Buyer's Knowledge Of Title Defect Doesn't Extinguish Statutory Warranty Of Title Unless Sale Deed Specifically Excludes It: Kerala High Court

"Law is clear that [Section 55 of the Transfer of Property Act] gives a warranty of title even in cases where the buyer is aware of the defect in title. The implied covenant of title can be excluded only by clear and unambiguous words expressly negativing the vendor's guarantee of title, and mere disclosure of the defect or the purchaser's knowledge thereof does not extinguish the statutory warranty." Kerala High Court, in a significant judgment dated July 1, 2026, has clarified that a seller’s statutory liability to provide a clear title is not waived merely because the buyer was aware of a defect in the title at the time of purchase.

A bench of Justice Mohammed Nias C.P. observed that under Section 55(2) of the Transfer of Property Act (TPA), an implied warranty of title is imported into every sale, and this can only be excluded through an express "contract to the contrary" within the sale deed itself.

The appellants, M/s. Malabar Plantations, purchased 143.31 acres of land from the respondents for Rs. 270 lakhs via a registered sale deed. Following the sale, the appellants discovered that the sellers lacked title or possession over 7.5 acres of the scheduled property due to ongoing litigation. They filed a suit for the realization of money, seeking compensation for the value of the 7.5 acres and reimbursement for payments made to estate workers on behalf of the defendants. The trial court dismissed the suit, prompting the present appeal.

The primary question before the court was whether a buyer is entitled to compensation for a defect in title under Section 55 of the TPA even if they had prior knowledge of such defect. The court was also called upon to determine whether oral evidence could be admitted to contradict the recitals of a registered sale deed in light of Sections 91 and 92 of the Evidence Act.

Statutory Warranty Of Title Under Section 55 TPA

The court conducted an in-depth analysis of Section 55 of the Transfer of Property Act, which outlines the rights and liabilities of buyers and sellers. The bench noted that Section 55(1)(a) mandates the seller to disclose material defects, while Section 55(2) creates a "statutory warranty" that the seller possesses the interest they profess to transfer.

Buyer’s Knowledge Does Not Absolve Seller Of Liability

The court held that even if a buyer is aware of a defect in the seller's title, the seller remains legally bound by the implied covenant of title. The bench emphasized that for a seller to escape this liability, there must be a "contract to the contrary" that is clear, unambiguous, and specifically negatives the guarantee of title.

"Section 55(2) imports into every sale an implied statutory warranty that the seller has the power to transfer the interest professed to be conveyed, and that the purchaser's knowledge of the defect neither constitutes a 'contract to the contrary' nor excludes the statutory covenant," the court observed.

Court Explains Nature Of Material Defects

The bench further noted that if a defect is material enough that the buyer would not have entered the contract had they been aware of it, the seller's failure to disclose it is considered fraudulent. In such instances, the buyer is entitled to seek the return of purchase money and interest by way of damages, independent of a suit for rescission of the sale deed.

Bar Under Sections 91 And 92 Of The Evidence Act

The defendants had argued that the purchase price was reduced from an initial Rs. 277 lakhs to Rs. 270 lakhs because the plaintiffs were made aware of the litigation regarding the 7.5 acres. However, the court rejected this contention, ruling that it was hit by the exclusionary rules of the Evidence Act.

The court held that since the terms of the contract were reduced to a written sale deed which claimed "marketable title" over the entire extent, the defendants could not lead oral evidence to suggest a different transaction or a different consideration.

Oral Evidence Cannot Contradict Registered Sale Deed

The bench remarked that when the nature and intent of a transaction are recorded in a document required by law to be in writing, no evidence of any oral agreement can be admitted to contradict, vary, add to, or subtract from its terms.

"The contention of the defendants that the consideration shown in the document is not the actual consideration and a different contract exists cannot be countenanced in view of the express recitals in the deed," the Court stated.

Final Directions and Partial Relief

While the court set aside the trial court's findings regarding the 7.5 acres, it upheld the dismissal of the claim related to worker payments. The bench found that the plaintiffs failed to produce convincing evidence to show they had settled liabilities that the defendants were originally obligated to pay.

The appeal was allowed in part, granting the appellants a decree for Rs. 14,13,000, representing the consideration paid for the 7.5 acres of land, along with 6% interest from May 10, 1996, until the date of realization.

The ruling reaffirms the high standard of protection afforded to property buyers in India under the Transfer of Property Act. By strictly interpreting the "contract to the contrary" requirement and upholding the evidentiary bar against oral contradictions of registered deeds, the Court ensured that the written recitals of a sale deed remain the primary source of legal obligations between parties.

Date of Decision: 01 July 2026