advocate finds that the seller's brother filed a partition suit two years earlier claiming a half share in the flat, which their father had bought.

If the agreement contains a disclosure schedule saying there is no litigation, the buyer has a clear written misstatement to rely on, in addition to the statutory duty under Section 55(1)(a). If the agreement instead says the buyer has satisfied itself as to title on an as-is basis, the buyer will be arguing that the seller knowingly concealed the suit and that the clause cannot cover that. The second argument may well succeed, but the first position is far stronger and far cheaper to enforce.

In either case, the practical lesson is that the title search should have been done before the ₹25 lakh was paid, not after.

A better sequence would have been a small token of ₹1 lakh, refundable if title was not found clear within thirty days, followed by the title search, and only then the agreement and the larger payment. Most genuine sellers accept that sequence, and a seller who resists it is telling you something.

Is a seller's warranty enough, or do I still need a title search?

You still need the search. The section addresses defects of which the seller is aware and which the buyer could not with ordinary care discover, which leaves a great deal that ordinary care is expected to find. A warranty gives you a claim after the event; diligence avoids the problem.

The ordinary steps are set out below. Which records exist, and where, differs from State to State and between urban and rural property.

• Examine the chain of title documents, commonly going back at least 30 years, through an advocate who does property work in that area.
• Obtain an encumbrance certificate from the sub-registrar's office covering the same period.
• Check revenue and municipal records, including mutation entries and property tax receipts, and confirm the seller's name appears.
• For a flat, obtain the society's or association's NOC and confirm there are no maintenance arrears.
• Check approvals, including sanctioned plans and occupancy or completion certificates, and for a project sale, the RERA registration and record.
• Search court records for pending cases involving the seller and the property, and consider a public notice in local newspapers inviting objections.

Where advice is worth taking

Title work in India is fact-heavy and State-specific, and a general article can only tell you what to ask about. Whether a particular chain of title is clean, whether an encumbrance matters, and what a specific disclaimer clause achieves are all questions for an advocate who does property work in that State.

For a purchase representing a large share of your savings, a title search fee of a few thousand to a few tens of thousands of rupees is small against the exposure. This is the clearest case for not relying on general information.