TRANSFER OF PROPERTY ACT
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Historical Background of the Transfer of Property Act, 1882
Before the enactment of the Transfer of Property Act, 1882, the laws governing property transfers
in India were largely influenced by English law and equity principles. These principles were
introduced during British rule, but their application in India often lacked uniformity and clarity due
to the absence of specific statutory provisions tailored to the Indian context.
Challenges Before 1882
1. Reliance on English Law: In the absence of codified laws, the courts had to rely on English
principles concerning real property. These principles, while robust in their origin, were not
entirely suited to India’s unique socio-economic and cultural context.
2. Judicial Discretion: Courts frequently resorted to their own notions of justice, equity, and good
conscience, leading to significant variations in judgments. This resulted in:
o Confused and conflicting case laws.
o Unpredictability in the resolution of property disputes.
o Lack of a cohesive legal framework for property transactions.
3. Legal Uncertainty: The inconsistency in case law created uncertainty for individuals and
businesses engaged in property transactions, hampering economic activities and creating
disputes.
Steps Towards Codification
To address these issues, a Law Commission was appointed in England with the task of drafting a
Code of Substantive Law governing the transfer of property in India. This effort was part of a
broader initiative to streamline and codify laws in British India.
1. Drafting the Code:
o A draft Bill was prepared by the Law Commission and sent to India by the Secretary of
State for India.
o The draft was based on English property law but incorporated adaptations to align with
Indian customs and practices.
2. Introduction in the Legislative Council:
o The Bill was introduced in the Legislative Council in 1877.
o It underwent rigorous scrutiny and was referred to a Select Committee for further
examination and recommendations.
3. Consultations with Local Governments:
o The Select Committee circulated the draft Bill among the Local Governments for their
comments and suggestions.
o This collaborative process aimed to incorporate the diverse perspectives of various
regions in India, ensuring the law’s relevance across the country.
4. Revisions and Refinements:
o The Bill was revised no fewer than seven times to address ambiguities, incorporate
feedback, and ensure clarity and consistency.
o The meticulous drafting process reflects the significant effort to create a comprehensive
and effective legal framework.
Enactment of the Transfer of Property Act, 1882
After extensive deliberations, the Bill was finalized and passed as the Transfer of Property Act,
1882. It came into force on July 1, 1882. The Act marked a pivotal moment in Indian legal
history by providing:
1. A Codified Framework: It established a systematic legal code governing the transfer of property,
replacing the reliance on English common law and judicial discretion.
2. Uniformity and Clarity: The Act introduced uniform rules for property transfers, reducing
confusion and conflicting judgments.
3. Protection of Rights: It safeguarded the rights of individuals and entities involved in property
transactions by clearly defining legal procedures and obligations.
Significance of the Act
The Transfer of Property Act, 1882, remains one of the foundational pieces of legislation in
Indian property law. It:
Codifies the principles governing the transfer of movable and immovable property.
Serves as a vital reference for courts in resolving property disputes.
Provides a stable and predictable legal framework for property transactions, contributing to
economic growth and legal certainty.
The Act’s historical development underscores the importance of careful legislative drafting and
consultation in creating laws that address the needs of a diverse and dynamic society like India.
Scope of the Transfer of Property Act, 1882
The Transfer of Property Act, 1882, was enacted to codify and amend the laws relating to the
transfer of property by the voluntary act of parties. It primarily governs the transfer of property
between living persons and lays down the legal framework for such transactions.
Key Features of the Scope
1. Application to Transfers Inter Vivos:
o The Act is limited to inter vivos transfers, i.e., transfers made between living persons.
These can include individuals, companies, or associations.
o It regulates transfers that occur by mutual consent, such as:
Sale of property
Mortgage
Lease
Gift
Exchange
2. Exclusion of Transfers by Operation of Law:
o The Act does not apply to transfers that occur by the operation of law, such as:
Transfer of property through inheritance.
Transfer by testamentary succession (governed by wills).
Court orders or statutory obligations, such as insolvency proceedings or
foreclosure actions.
3. Testamentary Succession:
o When property is transferred according to a will, it is referred to as testamentary
succession. This form of property transfer is governed by different laws, such as:
The Indian Succession Act, 1925, in most cases.
Personal laws, such as Hindu, Muslim, or Christian laws, depending on the
religion of the individual involved.
4. Non-Exhaustive Nature:
o While the Transfer of Property Act provides a comprehensive framework, it is not
exhaustive. It does not cover every possible scenario of property transfer. In cases
where the Act is silent, courts may apply:
Principles of justice, equity, and good conscience.
Relevant case laws and precedents.
o This flexibility allows the Act to remain applicable to evolving societal needs and
circumstances.
5. Supplementary Role:
o The Act works in conjunction with other laws governing property and contracts, such as:
The Indian Contract Act, 1872, for agreements related to property transfers.
Personal laws for property inheritance and succession.
The Registration Act, 1908, for registration of property documents.
6. Applicability to Movable and Immovable Property:
o The Act primarily focuses on the transfer of immovable property, such as land and
buildings.
o However, certain provisions may also extend to movable property, depending on the
context of the transfer.
Implications of the Act’s Scope
By restricting itself to voluntary transfers, the Act ensures clarity and consistency in regulating
contractual property transactions.
Its exclusion of transfers by law or inheritance preserves the domain of personal and
testamentary laws, avoiding overlaps.
The Act’s allowance for the application of justice, equity, and good conscience ensures that it
remains adaptable to unforeseen circumstances and gaps in statutory provisions.
Examples of Applicability
1. Covered Under the Act:
o A person selling a house to another individual.
o A landlord leasing property to a tenant for a specified period.
o A person gifting land to a relative.
2. Not Covered Under the Act:
o Property passing to heirs after a person’s death without a will (intestate succession).
o Distribution of assets according to the terms of a will.
o Property taken over by a bank in foreclosure proceedings.
The Transfer of Property Act, 1882 is a law, which governs the transfer of immovable
property in India. It came into force on the first day of July 1882. It is not a complete code and as
the preamble states it merely amends certain parts of the law relating to transfer of property. It
merely deals with some transfers inter vivos that is, between living persons. The transfer of
property Act deals with transfers by act of parties alone. Transfer of property by operation of
law, e.g. In case of insolvency, forfeiture or sale on execution of a decree etc are not subject
matter of the act. The act is not retrospective in operation. The act has been amended several
times and the important amendment was carried out in the year 1929 by the Act 20 of 1929,
which came into force from 1st April 1930. Though Act governs transfers inter vivos of movable
property in India it has not defined either the terms ‘property’ or ‘immovable’. Hence it is
necessary to examine the meaning of these terms.
Transfer of Property Act and Muhammadan Law
The Transfer of Property Act, 1882, recognizes the importance of accommodating the
personal laws of various communities in India. In this context, the Act respects and preserves the
unique principles of Muhammadan Law (Islamic law) regarding property transfer and related
matters. Two key provisions highlight this deference:
1. Section 2: Exemption for Muhammadan Law in Chapter II
Scope of Section 2:
o Chapter II of the Transfer of Property Act (Sections 5 to 53A) outlines general
principles of property transfer, including the definitions, modes, and effects of
transfers.
o Section 2 explicitly states that nothing in Chapter II shall be deemed to affect any
rule of Muhammadan Law.
Implications:
o Transfers governed by Islamic law, such as gifts (Hiba), wills (Wasiyat), and
inheritance (Mirath), are exempt from the general provisions of the Act.
o For example:
Under Muhammadan law, a gift does not require registration or a written
instrument, unlike the provisions of the Transfer of Property Act.
The principles of oral gifts and the delivery of possession as a requisite
for the validity of a gift in Islamic law remain unaffected.
2. Section 129: Gifts in Contemplation of Death
Scope of Section 129:
o This section deals with gifts made in anticipation of death, often referred to as
donatio mortis causa in legal terms.
o It explicitly states that nothing in the chapter related to such gifts shall be deemed
to affect any rule of Muhammadan law.
Implications:
o Islamic law has specific rules for gifts made in contemplation of death, which
differ significantly from the general law of gifts under the Act.
o For instance:
Under Islamic law, a gift made in contemplation of death is treated
differently from a will, and specific conditions govern its validity.
Key Features of Muhammadan Law and its Influence
Origin and Nature:
o Muhammadan law is regarded as divine law, derived from religious scriptures
like the Quran, Hadith (sayings of Prophet Muhammad), Ijma (consensus), and
Qiyas (analogical reasoning).
o It is not a man-made law created by legislatures but a spiritual and ethical
framework for governance.
Governing Principles:
o Hiba (Gift):
Muhammadan law emphasizes the intention (niyyah) of the donor and the
delivery of possession for a valid gift.
Unlike the Transfer of Property Act, it does not mandate a written
instrument or registration.
o Inheritance (Mirath):
Inheritance under Islamic law is based on fixed shares prescribed by the
Quran, leaving limited scope for testamentary disposition.
o Wills (Wasiyat):
Islamic law restricts wills to one-third of the estate and requires the
consent of heirs for any disposition exceeding this limit.
Reconciling the Two Legal Systems
The Transfer of Property Act attempts to create a uniform framework for property
transactions while respecting the diversity of personal laws. The exemptions for Muhammadan
law reflect:
1. A recognition of the distinct principles governing Islamic property law.
2. An acknowledgment of the need for religious and cultural sensitivity in matters of
personal and family property.
By explicitly exempting the application of certain provisions to Muhammadan law, the
Transfer of Property Act ensures that the unique and deeply rooted principles of Islamic law
are preserved. This balance between codified law and personal law exemplifies India's
pluralistic legal system, accommodating diverse religious traditions within a unified legal
framework.
Amendments to the Transfer of Property Act, 1882
The Transfer of Property Act, 1882, has undergone several amendments since its inception to
align with changing legal requirements and social contexts. These amendments have refined the
provisions of the Act, addressing gaps, improving clarity, and ensuring consistency with other
related laws.
Key Amendments
1. Amendment of 1885:
o The Act was amended to harmonize its provisions with the Registration Act of 1877.
o This ensured better integration between the two statutes, particularly regarding the
registration of property-related documents.
2. Amending Act of 1900:
o Exclusion of Government Grants:
Government grants were excluded from the scope of the Act, making it clear
that the provisions of the Transfer of Property Act would not apply to property
transfers made by the government.
o Reshaping Chapter VIII:
Chapter VIII, dealing with certain miscellaneous matters, was revised for better
clarity and organization.
3. Amending Act of 1904:
o Local governments were empowered to apply the provisions of the Act to agricultural
leases, ensuring the Act could address the specific needs of agrarian transactions in
various regions.
o Several sections were amended:
Section 1: Relating to the applicability of the Act.
Section 59: Concerning mortgages where a written instrument is required.
Section 69: Governing the power of sale without the intervention of the court in
specific mortgages.
Section 107: Relating to leases of immovable property.
Section 117: Addressing exceptions to the general applicability of the Act.
4. Civil Procedure Code, 1908:
o The laws relating to mortgages were brought under the purview of the Civil Procedure
Code, 1908.
o This amendment ensured consistency between the procedural aspects of mortgages
and the substantive provisions under the Transfer of Property Act.
5. Amendment of 1915:
o Minor modifications were made to Section 69, focusing on the procedural aspects of
mortgages.
6. Amendment of 1920:
o Changes were introduced to Section 1, further refining the scope and applicability of the
Act.
7. Amending Act of 1925:
o Significant changes were made to Section 130, which deals with the transfer of
actionable claims. This amendment clarified the procedures and conditions for such
transfers.
8. Amendment of 1926:
o The definition of “attested” was introduced in Section 3, providing a clear legal
interpretation of attestation in property transactions.
9. Amendment of 1927:
o The definition of "attested," introduced in 1926, was given retrospective effect,
ensuring its applicability to transactions that occurred before the amendment.
10. Amendment of 1929:
o This amendment introduced extensive modifications to the Act:
Provisions relating to substantive law were overhauled for better clarity and
precision.
Significant changes were made to the provisions governing mortgages,
addressing both procedural and substantive aspects.
The amendment aimed to streamline the law and resolve ambiguities.
11. Amendment of 2003:
o Section 106 was substituted with a new provision.
o The amendment modernized the rules governing notices for termination of leases,
aligning them with contemporary property practices and addressing ambiguities in the
old provision.
What is property?
'Property' in law means anything that is capable of being owned. It includes not only
material things but also abstract rights. Salmond in his book on jurisprudence points out that in
all cases of ownership what we really own is a particular kind of right. When we say that ‘A’ is
the owner of land it means that he has a particular right in relation to a thing. Property is broadly
divided into two types, namely, movable and immovable. Transfer of Property Act deals with the
general principles of transfer of both movable and immovable property and some specific
transfers of immovable property.
Movable property is defined by the General Clause Act as that which is not immovable property.
Immovable property
According to section 3, para 2 of the TP Act, “immovable property” does not include
standing timber growing crops or grass. Thus TP Act does not define immovable property but it
simply excludes standing timber, growing crops and grass. It is a negative definition and is not
exhaustive. Since immovable property is not defined in the TP Act the definition has to be
looked from the General Clause Act, but the definition under the General Clause Act is also not
exhaustive. It has been defined under section 3(26) of General Clause Act thus:
“Immovable property includes land, benefits to arise out of land and things attached to earth”
What is immovable property?
The term ‘immovable property’ includes three things:
1.Land: This word does not include only the upper surface of the earth but is extensive enough to
cover things below it. For eg. Minerals. These all are immovable property.
2.Benefits arising out of land: These are immovables.
eg a) Rent from house
b) Revenue from agriculture etc.
The right to catch and carry away the fish being a “profit- a- prendere” ie profit or
benefit arising out of land, it has to be regarded as immovable property within the meaning of the
TP Act and in the light of section 3(26) of the General Clause Act (Bihar E.G.F. Co-op. Society
v Sipahi Singh)
3.Things attached to earth:
It means three things (section3 para 6 of the TP )Things:
a)rooted to earth as in the case of trees and shrubs
b)imbedded in the earth, as in the case of walls, or building, or
c)attached to what is so imbedded for the permanent beneficial enjoyment of that to
which it is attached. For eg. Doors, window, ceiling fan etc.
Thus immovable property includes land, benefits arising out of land and things attached to
earth, except standing timber growing crops and grass.
Standing Timber and Growing Timber
Standing timber is not immovable property as such timber would be cut at once for use in
house building etc. It does not require further nutriment from the soil. Growing trees are
immovable property as they require further nutriment from the soil.
In Joseph v. Joseph Annamma (AIR 1979 KA) it was held that rubber trees do not fall within
the category of standing timber.
Grass:
Grass is movable property but it would appear that a right to cut a grass would be an interest and
therefore immovable property.
Following are held to be immovable property:
1.Right of way
2.Right to ferry
3.Right to tap trees and obtain toddy
4.Fruit bearing trees
5.Mortgage
6.Equity
Following are not immovable property
1. Copy right
2. Door and windows of a house
Doctrine of fixtures
A fixture formerly meant any chattel which in becoming affixed to the soil became part
of the land. In England the general rule is that Whatever is planted on (or built in ) the soil
belongs to the soil. This is based on the maxim “ quicquid plantatur (or inaedificatur ) solo solo
cedit”. The maxim has no application in India.
Paramanick’s case:
In Thakur paramanick Chunder V Ram Dhone, an alienee from a Hindu window
erected certain building on the land. He was sought to be evicted by the reversioner who
succeeded to the property on the death of the widow. It was held that the reversioner could evict
the alienee as the alienation was not supported by necessity.
Sir Barnes peacock observed:
“We have not been able to find the laws or customs of this country any traces of the
existence of an absolute rule of law that whatever is affixed or built on the soil becomes a part of
it and is subjected to the same right of property as the soil itself”
The term fixture or chattel can became immovable property by their annexation to the
immovable property. Whether a chattel has become a fixture and so has become immovable
property or not can be determined by applying the following rules:
1. Mode of annexation:
If the chattel rests on the land by its own weight and is not affixed to the land there is a
presumption that it is only a movable property( eg machinery not affixed to the land). But the
presumption is rebuttable. If the intention was to make it part of the land it will be treated as a
fixture.
But is the chattel is fixed to the land by means of nails or any other contrivance there is
presumption that the chattel has become a fixture and so an immovable property. This can also
be rebutted.
2.Purpose of annexation:
If the purpose of annexation is the permanent beneficial enjoyment of the land, there is
presumption that it is a fixture. The purpose of permanent beneficial enjoyment can be presumed
if the owner of the land affixed the chattel.
In an earlier Madras case, Board of Revenue v Venkatasami Naidu the equipment the
tourin cinema was held to be only movable property and a lease of that was not a lease of
immovable property for the purpose of stamp duty. There was no intention of annexing the
machinery for the enjoyment of the land. It was a case if beneficial enjoyment of the machine
itself.
Trade fixtures
With a view to encourage trade there has been in English law relaxation of the rules with
reference to trade fixtures. These are regarded as accessory to the business and not as annexation
to the premises. Thus soap boiling vats and engine for working collieries are not fixtures.
(C)Attestation: (Section 3)
Attestation is defined by section 3 of the TP Act. It means the act of witnessing the execution
of a document and subscribing the name of the witness in testimony of such fact. The object of
attestation is to avoid fraud, misrepresentation or force in execution.
Shamu Patter’s case:
In 1912, the privy Council in the case of Shamu Patter v Abdul Khader held that
Attesting witness must see actual executant. Shamu patter’s case was followed until the
enactment of the Act 27 of 1926 which inserted in the TP Act a definition including attestation
on acknowledgement of execution. Shamu Patter’s case is no longer good law.
Who are competent to the attestors?
A party to the deed cannot be an attesting witness, for the object of attestation is
protection against fraud and undue influence.
Ingredients of attestation:
1. For a valid attestation witnesses must be Sui Juris
2. There should be at least two attesting witnesses
3. They may not be literate
4. An attesting witness should sign his name in the presence of the
executant
In Kundan Lal V Mushar Rafi Begam, the executant was a pardanshin lady sitting behind
a thin curtain when the attesters signed. The Privy Council held that the attestation was valid as
the executant, if so minded could have seen the witnesses, even if she did not actually see them
through the curtain.
5. The attestor should sign only after execution is complete. Otherwise it
is no attestation in the eye of law.
6. The attestor must have actually witnessed execution or received from
the executant an acknowledgement of execution.
7. It is not necessary that more than one witness should be present at the
sametime.
8. There is no particular form of attestation.
Section requires that the attesting witness should have singed in the presence of the
executant and they should sign for the purpose of the transaction. The purpose of attestation is to
create authenticity or genuineness to a document. If the executant denies the execution of the
document, attesters can be cited as witness, Mere attestation of a document does not show that
the attesters had notice of its contents.But it stops him from denying the fact of execution. The
role of an attester is to corroborate the signature of the executant and no further.
Notice
The definition of notice has been added by Amendment Act of 1900 and it was Amended
by the Act of 1929. The word ‘notice’ in law means knowledge of a fact. According to section 3o
“a person is said to have notice” of a fact when he actually knows that fact, or when, but for
willful abstention from an inquiry or search which he sought to have made, or gross negligence,
he would have known it.
Notice may be either express or constructive. Notice to the agent when it is imputed to
the principal is sometimes called imputed notice. Express notice or actual notice whereby a
person acquires actual knowledge of the fact. Actual notice must be definite information given
by a person interested in a thing for which a notice is given. It must be given in same transaction.
Constructive notice.
Constructive notice is the equity which treats a man who ought to have known a fact, as if
he actually does not know it. Constructive notice is knowledge to party on presumption so strong
that it cannot be rebutted. The board principle underlying the doctrine of constructive notice is
that a person who is bound to make an inquiry and fails to do it should be held to have a notice of
all facts which would have come to his knowledge as if he made the inquiry.
Constructive notice can be divided into five classes:
1. Notice imputed by willful abstention from inquiry
2. Notice from gross negligence
3. Notice by registration
4. Notice by possession
5. Notice by agent
Notice by registration
Tilak Dharilal v Khedanlal: This case resolved a conflict of judicial opinion which existed in
India on the question whether the registration of an instrument operates as constructive notice to
subsequent transferees. In this case the Privy Council held that notice cannot in all cases be
imputed upon the mere fact that a document is to be found upon the Indian register of deeds.
In this case, two suits were brought to enforce certain mortgages executed by the same
mortgager. There were two sets of mortgages. Tilak Dharilal Lal claimed priority over his
mortgage which was earlier in point of time. But the subsequent mortgagee had obtained his
mortgage without notice of Tilak Dhari Lal’s mortgage and in good faith for value, Tilak lal’s
mortgage was a registered deed.
The question was whether registration will amount to constructive notice to the
subsequent transferees. Lord Buckmaster held that registration in all cases cannot be treated as
constructive notice.
The decision was statutorily superseded by adding explanation to section 3 of the
TPAct(Amendment Act 20 of 1929).Since 1.4.1930 registration of a document operates as a
constructive notice of the interest created by it to subsequent transferees.
This doctrine will apply:
1.Where the property relates to a transfer of property as defined in section 5 of the TP Act and
2.Where the transfer is compulsorily registerable.
Define ‘ transfer of property’ and what things cannot be transferred? ( Section 5 & 6)
In India rules relating to transfer of property is contained in the TP Act 1882. It is a
central legislation. Section 5 of the TP Act defines the expression transfer of property. It is an act
by which a living person conveys property to one or more living persons. It is otherwise known
as transfer inter-vivos. According to the explanation to section 5, a corporation, an association or
a body of individuals whether incorporated or not is considered as a living person.
Ingredients:
1. The transferor must be a living person.
When the transfer comes into effect the transferor must b a living person. Hence a will
which comes into operation only on the death of the transferor is not a transfer as contemplated
by the Act.
2. The transferee must be a living person
In Narasimha v Vekatalingam a gift was made to “Sree Kothanda Ramamchandra
Murthy”. It was held that a gift to God almighty is not a gift to a living person within the
meaning of TP Act.
3. There must be a conveyance of the property from the transferor to the transferee.
Partition is not a transfer as there is no conveyance of property from one member to
another member. A member who has joint interest in the entire property will get an interest not a
transfer as per the Act. In a case Radhakrishnayya v Sarasamma Subbarao J. observed “partition
is really a process in and by which a joint enjoyment is transformed into an enjoyment in
severally”
A family arrangement is not a “transfer” within the meaning of section 5 may be made by
an unregistered instrument or even orally. The object of a valid family arrangement should be the
compromise of doubtful or disputed claims.
4. Conveyance may be in present or in future.
5. The subject matter of the transfer should be in existence.
Can future property be transferred?
In England future property may be transferred for consideration in equity. In Holroyd v
Marshall ‘T’ the owner of a certain machinery transferred it to “B” to be held in trust for ‘H’ The
subject matter of the transfer was a certain machinery in the mill and machinery to be brought in
future in addition thereto or in substitution thereof. Later on new machinery was added to and the
question arose whether H could claim it against the execution creditor of ‘T’. It was held that ‘H’
acquired an equitable title as soon as the machinery was added and this title would prevail
against the claims of the execution-creditor.
Indian position.
In India a transfer of future property for consideration will operate as a contract and the
transferee can enforce such a contract specifically as soon as the property comes into existence.
Can a person transfer the property to himself?
Before the amendment Act of 1929 there was a doubt as to whether a person could
transfer the property to himself. After the amending Act it is clear that a person can transfer
property to himself . For eg. A person can create a trust and constitute himself a trustee.
Transferability of property (section 6)
According to section 6 of the TP Act, property of any kind may be transferred.
Alienability is the virtue of property. Section 6 of the Act while recognizing the general principle
that property of any kind may be transferred lays down several exceptions in the interest of
public policy. Following are the exceptions:
1.Spec Successionis (section 6 (a))
The expression means a person’s chance to succeed. It is a chance of an intestate or
testamentary succession. The presumptive heir of a living person has only a chance of succession
on the death of that person. A legatee under the will of a living person has only a chance of
testamentary succession after the death of the testator. While a person is living nobody can claim
rights of intestate of testamentary succession. The heirs and legatees have only chances of
succession. Such chances of succession are alienable. A son’s right of succeeding to his father’s
self acquired property while the latter is still living, is a spes successionis. The transfer of Spes
successionis is null and void.
2.Right of re-entry(section 6 (b))
A mere right of re-entry cannot be transferred, It can be transferred only along with the
transfer of property.
Illustration
‘A’ made a lease in favour of ‘B’ for a period of five years. The lease deed contained
certain stipulations with regard to the maintenance of property on payment of rent. Suppose ‘B’
committed a breach. Then ‘A’ can exercise the right of re-entry. But the lessor cannot alienate
the right of re-entry to one person and the interest in the property to another person or retain the
property for himself and transfer only the right of re-entry.
3.Easement right (section 6 (c))
An easement is an incident of the ownership of the dominant heritage and passes with it.
It cannot be detached from the dominant heritage and transferred separately.
4.Interest restricted to personal enjoyment (section 6 (d))
An interest in property restricted in its enjoyment to the owner personally cannot be
transferred by such person. An inam land for personal services is a land restricted in its
enjoyment to the owner personally and it cannot be transferred.
In Arjayya v Krishnmurthy, the first defendant was the holder of washerman’s service
Inam land. Such an interest in land is not alienable under section 6 (d) of the TP Act.
5.Right to future maintenance (section 6(dd))
A right to future maintenance, whether it is by way of decree, deed or otherwise cannot
be alienated. Arrears of maintenance can be alienated. As in the other cases public policy is the
basis of this prohibition.
A right to future maintenance also not attachable in execution proceedings.
6.Mere right to sue (section 6 (e))
A mere right to sue cannot be transferred. It is personal in nature. But an agent can file a
suit.
7.Public office and salary of public officer (section 6 (f))
A public office or the salary of a public officer whether before or after it has become
payable cannot be transferred.
8.Stipends, pension etc (section 6 (g))
Stipends allowed to military, naval, air force and civil pensions of the government and
political pensions cannot be transferred
Condition restraining alienation (section 10)
Section 10 deals with restrictions imposed on transfer of properties. The principle
underlying this section is that a right of transfer is incidental to and inseparable from the
beneficial ownership of property. A restraint on alienation may be absolute or partial. An
absolute restraint is void a partial restraint is not.
Absolute restraint on transfer:
The section says that a condition which absolutely restrains the power of alienation is void.
Rosher v Rosher
A testator devised an absolute estate to his son with a proviso that if he sold during the lifetime
of his wife she should have an option of purchasing the estate at a price which was one fifth of
the market value. This was held to be in effect an absolute restraint and void. It is to be noted that
only condition is declared void and transfer stands as valid.
Sarjubala v Jyothiramayee
In this case a condition, that the donee should not transfer the property by way of gift except to a
limited extent for religious purpose annexed to an absolute transfer was held to be invalid.
Partial restraint on transfer
A condition only partially restraining alienation is valid. One may restrict alienation in
many ways such as prohibiting alienation to a particular class of individuals; or for a particular
period; or alienation of particular nature.
Mohamed Raza V Abbas Bandi Sibi
In this case the Privy Council held that a condition restraining the transferee from
transferring to a stranger ie outside the family was not an absolute restriction and was valid.
Two exceptions:
There are 2 exceptions to the rule that absolute restrains are void. They are:
1.Lease : A lessor can impose a condition in a lease that the lessee should not alienate the
property. Such a condition is valid if the lessor stipulates a right of re entry on the breach of the
condition
2.Married woman: In England a woman can be given property with a condition that so long as
she is married, she can only enjoy the income and not transfer the property. During covertures
there is danger that the husband may force his wife to transfer the property to him. It was said
that he might “kiss or kick” her to make unwarranted alienation. To guard against this misuse of
the husband’s authority, the law has recognized this exception to the rule against alienability.
The restraint is valid only during the subsistence of the marriage relationship. When the
woman becomes a feme sole (single woman) on account of either the death of the husband or
dissolution to the marriage, the condition will not operate and may be ignored. In England the
rule was abolished in 1935.
The old English rule was embodied in the latter part of section 10 of the TP Act 1882.
This rule is not applied to Hindus, Mohammedans or Buddists. It is applicable to Christian
woman; so when property is transferred to a Christian woman a condition may be attached to the
transfer to prevent her from alienating the property during her covertures. The condition would
be valid in such case though it is restrained upon alienation. The abolition of the rule in England
has apparently not yet been taken note in India.
Condition restraining enjoyment (section 11)
Not only the law forbids conditions restraining alienation but it also forbids conditions
restricting enjoyment in an absolute transfer of property. Section 11 of the TPAct provides for
this. In an absolute transfer of property right to unfettered enjoyment is a legal incident. The
section provides that a condition restraining enjoyment of property which has been transferred
absolutely is void and the transferee is free to enjoy and dispose of the income of the property in
any manner he likes.
Illustration
‘A’ sells his house to ‘B’ with a condition that ‘B’ shall reside in it. He shall not use the
house for any other purpose. This condition is void. ‘B’ is entitled to use the house for the
purpose he likes.
Elements
1. Interest must be created absolutely. (Applicable only for sale)
Section 11 applies only when the interest created in favour of the transferee should be absolute.
Where the interest created is not absolute eg lease this section does not apply.
2.Interest shall be applied or enjoyed in the manner prescribed by the transferor
The expression ‘enjoyment of property’ includes several rights such as right of alienation,
right to effect partition of property, right to use the property for the purpose of residence, a
provision for payment etc. the right of alienation of property is an important form of enjoyment
of property. A restriction on such right, therefore, is a restriction on the enjoyment of property
and it should be disregarded (Official Receiver West Tanjore v S.Chettiyar)
Exceptions
Transfer to unborn persons (section 13)
A transfer to an unborn person cannot be affected directly section 5 of the TP Act defines
a transfer of property as a transfer between living persons. The same is reiterated is section 13 of
the TP Act. Living person includes a child in the womb (en Ventre Samere) section 13 lays down
the rules to be applied when a transfer is to be made in favour of an unborn person. Following
are the rules
1. Transfer cannot be made directly to in favour of the unborn person
2. Till the unborn person comes into existence there should be a transfer in favour of a living
person.
3.The entire remaining interest of the transferor after the creation of the prior interest in
favour of living person should be given to the unborn person.
Illustration
A transfer by ‘A’ to B’s unborn son directly is not valid. Again a transfer by ‘A’ to ‘B’
for life then to B’s unborn son ‘C’ for life, then C’s unborn son for life is not valid. Transfer to
B’s unborn will not take effect, because it does not extend to the whole of A’s remaining interest
in the property.
In Girjesh v Data 1934 ‘ A’ made a gift of her property to ‘ B’ her nephew’s daughter for
life and to B’s male descendants if she should have any, absolutely; but if no male descendants
then to B’s daughter without power of alienation, and if there was no descendants of ‘B’, male
or female then to her nephew. ‘B’ died without issue. The gift to unborn daughter was of limited
and therefore void.
Hindu law:
The rule under the Hindu law laid down in Tagore v Tagore that a transfer could not be made in
favour of unborn persons was later on modified by various enactments. Now section 13 directly
applies to Hindus and a Hindu can transfer his property to unborn person in accordance with the
rules on section 13.
Muslim law: A gift to a person not in existence on the date if transfer is void except in the case of
waqf.
Direction and accumulation
Sec 17 of the TP Act deals with direction for accumulation. The word “accumulate”
means to collect. A direction for accumulation means a direction to separate the fund or income
from the property for his own benefit.
Illustration
A transfers a rubber estate to B with a direction that the income from the rubber must be
accumulated for a particular period.
What is a period?
Sec 17 of the TP Act prescribes the maximum period of accumulation is
1. the life time of the transferor or
2. A period of 18 years from the date of transfer whichever is higher. The correct period is based
upon the longer events. If the accumulation period exceeds the statutory period, it is void.
Illustration
A transfers property to ‘B’ with a direction for accumulation during the life time of ‘A’ and the
lifetime of ‘A’s son. The period is in excess of the period mentioned in section and hence void.
Compare Indian Rule and English Law
Under the Indian law the period is 18 years from the date of transfer of the life time of the
transferor/ whereas under the English law the period is 21 years
Leading English case
Thelluson v Woodford (1805)
One Peter Thelluson an Englishman made an eccentric will. The direction of
accumulation contained in the will was that the income should be accumulated during the life-
time of the grandsons. After that the income must be distributed among his descendant then
alive.
The court has to consider the validty of the period of accumulation. The house of Lords held that
direction was valid because it did not go beyond the period of perpetuity (two generations) and
hence the court validated the condition. Decision created some confusion in England and so the
British parliament passed a new accumulation (popularly known as the Thelluson Act)Act. The
period of mentioned in this Act was incorporated in the English TP Act. So the recent position is
1. Life time of the grander
2. A period of 21 years
Exception to sec 17
1. The direction for accumulation is not applicable when the condition was intended to clear
the debts of the transferor.
2. The direction for accumulation is not applicable when the condition is relating to the
maintenance of the children or remote issue of the transferor. In England it is applicable
only to the existing issue.
3. The direction for accumulation is not applicable with regard to the preservation of
maintenance of the property transferred.
Doctrine of Acceleration
Section 27 of the TP Act enunciated the ‘ Doctrine of acceleration’ When a prior interest
fails by reason of valid condition not being fulfilled the subsequent interest is accelerated and
takes effect as if the prior interest had never been in the way.
Problem
1. A transfers to B Rs. 500/- on condition that he shall execute a lease within 3 months after A’s
death. If he neglects to do so to C. B dies in A’s life time can claim the property?
The fact of this problem is based upon the decision in Avelyn V Ward. The doctrine of
acceleration operates in this case and so C can claim the property.
Ajshia v Rakhm kaur (1883)
There was a bequest to the wife and a remainder to her children. The gift to the wife
failed under a local Act for want of registration. The result was the acceleration of the gift to the
children.
Under a will a life-interest was created in favour of ‘X’ and a provision was made in
favour if ‘Y’ for certain annuities payable after the death of the life tenant ‘X’. The tenant for life
disclaimed this interest under the will Held the annuities in favour of Y was thereby accelerated.
2. A transfers his property to ‘B’ with the condition that if ‘B’ should die in ‘A’ lifetime, the
property should go to ‘C’. ‘A’ and ‘B’ both perish together in a shipwreck. Can ‘C’ claim the
property?
‘C’ cannot claim the property in India because of the rule enacted by the second paragraph of
section 27
The rule of acceleration is subject to one exception. If the intention of the parties is that
the subsequent interest should become operative only if the prior interest failed in a particular
manner, then that intention prevails.
DOCTRINE OF ELECTION (section 35)
The general principle of law that “no one can give what he has not” is laid down in
section 7 of the TP Act. This principle is well reflected in the Latin maxim “Nemo dat Quod Non
Habet”. To this principle one of the exception is laid down in section 35 of the TP Act.
If ‘A’ transfers the property ‘X’ to ‘B’ and by the same transaction transfers the property
of ‘B’ to ‘C’, ‘B’ has a right to elect either to take under the transaction to ‘A’ or against the
transaction,
If ‘B’ elects to take against the transaction of ‘A’ he is called the refractory transferee.
When he takes against the transaction this property will not go to ‘C’ and therefore ‘C’ is called
disappointed transferee
If ‘B’ elects to confirm the transfer he shall relinquish the benefit confirmed on him and
the benefit so relinquished shall revert to the transferor or his representative as if it had not been
disposed.
Thus the refractory transferee must forfeit the benefit if he elects against the transfer.
For the doctrine of election to apply the following condition should satisfy
1. The transferor should dispose of property which he has no right to transfer.
2. The transferor should confer a benefit out of his own property on the owner
property which he profess to dispose of
3. the transfer of property to the person who is to put to a election and the
conferment of benefit on him should be the parts of the same transaction
4. Same transaction does not always mean the same instrument.
The doctrine is based on the principle that “ there is an obligation on him who takes a
benefit under a will or other he takes the effect” as stated in Cooper v Cooper.
APPORTIONMENT (section 36 - 37)
Story in his book “Equity jurisprudence” points out that the term ‘Apportionment’ is used in two
senses:
1. To denote the distribution of a common fund among the several claimants; and
2. To denote contribution made by several persons having distinct right to discharge a common
burden.
In the present context the word ‘apportionment’ is used only in the first sense. Apportionment
means division. Section 36 deals with apportionment of periodical payments as between the
transferor and the transferee. Section 36 deals with apportionment of a obligation in the event of
the division of the property to which it relates. Section 36 deals with apportionment by time
whilst section 37 deals with apportionment by estate.
1.Apportionment by time(section 36)
Section 36 embodies a rule of justice equity and good conscience. Several properties
yield income. The division of his income between the transferor and the transferor and the
transferee is called its apportionment.
Section 36 lays down that all periodical payments in the nature of rents, annuities,
pensions and dividends shall be deemed to acquire from day to day and be apportioned between
the transferor and the transferee on that basis.
Illustration
‘A’ leases his house to ‘B’ at a rental of Rs.400/- per month payable on the last day of the
month. On the 15th April A transfers his interest to ‘C’. On the 30th April ‘A’ is entitled to 15
days rent ie Rs.200 and ‘C’ is entitled to the other 15 days rent ie Rs. 200/-
This rule can be executed by a local usage or contract the contrary. Section 36 does not apply to
transfer by operation of law. For eg. A person buys property at an execution sale acquires title by
operation of law. Similarly the section does not apply to cases of partition because a partition is
not a transfer.
Phirozshaw V Coolbai
In this case the income was derived from the rents and shares. In this case it was held that
the rule of apportionment was applicable. So prior to the TP Act there could be no
apportionment of rent.
The scope of section 36 was considered in Sathyabhamadevi v Ram Kishore it was held that the
rent was apportionable.
2.Apportionment by estate (section 37 )
Where a property is given on a transfer to several persons by portions, each of the
transferee is entitled to all the advantages, accruing from the property to his interest in it. Bit it is
provided that the person who has to original performs the corresponding duty must have
information that the original single owner had divided his property. In other words notice to
tenant is necessary to convert single obligation into several obligations proportionately Notice
can be given by transferor or transferee.
Illustration
‘A’ sells his house at a rent of rs.100/-. ‘A’ sells half of his house to ‘B’. the tenant
having notice of the sale must pay from the date of sale, rent at the rate of rs.50/- to ‘A’ and
rs.50/- to ‘B’. This section also does not apply to involuntary transfer or to cases of succession.
‘A’ sold his building to ‘B’ on the 15th of a month. The building was given in rent. ‘A’
can claim the rent upto the date of 15th and ’B’ can give the rent only from 16th. But the amount
are payable only on the date appointed for a payment. Where the property enjoying the benefit of
an obligation is divided and held in several shares, each is entitled to the benefit of the obligation
in proportion to his share.
‘A’ sells to ‘B’ ‘C’and ‘D’ a house situated in a village and leased to ‘E’ annual rent of
Rs.30 and delivery of one fat sheep. ‘B’ having provided half the purchase money and ‘C’ and
‘D’ one quarter each. ‘E’ having notice of this must pay Rs.15/- to ‘B’ Rs.15 to ‘D’ and must
deliver the sheep according to the joint direction of ‘B’ ‘C’ and ‘D’.
Rent paid to a holder under the defective title (section 50)
Section 50 of the TP Act protects payment d rent made in good faith to a holder of
immovable property under a defective title.
If a tenant or any other person, who has to make periodical payments in respect of an immovable
property makes a payment in good faith to a person from whom he held the property he cannot
be compelled to make a second or further payment to another person, even if it should turn out
later on that the person who received the payment had no right to receive it.
Illustration:
‘A’ lets field to ‘B’ at a rent of Rs.50/- and then transfers the field to ‘C’. ‘B’ having no
notice of the transfer, in good faith pays the rent to ‘A’. ‘B’ is not chargeable with the rent so
paid.
Section 100 similarly provided that if the lessee, not having reason to believe that the
lessor has transferred the property leased, pays rent to the lessor the lessee is not liable to pay
such rent to the transferee.
II If improvement made by bonafide holders under defective title( section 51)
The law relating to improvements made on lands by bonafide persons holding under the
defective titles is laid down in sec 51 of the TP Act
A transfer of an immovable property with a defective title acquires no real interest to the
property. But if he makes improvements on the property, believing in good faith that he is
absolutely entitled thereto, he will have two alternative remedies when the real owner seeks to
evict him. Either he will be entitled to the cost of his improvements, or he will be entitled to have
the property sold to him to the market price irrespective of his improvements.
This section cannot however apply unless the transferee made the improvements in good faith.
This section is based upon the principle that “he who seeks equity must do equity”
In order to entitle a person to the benefit of this section (ie to the improvements made by
him or to their value, four things are necessary
1.He must be a transferee
2.He must believe himself to be absolutely entitled to the immovable property. A person who is
aware if his imperfect title or who knows that his title is terminable, such a lessee or a tenant or a
‘mortgage is not entitled to the benefit of this section.
(Gokulapathi v Venkatarama Sharma 1971)
3.He must believe in good faith. A person in wrongful possession cannot recover the costs of the
improvements
4.Property must not have been claimed by inheritance
In Topanmal v Chanchamal ‘A’ believing that he had become the owner of a property and
spend Rs.2000/- ‘A’ was subsequently evicted by a person having a better title. The court held
that ‘A’ had no remedy because section 51 does not apply to a person who claims property by
inheritance.
Section 51 of the TP Act relates to conveyances between living persons.
Narayana Rao v Basavarappa (1956)
The plaintiff sued for possession of the property from the defendant title was found to be
defective. The defendant had purchased the property and had bonafide constructed a new
building upon it. The trial court gave the plaintiff an option to pay to the defendant the cost of
improvements and take possession or to sell the property to the defendant.
On 25-07-45 plaintiff elected to pay for the improvements and to take possession. The
value of the improvements on 25-07-45 was found to be Rs.14000/- and the court directed the
plaintiff to pay the amount to the defendant. The plaintiff actually took possession on 01-07-48.
The SC pointed out that a court should assess the valuation of the improvements as at a
date as near as possible to the date of actual eviction rather than the date of election as he has
been done in this case.
The values of the improvement about the time of eviction was found to be Rs.190000/-.
The plaintiff was accordingly directed to pay this amount to the defendant if he wanted to retain
the possession of the property.
Problems:
1. ‘A’ purchases certain property from a Hindu widow without making any inquiry as to the
necessity for the sale and effected some improvements. On the death of the widow, the sale was
set aside by the reversioner. Can ‘A’ claim compensation for the improvements.
Purchaser from widow
For claiming compensation in respect of improvements, the transferee should have
believed in good faith that he was absolutely entitled to the property. Where there is willful
abstention from the inquiry good faith must be held to be lacking. Thus in Nanjappa Goundan v
Preman Goundan a purchaser from a widow did not make any enquiry as to the necessity for the
sale. The sale was set aside at the instance of the reversioner.
Since the purchaser could not in the circumstances had believed that he was absolutely
entitled, it was held that there could not be no valid claim to compensation for improvements
2. ‘A’ builds on land which he thinks is his, but it is really B’s. ‘B’ knowing of A’s mistake
encourages ‘A’ to build. Discuss the rights of ‘A’ and ‘B’?
The owner of land cannot sue for eviction where he seeks another person erecting a
building on his upon it and knowing that such other person is under mistaken belief that the land
is his own property obtains from interference.
‘A’ cannot be evicted by ‘B’ and the question of A’s right to claim compensation under
section 51 which arises only on eviction does not arise.
Durgozi v Fakeer Sahib
The mother of a Mohammedan minor, acting as defacto guardian sold the minor’s
property to ‘A’ believing in good faith that she had authority to do so. When ‘A’ was evicted by
the minor ‘A’ was entitled to compensation for the improvements made by him.
TRANSFER BY OSTENSBLE OWNER AND DOCTRINE OF FEEDING THE GRANT
BY ESTOPPEL:
A) Transfer by ostensible owner section 41
If any person transfers with the express or implied consent of the owner of a property for
consideration, then the former is called the ‘ostensible Owner’ of such property. The transfer is
fully valid if the transferee has taken reasonable care to ascertain the real owner of the property.
The transferee must also act in good faith that the transferor has the authority to make such
transfer.
The above rule is famous case Ramcoomar v Moqueen
Facts
The property in this case was purchased by Mc Donald but the sale deed was in the name
f his concine Bunno bibi. Bunno bibi was said to be a binamidar, a tender of her name for the
transaction between MC Donald, ‘X’ the father of Ram Coomar purchased the property from
Bunno bibi believing to be the owner. He took possession. There was no objection from MC
Donald. Later on MC Donald executed a will under which he bequeathed the property to the
plaintiff. The plaintiff brought the suit to recover the property from the heir of ‘X’ who had died
by the same time. Privy Council dismissed the suit.
The Privy Council held that Mrs. Donald was the ostensible owner and hence the transfer
made by her was valid. The case led to the formulation of the “Doctrine of holding out” which is
incorporated in section 41 of the TP Act.
For the purpose of application of the doctrine of holding out, the following three conditions are
essential
1. The transferor should be the ostensible owner of the property
2. The ostensible owner should hold out the property with the consent of the real
owner.
3. The transferee must have purchased the property for value and in good faith.
Section 41 is an exception to the rule “nemo dat quod non habet” Ie “no man can transfer
a better title that what he himself has”
B)Doctrine of feeding the grant by estoppel (section 43)
If a person fraudulently makes an invalid transfer of certain immovable properties for
value, then the transferee gets no title to the property even though he has purchased the property
for value and in good faith. But if the transferor subsequently gets a title over the fraudulently
transferred property, then he must give such property to the transferee. In other words, the seller
is estopped from denying the fact that he was not the owner of the property. He must remedy the
wrong committed by him to the transferee by way of giving the property newly acquired for eg
‘A’ is the son of ‘B’. ‘A’ makes a transfer of his father’s property to ‘X’. He represents he is the
real owner. The buyer ‘X’ makes the purchase for value and in good faith. ‘B’ dies and ‘A’
inherits the property subsequently. Now ‘A’ must hand over the property to ‘X’ under the
doctrine of feeding the grant by estoppel.
The following condition must be satisfied for the application of the doctrine
1. The transferor must have made a fraudulent transfer
2. The transferee must have believed the transferor’s misrepresentation and purchased
the property for value and in good faith.
Subsequently to the transfer the transferor must have acquired some title in the property.
DOCTRINE OF LIS PENDENS (Section 52)
Lis pendens generally means the pending of a suit before a court of law. The subject
matter of the suit should not be transferred to any third party, when a suit is pending. If one of
the parties to the suit transfers the immovable property which is the subject matter of the suit
then the transferee is bound by the result of the suit or proceeding.
For eg. If ‘A’ and ‘B’ have a pending case before a court with regard to the ownership of
a house and if ‘B’ transfers the house to ‘C’, during the pending period, the transferee ie ‘C’
should return the house to ‘A’ if he wins the case.
So the rule affects the purchaser if the judgment is in favour of the party opposing the
transferor. The basis of the doctrine is the final adjudication of the dispute. The aim of the
doctrine is to prevent multiplicity of suits.
The essential condition is that the right to immovable property must be directly and
specifically in question. The rule does not apply to court sales but only to the voluntary transfer
like sales, mortgages etc.
Bellamy V Sabine
‘F’ filed a suit impeaching the sale of an estate by ‘E’ to which ‘F’ is the heir. During
pendency ‘S’ transferred it to ’B’ who had no notice of the suit. judgment was given in favour of
‘F’. It was held that ‘B’, The alienee from ‘S’, is bound by the direction and he had to return the
estate event though he was not aware of the suit.
The purpose of Lis Pendens is to bring a final adjudication and to protect the plaintiff. In Love
Raj Kumar v Daya Shankar
1
it was held that section 52 is based upon the principle of equity,
justice and good conscience.
B) Application and Scope
1. The doctrine is applicable to all cases between the co – heirs
2. It is applicable to exparte judgments
3. It is also applicable to compromise decrees
4. Involuntary transfer
The doctrine of lis pendens now applies to both voluntary and involuntary transfers.
Execution of property under courts order is an example of involuntary transfer. The purchaser of
the property at court auction sale is also affected by the doctrine.
C) Essentials of Lis pendens
1. The suit must be pending before a court of competent jurisdiction
2. If a suit is not filed before a court of competent jurisdiction it is not a pending
suit. So transfer during the pendency of the suit in a court of incompetent jurisdiction is valid. If
the plaint is returned due to insufficient court fee then the case is not pending till it is filed with
sufficient court fees stamp.
In Supreme General Films Exchange Ltd.(M/s) v.Brijnath Singh
2
it has been held that a
lease, purporting to create new right pendente lite is to be struck down by the doctrine of lis
pendens.
FRAUDULENT TRANSFER (section 53)
Introduction
Section 53 says “every transfer of immovable property made with the intention to defeat
or delay the creditor of the transferor is voidable at the option of the creditor so defeated or
delayed.
However if the transferee purchased the property in good faith and for consideration, then
the transfer is valid. Similarly the insolvency of the transferor will not affect the transfer.
1
AIR 1986 Del 364
2
AIR 1975 SC 1810
A suit instituted by the creditor to avoid the transfer on the ground that the transfer has
been made with the intention to defeat or delay the creditors of the transferor shall be instituted
on behalf of or for the benefit of all creditors.
If the transfer of immovable property is made without consideration or with the intent to
defraud, such transfer shall be voidable at the option of such transferee.
Essentials of( section 53)
1. There must be a transfer if immovable property for consideration
2. Such transfer must be made with the intention to defeat or delay the creditors
3. Such transfer is now voidable at the option of the creditor
4. The creditor can file a suit on behalf of all creditors
5. The transferee who gets the property in good faith and for consideration is not
affected by the creditor’s suit.
Twyne’s case
A debtor secretly transferred his whole property but retained the possession with himself.
The court held that it was a fraudulent transfer. But he transferee contended that he had paid
consideration. The court again held that the transferee was not protected because he was not a
bonafide purchaser.
Conditions for setting aside a fraudulent transfer
A fraudulent transfer can be set aside under the following two conditions
1. If the subsequent transferee had the knowledge of the transferor’s debt
2. When the transferee has received the property gratuitously.
Remedies of creditors
1. The creditor can sue for a declaration of nullity of the transaction by a court.
2. A single creditor can sue on behalf of all creditors.
3. The creditor can recover the property from the subsequent transferee if such transferee had
received the property without consideration toith the knowledge of transferor’s debt.
Illustration
If ‘A’ by a written agreement has agreed to transfer a land to ‘B’ and if ‘B’ is prepared to
perform the terms of the contract. ‘A’ must transfer the land. Here ‘B’ must have taken
possession of the land and must have done some act in furtherance of the contract. ‘A’ can be
prevented denying the transfer of land.
A)Transfer on impossible or fraudulent conditional transfer :( Section 25)
Section 25 gives some rules relating to conditional transfers .Conditional transfers means
transfers to which conditions are attached. According to this section a transfer made on a
condition fails if the performance of the condition is impossible. The section enacts that if an
interest is created depending on a condition which is either impossible or forbidden by law or is
fraudulent or immoral or opposed to public policy the interest fails.
Section 25 is closely related to section 23 of the Indian Contract Act
Illustration
1. ‘A’ transfers property to ‘B’ on condition that ‘B’ must touch the sky with his finger. This
condition is invalid as being impossible the transfer to ‘B’ also fails.
2. ‘A’ transfers Rs.500/- to ‘B’ on condition that he shall murder ‘C’. The transfer is void.
3. ‘A’ transfers Rs.500/- to his niece if she will desert her husband. The transfer is void.
B) Condition precedent (section 26) and condition subsequent (section 29)
Property subject to conditions. Conditions may be condition precedent or condition subsequent.
A condition precedent is one, on the fulfillment of which an interest takes effect.
A condition subsequent is one on the happening of which an already vested interest becomes
divested.
Conditions precedent (section 26)
In a condition precedent it is not necessary that the condition is strictly complied with.
Only a substantial compliance is necessary. Rule of substantial compliance is otherwise known
as the doctrine of cypres.
Illustration
1. ‘A’ transfers Rs.5000/- to ‘B’ on condition that he shall marry with the consent of ‘C’ ,
‘D’, ‘E’. ‘E’ dies ‘B’ marries with consent of ‘C’ and ‘D’ . ‘B’ is deemed to have fulfilled the
condition
2. A transfers Rs.5000/- to ‘B’ on condition that he shall marry with the consent of ‘C’, ‘D’
and ‘E’. ‘B’ marries without the consent of ‘C’, ‘D’ and ‘E’. But obtains their consent after
marriage. ‘B’ has not fulfilled the condition.
THE DOCTRINE OF CYPRES
Section 26 lays down the important English doctrine of cypress. According to this
doctrine when there is conditions precedent to the accrual of an interest, the condition is deemed
to have been fulfilled if it had been substantially complied with.
In case of a condition precedent, subsequent fulfillment of the condition is not sufficient
compliance. Thus in the second illustration where B takes the consent of C, D and E(assuming
that B did not die) after his marriage and not before , the condition is not fulfilled and he cannot
take any interest.
Where a literal execution of the intention of the transferor became inexpedient or
impracticable the court will excuse it as nearly as it can according to the original purpose. Thus
where the consent of several persons is necessary for the marriage of the transferee, and some of
the persons become or die the consent of the rest will do.
Law leans in favour of vesting and against diversting Discuss:
Section 26 enacts the cypress doctrine in regard to condition precedent. Section 26
provides that the condition shall be deemed to be fulfilled if it substantially complied with. Thus
if ‘A’ transfers Rs.5000/- to ‘B’ on condition that he shall marry with the consent of ‘C’, ‘D’ and
‘E’. ‘B’ marries with the consent of ‘C’ and ‘D’ the condition is deemed to be fulfilled and ‘B’
can take Rs.5000/- On the other hand condition subsequent is subject to the rule of strict
compliance. This rule is laid down in section 29. So when Rs.5000/- is given upon ‘B’ upon a
condition that if he marries without the consent of ‘C’ ‘D’ and ‘E’ the property should go to ‘F’.
The condition will not be deemed to be fulfilled after the death of ‘C’ and ‘D’. So ‘B’ will not
get Rs.5000/-. Law thus leans in favour of vesting and against divesting.
Problem
‘A’ transfers to ‘B’ Rs.500/- on condition that he shall marry with the consent of ‘C’. ‘B’
marries without the consent of ‘C’ but obtains the consent after marriage. Can ‘B’ claim the
amount?
Conditions precedent are governed by the rule of substantial compliance and not by the
rule of strict fulfillment. Since the law favours the vesting of the estates. The condition has not
been even substantially complied with in this case for obtaining the consent prior to the marriage
is the essence of the matter. B has not fulfilled the condition and so cannot claim the property.
Condition precedent and condition subsequent
1.(C.P), by the fulfillment of the condition and estate, not previously becomes divested.
(C.S) by the fulfillment of the condition, and estate previously vested become divested
2.(C.P), if fulfillment is impossible both the condition and the estate
limited upon it are void.
(C.S) if fulfillment is impossible, the condition fails and the previous
estate become incapable of being defeated or avoided indefeasible.
3.(C.P), Substantial compliance is sufficient
(C.S) requires strict fulfillment
4.(C.P) if condition is illegal, the estate limited upon it fails
(C.S) if condition is illegal, the previous estate becomes indefeasible and
the condition is ignored.
Doctrine of part performance (section 53 A)
Introduction
If a person contracts to transfer any immovable property on certain terms and if the
transferee has taken possession of the property and has done some act in furtherance of such
contract, then the transferor cannot breach the contract of transfer
Essentials:
1. There must be a contract to transfer some immovable property for consideration
2. Such contract must be in writing
3. it must be signed by both the transferor and the transferee
4. The terms of the contract must be ascertained with reasonable certainty.
5. The transferee must have taken possession of the property and continue to be in
possession of the
property and must have done some act in furtherance of the contract.
6. The transferee must be willing to perform his part of the contract.
7. The contract need not be registered and it need not be complete in the prescribed manner
as provided
by law
8. Now the transferor is (debarred) prevented from breaching the contract except by the
term provided
under the contract.
The second transferee for consideration who has no notice of the contract or the part
performance can get a valid title and so the rule ‘Nemo dat quod non habet’ will not apply.
Illusrtation:
If ‘A’ by a written agreement has agreed to transfer a land to ‘B’ and id ‘B’ is prepared
to perform the terms of the contract. ‘ A’ must transfer the land. Here ‘B’ must have taken
possession of the land and must have done some act in furtherance of the contract. ‘A’ can be
prevented from denying the transfer of land.
Maddison v. Alderson
Alderson agreed to remain in B’s service. The consideration was that ‘B’ would give a
life estate to Alderson by will. The life estate was bequeathed by a will subsequently. The will
was defective because there was no attestation. The legal heirs of ‘B’ claimed property by
challenging the validly of the will. The court held that Alderson’s service under ‘B’ could not be
regarded as an act of part performance because the act was not in connection with the transfer of
property.
Indian law as to part performance
Section 53 A was introduced in the amended TP act, 1929, on the basis of equity. It was
borrowed from the English Law, and was incorporated on the basis of decision of the Privy
Council in the case of Mohammed Musa v Aghore kumar. The privy council held that the
agreement could in oral from relying on the judgment in Maddison v Alderson. Subsequently to
this decision this doctrine was introduced in section 53A, but with only one change namely the
agreement must be in written form.
In Dharmaji v. Jagannath Shanker Jadav
3
the court held that by virtue of the provisions
of section 53A, the transferee can resist any endeavour on the part of the transfereror to disturb
the transferee's lawful possession both as plaintiff and as defendant.
SALE OF IMMOVABLE PROPERTY
Definition of Sale
S.54 of the Act defines sale. Sale is the transfer of ownership in exchange for a price paid
or promised or part paid and part promised. In sale there is absolute transfer of all rights in the
property sold. No rights are left to the transferor. In a sale there is a transfer of ownership and not
transfer of an interest or a rights. The proprietary right of the seller passes to the buyer absolutely
after sale. Following are the essentials of a valid sale.
Essentials of a Valid Sale
1. Parties
Parties to a sale are the seller and buyer. The seller is also called vendor and the buyer
vendee. The seller must be competent to transfer and the buyer may be any person who is not
disqualified as a transferee.
2. Subject matter
The subject matter of a sale must be specific immovable property. The subject matter
must be in existence at the time of transaction.
3. Conveyance or Formalities
In the case of tangible immovable property of the value of Rs.100/- or above and in case
of Intangible Immovable property the transfer must be effected by a registered document
(Instrument). In case of tangible Immovable property of the value less than Rs.100/- transfer
may be made either by registered instrument or by delivery of property.
4. Consideration
3
AIR 1994 Bom 254.
Consideration is called the price. Price means money only. If the consideration of the
transfer is something other than money it is not a sale. Thus price is an essential requirement for
sale. The price must be paid or promised or partly paid and partly promised.
Contract of Sale and Contract for Sale
Immediate sale or contract of sale means instant sale. Contract for sale means agreement
to sell.
S.54 of the Act defines a contract for sale. It is a contract that a sale of such property
shall take place on condition (terms) settled between parties.
In a contract for sale the property passes to the buyer only after some days. That is after
the condition is fulfilled. In other words in a contract for sale title passes after some conditions
are fulfilled.
Contract of sale creates a right in rem and contract for sale creates a right in personam.
In India contract for sale does not create any interest on such property. The English law is
different. In England an agreement to sell creates a right in equity.
In Crest Hotel Ltd. v. Assistant Superintend of Stamps
4
, the court observed as follows:
"A contract for sale of immovable property is a contract that a sale of such property shall
take place on terms settled between the parties, It does not, of itself create, any interest, in or
charge on such property. An agreement for sale is merely a document creating a right to obtain
another document of sale on fulfillment of terms and conditions specified therein. On the
strength of such an agreement a buyer does not become an owner of the property. The ownership
remains with the seller. It will be transferred to the buyer on the execution of sale deed by the
seller. The buyer obtains only a right to get the sale deed executed in his favour."
Rights and Duties of Seller
4
AIR 1994 Bom 228.
Before sale deed is executed (before completion of sale) S.55 of the Act provides the
following Rights and Liabilities of a Seller:
1. To Disclose the Defects
5
The seller is bound to disclose the material defects of the property or in the seller's title,
which he is aware and the buyer is not aware and cannot be found out by mere inspection of the
property.
2. To Produce Title Deeds
6
The seller is bound to produce title deeds, answer to questions as to the title to the
property and should be a marketable title.
3. To Execute a Conveyance
7
When the buyer pays money the seller must execute a proper conveyance (by Deed)
4. Reasonable Care of the Property
8
The seller is bound to care the property, which is the subject matter of the sale. This care
should be taken by the seller in between the date of sale and the date of actual delivery of
possession. The seller must not destroy Injure or anything done which will affect the property.
5. Pay Outgoing
9
The seller must pay the public charges, rent, tax etc. up to the date of the sale.
Seller's Duty after the Sale is completed
The seller must deliver possession of the property to the buyer. He has to discharge the
encumbrance when the property is sold. He has to deliver title deeds when he does not retain any
part of the property and when the whole of the purchases money has been paid. Where part of the
5
S.55 (1)(a).
6
S.55 (l)(c).
7
S.55 (1)(d)
8
S.55 (1)(e)
9
S.55 (1)(g)
purchase money remains unpaid, the seller has a charge on the property for recovering that
unpaid price; this is called the seller's charge for unpaid purchase money.
Unpaid Vendor's Lien
10
S.55 (4) (b) deals with an important right, available to an unpaid seller. This right is
available in England and in England it is called English Equitable Lien.
For E.g. Mr. 'A' sold the property to 'B'. The full consideration is not paid. Here 'A' is an
unpaid vendor. He can exercise a charge for the balance money in the property at the hands of
the buyer.
If the sale is completed by conveyance and whole price is unpaid or part remains unpaid,
the seller acquires a charge on the property.
The unpaid vendor's lien arises when two conditions are fulfilled:-
1. The buyer should have become the owner of the property
2. The purchase money, in whole or in part should remain unpaid.
Indian Law
S.55 (4) of the T.P. Act deals with the unpaid vendor's charge in India. When the
ownership of the property has passes to the buyer, before payment of the whole of the purchase
money, the seller (vendor) is having a charge upon the property In the hands of the buyer to the
extent of the balance money with interest. The charge may be excluded by a contract to the
contrary. The charge can be waived only by an express contract.
10
S.55 (4)(b).
In Webb v. McPherson
11
, a tea estate was sold by Lloyd to McPherson for Rs.80,000/- of
which Rs.30,000/was paid in cash and the balance was agreed to be paid in annual instalments.
When the annual instalments were not paid, Webb, executor of Lloyd, brought a suit for
declaration of a charge on the tea estate for the balance of the unpaid purchase money. It was
argued that an agreement to pay the balance in annual instalment is waiver. It was held that a
mere agreement to pay the balance money in instalments is not a waiver, so there is scope for the
unpaid vendor's charge to arise in this case,
Rights & Duties of Buyer
12
1. Before Purchase is complete
a. Duty to Disclose
The buyer should disclose facts materially increasing the value of the property and
relating to the vendor's title.
Suppose 'A' sells a property to B which A is thinking that he has a life estate in the
property while B knows that has an absolute interest, then B should disclose the fact for it relates
to A's title.
b. Duty to Pay the Price at the Proper Time and Proper Place
At the time of the contract, the buyer usually pays earnest money to show his earnestness
to complete the sale. If the transaction falls, not due to any fault of the buyer, he is entitled to get
back the earnest money and can claim a charge on the property. But if the transaction fails
through his default, the seller may forfeit earnest money. If the buyer has paid the price of an
installment of it but the transaction falls, he can get back the amount. He can claim a charge for
this; amount if he can prove that there was not any default on his part, this right of the buyer is
called the buyer's charge for prepaid price.
13
2. After Purchase is Complete
11
1904, 31 Cal. 57.
12
S. 55(5), (6).
13
S. 55(6)(b).
He has to bear the loss arising from the destruction and depreciation of the value of the
property. He has to pay the public charges. He is entitled to the rents and profits. He has to pay
up the encumbrance if the property is subject to encumbrance.
MORTGAGES
Definition
Ss 58 to 99 of the Transfer of Property Act deal with mortgage. Mortgage is a French
word, which literally means deed pledge. According to Sec.58 (a), a mortgage is a transfer of an
interest in specific immovable property as security for the repayment of a debt. The nature of the
right transferred depends upon the form of the mortgage. The transferor is called the mortgagor.
The transferee, the mortgage, and the amount for which the property is transferred as a security is
called the mortgage money.
Elements
1. There must be a Transfer of an Interest
The mortgager transfers some interest to the mortgages. If no interest if transferred it is
not mortgage.
An undertaking not to alienate the property till the debt is discharged is not a mortgage
since there is no transfer of interest. In charge there is no transfer of Interest.
2. Interest must be Transferred in a Specific Immovable Property
In every mortgage deed the property mortgaged is described specifically in the document. If
the property is not specific, it does not create a mortgage. If the property is vaguely described
as "a mortgage over all my property", it does not create a mortgage.
3. Transfer must be for the Purpose of Security of a Debt
It may be for the purpose of securing the performance of any contract which gives rise to
pecuniary liability. The word 'engagement' means a contract.
The purpose or object of a mortgage is to secure a debt. A transfer for the purpose of
discharging a debt is not a mortgage.
In Mohan Lal v. Indumati
14
, it was held that an agreement not to alienate immovable
property till the repayment of a loan is purely a personal undertaking not amounting to mortgage.
CLASSIFICATION OF MORTGAGES
Section 58 of the T.P. Act enumerates six classes of Mortgages: -
1. Simple Mortgage
S.58 (b) of the Act defines Simple Mortgage. Where without delivering possession of the
mortgaged property, the mortgager binds himself personally to pay the mortgage money, and
agrees expressly or impliedly that, in the event of his failing to pay according to the contract,
the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds
of sale to be applied, so far as may be necessary.
A simple mortgage consists of;
1) A personal obligation, express or implied to pay and
2) The transfer of a right to cause the property, to be sold with an order of the Court.
The right transferred to the mortgagee is not ownership. The characteristic of a simple
mortgage is that possession is not given. In this type of mortgage mortgagor bind himself to pay
the mortgage money personally. If the mortgagor fails to pay the amount the mortgagee can
cause the property to be sold under an order of the court. What is transferred in a simple
mortgage is a power to sell the property through court.
2. Mortgage by Conditional Sale
15
In a mortgage by conditional sale the mortgagor ostensibly sells the mortgaged property
on any one of the following conditions:
a. That on default of payment of the mortgage-money on a certain date the sale shall
become absolute, or
b. That If such payment being made, the sales shall become void, or
c. That on such payment being made, the buyer shall re-transfer the property to the seller.
It is a mortgage in which the ostensible sale is conditional and intended as security for the
debt.
Though, the document says that the mortgagee will become the absolute owner if the
mortgagor does not pay the amount on a particular day, the mortgagor will be entitled to redeem
14
39 All 344 FB.
15
S. 58 (c).
the property at any time before foreclosure because of the principle "Once a mortgage, always a
mortgage". The ostensible sale is subject to the proviso that it shall become an absolute sale on
default of payment at the specified time.
Mortgage by Conditional Sale and Sale with a Condition to Re-purchase
A mortgage by conditional sale resembles a sale with a condition to repurchase. But they
are distinct transactions. Following are the distinction between the two:
1. In the case of a sale with a condition for re-purchase, the transaction is really a sale
and the ownership is immediately transferred.
In a mortgage by conditional sale, the mortgagee will not become the owner quickly. He
will get the title only when the mortgagor fails to pay the amount and obtaining a decree of
foreclosure.
2. In the case of a sale with a condition to re-purchase there is no subsisting debt. In the
case of a mortgage by conditional sale, there is the element of debt present.
3. In the case of a mortgage by conditional sale, time for payment is not an essential
condition. The mortgagor may redeem the property even after the due date and before it is to
re-closed by the mortgagee.
In the case of a sale with a condition to re-purchase the option to re-purchase must be
exercised within the time.
4. In the mortgage by conditional sale the amount is less than the value of the property. In
the case of a sale with a condition for re-purchase amount is equivalent with property.
In Chunchchun Jha v. Ebadat Ali
16
the Supreme Court held that a question whether a given
transaction is a mortgage by conditional sale or sale with a condition for re-purchase is a vexed
one and in such cases the intention of the parties is the determining factor. The court further held
that "if the sale and agreement to re-purchase are embodied in separate documents, then the
16
SC 1954.
transaction cannot be a mortgage". But the mere fact that there is only one document does not
necessarily mean that it must be a mortgage, and cannot be a sale.
In a mortgage there is generally an outstanding debt. Possession is generally with the
mortgagor. Payment of cost or taxes is generally done by the mortgagor only.
3. Usufructuary Mortgage
17
This is the common form of mortgage in India. In a usufructuary mortgage the mortgagee
is placed in possession and has a right to enjoy the rents and profits until the debt is paid. There
cannot be two different usufructuary mortgages on the same property at the same time. The right
to possession is the distinguishing feature of a usufructuary mortgage. It is not necessary that the
mortgagee should take physical possession, for the mortgager may continue in possession as
lessee of the mortgagee. Mortgagor may also direct the tenants to pay rent to the mortgagee
going in possession; there cannot be a usufructuary mortgage.
The word 'Usufruct' means income from the property including rent. Sec.58 (d) defines
Usufructuary Mortgage as;
"Where the mortgagor delivers possession of the mortgaged property to the mortgagee,
and authorized him to retain such possession until payment of the mortgage money and receive
the rents and profits accruing from the property or any part of such rents and profits and to
appropriate the same in lieu of interest or the payment of the mortgage money or partly in lieu of
mortgage money or partly in lieu of interest", the transaction is called Usufructuary Mortgage.
The chief requirements of a usufructuary mortgage are;
a. The mortgager must deliver or bind him to deliver possession to the mortgagee.
b. The mortgage money including interest should be realized out of the usufruct of the
mortgaged property
17
S. 58 (d).
c. The mortgagee should have no remedy except to enjoy the usufruct of the mortgage
property.
No Personal Liability
The mortgagee takes possession and takes the rent and profits to repay himself. The
mortgager cannot be sued personally for the debt.
4. English Mortgage
According to S.58 (e) of the Act, When the mortgagor binds himself to repay the
mortgage money on a certain date, and transfers the mortgaged property absolutely to the
mortgagee, but subject to a Proviso that he shall re-transfer it to the mortagagor upon payment of
mortgage money as agreed, the transaction is called English Mortgage.
In English mortgage the mortgagor absolutely transfers the property to the mortgagee and
personally binds to pay the amount on a certain day. The absolute transfer is subject to a proviso
that the mortgagee should re-transfer the property In case the amount is paid.
An English mortgagee is entitled to possession of the mortgaged property, when he is in
possession he has to account for the rents and appropriate them towards payment of the mortgage
money.
Essential Ingredients of English mortgage
1. Mortgagor shall bind to pay mortgage money on a certain date.
2. Mortgaged property should be absolutely transferred to mortgagee.
3. Transfer must be with a proviso so that mortgagee will reconvey upon repayment on
date when he binds to pay.
9. Mortgage by deposit of Title Deeds
According to S.58 (f) of the Act, Where a person in any one of the following towns of
Calcutta, Madras and Bombay and in any other town which the State Govt. concern, may by
notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent,
document or title to immovable property, with intent to create a security thereon, the transaction
is called a Mortgage by Deposit of Title Deeds.
This is called in English law an Equitable Mortgage. A mortgage by deposit of title deeds
may be created by the mortgagor depositing the title deeds with the mortgagee or his agent with
intent to create a security for the debt. According to Sec.96, the remedy of a mortgagee by
deposits of title deeds is a right of sale as in a simple mortgage.
The deposit should be in the specified towns. The properties covered by the title deeds
need not be situated in these towns.
The actual physical handing over of the title deeds In respect of Immovable property by a
borrower or his agent to his lender is not necessary. The deposits of title deeds may be
constructive.
This type of mortgage can be created orally. Mere delivery of title deeds is sufficient. But
if a memorandum in writing accompanies it, if the writing creates the mortgage, it requires to be
registered.
6. Anomalous Mortgage
S.58 (g) of the Act defines anomalous mortgage. This type of mortgage is the
combination of Simple and Usufructuary mortgage and also the combination of usufructuary
mortgage and Mortgage by Conditional Sale. A mortgage, which is not simple, a mortgage by
conditional sale, usufructuary mortgage, an English mortgage, or a mortgage by deposit of title
deeds and which comes within the meaning of this section can be considered as anomalous
mortgage.
In K.Rajarajavarma Tirumalpad v. K.K.Krishnan Nair
18
, the Court held that 'Otti' is an
anomalous mortgage.
'Kanom' is another example of this type of mortgage.
18
1958 Madras.
In Narsingh Partab v. Mohamed yaqub
19
, the court held that a combination of simple and
usufructuary mortgage is an anomalous mortgage.
Rights of the Mortgagor
The following are the rights of a Mortgagor:
1. Rights of Redemption
The mortgagor is always the owner of the property. S.60 of the Transfer of Property Act
deals with the most important right of mortgagor namely, the right of redemption. Right of
redemption means the right to buy back or set free the property by payment. In England it is
called equity of redemption. The courts jealously protect this valuable right of the mortgagor.
The principle is 'once a mortgage always a mortgage but nothing but a mortgage'
The mortgagor can exercise this right 'at any time after the principal money has become
due. By virtue of this right of redemption the mortgagor can require the mortgagee.
a. to deliver the mortgagor the mortgage deed and all other documents relating to the mortgaged property.
b. Where the mortgagee is in possession of the mortgaged property, to deliver
possession to the mortgagor and
c. At the cost of the mortgagor either to re-transfer the property to him or to such third
person as he may direct, or to execute and where the mortgage is by registered instruments to
have registered as acknowledgement in writing to the effect that the mortgagee had extinguished
all his rights in the property.
This right is called Right of Redemption' and a suit to enforce this right is called 'Suit for
Redemption'.
In Madhavan Nair v. Ramankutty Menon
20
, it was observed as follows:
DOCTRINE OF CLOG ON REDEMPTION
19
AIR 1929 P.C. 139.
20
AIR 1994 Ker. 75.
The word 'Clog' means an obstruction. The right to redeem is an essential element of a
mortgage. This is expressed in the maxim 'Once a mortgage, always a mortgage, It means that,
when a mortgage is created, something else against the redeemable right of the mortgagor is not
allowed. Lord Davery in Noakes & Co. v. Rice
21
explained the meaning of this maxim. "A
mortgage cannot be made irredeemable and that a provision to that effect is void". In this case
Rice mortgaged his building to N & Co. with a condition that Rice should not sell any other
liquor than produced by the N & Co. in the premises whether during the pendency of the
mortgage or after wards. The condition is void.
The law protects the right of redemption with all its strength. Therefore it creates contract
entered into as part of the mortgage transaction which are repugnant to the mortgagor's
contractual or equitable right of redemption as void, they are treated as Clogs on redemption.
The doctrine of clogs on redemption is expressed in the maxim 'once a mortgage, always
a mortgage and nothing but a mortgage'. There cannot be any additional contract in the mortgage
deed, which would clog or fetter the mortgagor from redeeming.
Whether a Long Term period is a Clog
A long term for redemption may be in the Interest of the mortgagee, who may not seek a
fresh debtor for his money and the mortgagor who may not seek a fresh creditor for a fresh loan,
so a long term for redemption by itself is not a clog on redemption.
Chaturbhai Valdas & other v. Baijivi & others
In this case there was a mortgage for 99 years. The mortgagors contended that it was a
clog on redemption. It was held that it was not a clog on redemption. Long period would not of
itself amount to a clog on redemption, in the absence of other evidence showing that the
mortgagee had taken unfair advantage of his possession as lender.
In Sherkan v. Swamy Dayal
22
, the plaintiff mortgaged his property in 1908 to the
mortgagee. In the mortgage deed there is a provision that, if the mortgage is not redeemed within
5 years, it shall not be redeemed for further 12 years. The court held that it is a clog.
21
1920 AC 24.
22
1922,44 All 185 P.C
It was held that a condition that if the mortgage is not redeemed within a certain period, it
shall not be redeemed for a specified subsequent period. The condition is void because it is a
clog.
COLLATERAL ADVANTAGES
In India, the accepted rule is that on redemption the mortgagor is entitled to get back the
mortgaged property free not only from the mortgage debt but from every obligation which
formed part of mortgage transaction. Any advantage to the mortgagee beyond the interest on
amount advanced as a loan is called a collateral advantage. Collateral advantages are permitted
provided they are not opposed or repugnant to the mortgagors legal or equitable right to redeem,
are not unfair and do not survive the mortgage debt.
English Position
English equity courts disallowed collateral advantages while Usuary Laws were in force
in England. But after the repeal of Usuary Law the courts in England began to enforce by
agreements giving collateral advantages to the mortgagee. The law on the subject is developed
by, Stage-by-stage and is finally laid down by Lord Parker in
In Kreglinger v. New Patagonia Meat & Cold Storage Co., Kreglinger
23
, the plaintiff, a wool broker lent money to New Patagonia Meat & Cold Storage Co. under a document on 24th August 1910 for repaying with interest at 6%, An agreement to sell sheepskins for 5 years at the best market price is also made. The
company repaid the money in 2 1/2 years after and refused to give sheepskin. The plaintiff sued
for injunction to restrain to sell the skin.
In this case Lord Parker said, 'Collateral advantages are enforceable provided It is not
either;
1. Unfair and Unconscionable
2. In the nature of a penalty clogging the equity of redemption
3. Inconsistent with or repugnant to the contractual or equitable right to redeem.
In this case, the agreement was not unfair and unconscionable and not a clog on
redemption.
23
1914, AC 25 H.L
So the modern tendency is that collateral advantages are enforceable provided it must not
defect the right of redemption. Lord Parker in Kreglingers case observed, "What you have to
examine is whether there is an attempt to prevent redemption".
Indian Position
In view of the wordings of Sec.60 of the T.P. Act, it has been held that the rule in
Kreglinger's case is not applicable in India. Therefore a stipulation, which is intended to operate
beyond the redemption of a mortgage, is a clog and cannot operate beyond redemption.
According to S.60 A of the Act , on redemption the mortgagor has a right to compel the
mortgagee to assign the mortgage to such person as he may direct.
According to S.60 B of the Act the mortgagor gets the right to inspect and obtain copies of documents of title. The mortgagor must meet the expenses in this behalf .
Right to redeem separately and simultaneously / Doctrine of consolidation
S.61 of the T.P. Act corresponds with section 93 of the English Property Act dealing with
the Doctrine of Consolidation.
In English law the mortgagor's right to redeem was an equitable right. Hence on
principle, "he who seeks equity must do equity". A mortgagee who had several mortgage
executed by the same mortgagor had a right under certain circumstances to require the
simultaneous redemption of all the mortgages
Thus where 'A' held a mortgage on, property 'X' and also a separate mortgage in property
'Y', the mortgagor has no right to redeem separately i.e. the mortgagor must redeem the property
together. This is known as the doctrine of consolidation. Today this doctrine is abolished in
India. In India mortgagor can redeem separately.
According to Sec.61, the mortgagor and mortgagee are the same persons and more than
one property is mortgaged.
Right to Accession,
According to S.63, the mortgagor is entitled to any accession of the mortgaged property.
That is, upon redemption, mortgagor will get that increase also.
According to S.63 A the mortgagor has a right to improvements made by the mortgagee in possession in the absence of a contract to the contrary.
Renewal of Mortgaged Lease,
According to S.64 of the T.P Act, where the mortgaged property is a lease and the
mortgagee obtains renewal of the lease, upon redemption the mortgagor has the benefit of the
new lease in the absence of a contract to the contrary.
Right to Grant Lease,
According to S.65 A of the T.P Act, mortgagor while lawfully in possession of the mortgaged property, has the power to make leases there of which are binding on the mortgagee in the absence of a contract to the contrary.
Marshalling
According to S.81 of the Act the term 'Marshalling' means Arrangement. It is an
arrangement of securities between mortgager's interse.
Sec.81 of the T.P Act seeks to protect the subsequent mortgage's in respect of property
mortgaged to them being sold to satisfy a prior mortgage when the prior mortgagee has other
properties also mortgaged to him which could be sold to satisfy his dues.
Illustration
'A' is the owner of the two properties X and Y. He mortgages both X and Y to 'B', and
later mortgages Y only to 'C'.
If B seeks to realize the mortgage debt out of property Y, 'C' can compel 'B' to proceed
first against 'X', and realize a much as he can out of it.
If B's debt is satisfied out of X, Y is left for C quite intact.
If 'B' is not able to realize the whole of his debt from X, he is entitled to recover the
balance out of Y and 'C' will have no right to prevent him from doing so.
In Aldrich v. Cooper
24
, it was held that the right is to be exercised when the first
mortgagee seeks to realize his security
Conditions to be fulfilled
1. There must be a common debtor.
2. Two or more properties of the debtor have been first mortgaged to one person, and
subsequently one (or more) of the same properties is (or are) mortgaged to another person.
3. It will not be enforced so as to prejudice the right of the prior mortgagee.
2. Subrogation
According to S.92 of the Act, Subrogation means substitution of one person for another.
If any co-mortgagor or any other person having authority redeems any mortgage shall have the
same right of the mortgagee whose mortgage he redeems. Then he is said to be subrogated to the
right of the mortgagee whose mortgage he redeems.
Subrogation is of two;
(1) Conventional Subrogation which takes place by agreement
(2) Legal subrogation, which takes place by the operation of law.
A volunteer can't claim subrogation. There can't be partial subrogation
In Janakinath Roy v. Pramanthanath Mahir, Mr. 'P' the owner of certain properties gave 4
mortgages to Mr. 'O' in December 1927. Mr. P created 5th mortgage in favour of Mr. R which
provided that Mr. R should pay the earlier 4 mortgages and then subrogate to the rights under
those mortgages Mr. R discharged the first three mortgages but did not discharge the fourth one.
24
1803, 8 Ves. 382.
It was held by the Privy Council that Mr. R was entitled to subrogate the 4th mortgage,
3. Doctrine of Contribution
Sec.82 of the TP. Act deals with contribution. The doctrine provides due if several
properties not belonging to the same owner are mortgaged to secure a debt each property should
contribute towards the debt in proportion to its value. The right of contribution is one that arises
between mortgagers interse.
The rule of rateable contribution i.e. contribution in proportion to the value of properties
mortgaged is subject to a contract to the contrary.
A claim for contribution cannot arise until the whole of the mortgage debt has been
satisfied.
Illustration:-
Suppose X belongs to 'B' and Y belongs to 'C'. B and C jointly execute a mortgage of
both to 'A'. 'A' realizes; the whole of the debt from X alone. In such case Y must contribute
rateably i.e. in proportion to the respective values of the properties. That is if X is worth Rs.10,
000/- and Y is Rs.20, 000/- then X and Y must contribute in the ratio of 1:2.
For the purpose of determining rate of contribution the value of the respective shares
shall be what it was at the date of the mortgage.
In Kedar Lal V Harilal
25
, Harilal, the plaintiff brought the suit for contribution after paying up the entire mortgage debt incurred by his father and Kedar Lal and another. He claim contribution from them and argued that he is liable only 1/3rd of the debt and the defendant's 2/3rd of the debt Under S. 42 of the Indian Contract
Act (Joint promises directs equal contribution)
25
1952 SCR 179.
The defendant argued that the benefit of the borrowing was shared in different
proportions by the 3 borrowers; The Supreme Court held that the plaintiff's calculation was
wrong. In this case Sec.82 of TP. Act is applied.
REMEDIES Of MORTGAGEE
(Against Mortgagor personally)
S.68 of TP. Act deals with remedies of the mortgagee against mortgagor personally, they are;
1. Personal Remedy
a. Suit for mortgage money S.68 (a) on the personal covenant. Where the mortgagor
binds himself to repay the mortgage money, the mortgagee may enforce the personal liability by
suing upon the covenant. A personal covenant is implicit in a simple mortgage. It is found also in
an English mortgage. It is not found in mortgages by conditional sale and in usufructuary
mortgages.
b. Under S. 68 (b): Security becoming insufficient. "Where by any clause other than the
wrongful act or default of the mortgagor or mortgagee, the mortgaged property is wholly or
partially destroyed or the security Is rendered insufficient and the mortgagee has given the
mortgagor a reasonable opportunity of providing further security enough to render the whole
security sufficient and the mortgagor has failed to do so, the mortgagee has a right to sue for the
mortgage money".
c. Under S.68 (c)Deprivation of Security: "The mortgagee has a right to sue for the
mortgage money where the mortgagee is deprived of the whole or part of his security by, or in
consequence of the wrongful act or default of the mortgage".
The mortgagor's omission to disclose the fact that the property mortgaged is
non-transferable or is subject to prior mortgage is a wrongful default within the meaning of this
clause, which enables the mortgagee to sue for the mortgage money.
In Kuppier V Perio Karuppa
26
, the mortgagee lost possession by the trespass of a third
party with whom the mortgagor was not in collusion. It was held that there was no default on the
part of the mortgagor to attract the provisions of Sec.68(c). The failure to got back lost
possession is not "default" as contemplated by that clause.
26
1942 Madras 578.
d. Under S.68 (d) possession withheld from usufructuary mortgagee. "The mortgagee has
a right to sue for the mortgage money where the mortgagor fails to deliver the same to him or the
mortgagor fails to secure the possession thereof to him without disturbance by the mortgagor or
any person claiming under a title superior, to that of the mortgagor".
When possession is not delivered to a usufructuary mortgagee, or anomalous mortgagee
entitled to possession, he may sue for the mortgage-money. Dispossession by the mortgagor or
by superior title also furnishes a cause of action for recovery of the mortgage money.
2. Suit for Damages
The mortgagee is entitled to claim damages when the mortgagor commits waste of a
breach of the covenant for quite enjoyment. In case of waste of the hypotheca, damages may be
claimed even against strangers responsible for the waste
REMEDIES OF MORTGAGEE
(Against Mortgaged property)
S.67, 69, 69A, 96, 98 of the TP. Act deals with the Remedies of the mortgagee against
mortgaged property. They are,
Judicial Sale
The right of causing the hypotheca to be sold by an order of Court is what is transferred
under a simple mortgage. A simple mortgagee is therefore entitled, after the mortgage-money
has become due to him, and before a decree is made for the redemption of the mortgaged
property, or the mortgage money has been paid or deposited in Court, to obtain a decree that the
property to be sold.
Sec.67 (a) of the T.P. Act provides that an usufructuary mortgagee as such or a
mortgagee by conditional sale as such cannot institute a suit for sale.
The remedy of judicial sale is available to an English mortgagee and a mortgagee under a
mortgage by deposit of title deeds (Sec.96)
2. Foreclosure
A mortgage is foreclosed when the mortgagee obtains a decree that the mortgagor shall
be absolutely debarred of his right to redeem the property. Such as decree puts an end to the
equity of redemption and makes the mortgagee, absolute owner of the property. It is as if the
mortgagor executes a transfer of rights in favour of the mortgagee.
The remedy for foreclosure is available only to a mortgagee by a conditional sale or a
mortgagee under an anomalous mortgage by the terms of which he is entitled to foreclose
The remedy of an equitable mortgagee is only a judicial sale (Sec. 96) and not foreclosure. In
England he has a right of foreclosure
A usufructuary mortgage cannot sue either for sale or for foreclosure.
RULE AGAINST PARTIAL FORECLOSURE OR SALE INDIVISIBILITY OF SECURITY
When there are more mortgagees than one, the question arises whether any of them can
maintain a suit for recovering his share only of the mortgage debt and pursue his remedy either
by way of sale of foreclosure against a proportionate part of the mortgaged property. The reasons
operating against the recognition of a claim to partial redemption by the mortgagor apply with
equal force to the claim to partial foreclosure by the mortgagee. The principle of indivisibility of
the mortgage security can the mortgagee trench upon no more than it can be by the mortgagor
[S.67 (d)].
A co-mortgagee can sue for his own share provided he asks for sale of the entire
hypotheca. The Allahabad High Court in Lachirni Narain V Babu Ram-1935 All. 391 came to
the conclusion that one of several mortgagees may sue for his share only, provided that the suit is
for sale of the entire property mortgaged
There is an exception to the rule against partial foreclosure or sale. If there is a severance
of the security with the consent of the mortgagor, a suit may be brought for a part only to the
mortgage-money against a fractional interest in the hypothecal.
3. Sale without Intervention of Court
In certain Cases the mortgagee has the power of private sale of the mortgaged property.
He may exercise this power without seeking the Intervention of the court. This power is
conferred by S.96 and exists in the following cases:
1. The mortgage document expressly confers the power of private sale and the mortgagee
is the Govt.
2. The mortgage document expressly confers this power and the mortgaged property or
any part thereof is on the date of the mortgage situating within the town of Madras, Bombay or
Calcutta or any other town specifically notified by the State Govt. in the Official Gazette.
3. The mortgage is an English mortgage and neither the mortgagor nor the mortgagee is a
Hindu, Mohammedan or Buddhist.
WHEN THE POWER OF PRIVATE SALE CAN BE EXERCISED?
The following conditions should be satisfied for exercising the power under S.69:
1. Interest amounting to at least Rs.500/- is in arrears and unpaid for 3 months after
becoming due or
2. Notice demanding payment of Principal has been served on the mortgagor and has not
been paid for 3 months after such service.
4. Appointment of Receiver (S.69A)
A mortgagee who can exercise the right of private sale under S.69 is given under S.69A a
right to appoint a Receiver. The Receiver collects the income from the property. The person
appointed as Receiver should be one nominated in the mortgage document. If there is no such
person, or if he is unwilling to act or is dead, the mortgagee should appoint the Receiver after
obtaining the concurrence of the mortgagor. Failing agreement, the mortgagee will have to apply
to the court for having a suitable person appointed as the Receiver.
LEASE
S.105-117 of the TP Act deals with Lease,
Definition and Classification
S.105 of the Act defines lease as a transfer of right to enjoyment of immovable property
by am person called the lessor to another persons called the lessee, there must be consideration.
It may be a price paid or promised, or rent which may be periodical payment of money, share of
corps, or rendering of services. Thus under Sec.105 of the T.P. Act, to constitute a valid lease,
there must be transfer of right to enjoyment of immovable property.
Classification
1. Perpetual lease:
There is no fixed term for them. A perpetual or permanent lease is heritable and
transferable.
In B.P.Sinha v. Swaminath the tenant was in possession of the leased property. There was
a letter from the landlord, which stated "you will pay Rs.40/- per month as rent and you an live
as long as you desire". The Allahbad H.C. held it did not create a permanent lease. It created
only a life tenancy.
2. Lease for a Fixed Term
Here the term is fixed. Lease for five years or ten years may be taken as an example of
such lease,
3. Periodical Lease
Periodical lease are leases (a) From year to year or (b) Leases from month to month.
4. Tenancy at Will
Tenancy at wills is the tenancy, which can be terminated at the will of either the landlord
or the tenant. To terminate the tenancy at will the landlord there must be a demand for
possession. The lessee can by surrendering the lease at any time may terminate tenancy at will. A
tenancy, which is terminable at the will of the tenant, is deemed to be terminable at the will of
the landlord also. It is also terminable by death of either landlord or tenant.
5. Tenancy by Holding Over
It is a tenancy that arises when a tenant enjoys the property even after the termination of
the period fixed for tenancy with the consent expressed or Implied of the landlord. Implied
consent arises where the tenant even after the termination of the period of tenancy continues in
possession and pays the rent to the landlord who accepts the same without protest.
6. Tenancy by sufferance
It is a tenancy that arises when a tenant holds over the property after the fixed term
without the consent of the landlord. He is not a trespasser, but at the same time he is not a tenant
in the strict sense of the term. He is liable to pay compensation or use and occupation. He can
become a periodic tenant if he obtains the assent of the landlord for his continuing in possession.
The tenancy by sufferance can be terminated without notice or even a demand for possession.
TERMINATION OF LEASE
S.111 of the TP. Act deals with Termination of Lease, the conditions for termination are;
1. Efflux of Time
According to S.111 (a) of the Act, when the lease is for a fixed time, it is determined on
the expiry of the period. In the case of conditional lease it will expire at the fulfillment of the
condition.
27
2. on Extension of the Title of the Lessor
According to S.111(c) of the Act, if the lessor's title is diverted to a third party, lease is
terminated.
27
S.111(b).
3. Happening of the Contingency
When the period of lease itself is determinable on the happening of a contingency, the
lease is determined on the happening of the contingency.
4. Merger
According to S.111 (d) of the Act, when the lessee acquires the interest of the lessor and
thus the lessor's interest and the lessee's interest is merged in the same person at the same time,
there is determination of lease.
5. Surrender
According to S.111 (e) of the Act, when the lessee expressly surrenders the lese, there is
a termination of the lease. Surrender means yielding up of possession by the lessee by mutual
agreement between lessor and lessee. Surrender is of expressed and implied surrender.
6. Forfeiture
According to S.111 (g) of the Act, forfeiture means disqualification. It occurs in three
grounds.
a. When lessee breaks an express condition.
b. When the lessee denies the title of his lesser and claim title to a 3rd person or to
himself and
c. When the lessee is adjudicated as an insolvent. When forfeiture happens the lessor
must sent a notice to the lessee to the owner of the land.
Waiver of Forfeiture
According to S.112 of the Act, Waiver means voluntarily given up a right. A lesser has a
freedom to waive the forfeiture and allow the lessee to enjoy. When the forfeiture is happened
and the lessor already accepted the on rent after knowing that forfeiture had happened, Sec.112 is
applicable.
7. Notice to Quit [Sec. 111 (L)]
A periodic tenancy is determined by a notice to quit.
RIGHTS AND DUTIES OF LESSOR
S.108 of the Act deals with the rights and duties of the Lessor, they are;
1. Duty to Disclose
According to S.108 (a) of the Act, The first duty of the lessor is that he must disclose the
lessee any defect in the property, which are material with reference to its intended use. The lessor
must disclose only known defects to the lessee. The duty imposed on the lessor under this clause
is not absolute and doesn't extend to the defect unknown to him. A failure to disclose material
defect in the property would come within the meaning of Fraud under Sec.17 of the Indian
Contract Act.
2. Duty to Give Possession
S.108 (b) of the Act imposes a statutory obligation on the lessor to deliver possession to the
lessee. The lessor is not entitled to rent from the lessee if possession is not given to the
lessee. If the lessor fails to give possession, &m lessee can maintain a suit for possession
against the lessor.
3. Covenants for Peaceful Enjoyment
According to Sec.108 (c) of the Act, ihen a lease is properly made and lessee pays the
rent properly, the lessor is bound not to disturb the enjoyment of the property during the period.
RIGHTS OF THE LESSEE
Sec108 (d) to (i) of the Act deals with the rights of the Lessee, they are;
1. Right to Accession
The lessee is entitled to the accession made to the property during the continuance of the
lease for the purpose of lease. When the lease is expired lessee must surrender the leased
property along with the accession.
2. Right to Repudiate the Lease
According to S.108 (e) of the TP. Act, the lease shall void at the instance of the lessee
when the subject matter of the lease is destroyed by 'Act of God'.
The lease shall be void at the instance of the lessee if the subject matter of the lease is
destroyed.
In Katyayani Devi v. Udoy Kumar, 'A' leased certain property to 'B'. Part of the property
was in possession of a trespasser and was not taken possession by 'B'. 'B' avoids payment of rent
and contended that these were a breach of the covenant for quiet enjoyment. The Privy Council
held that there was no breach of the covenant for quiet enjoyment. Against the encroachment of
trespassers a tenant has to protect himself by taking suitable action against the trespassers
So it was held that 'B' was bound by the entire rent as per the terms of the lease deed.
3. Right to Make Necessary Repairs after giving Notice to the Lessor
According to S.108 (f) of the Act, the lessee may make the necessary repairs to the subject
matter of the lease and deduct the expenses incurred with the interest from the rent or
otherwise recover it from the lessor, if the lessor neglects to make the repairs within a
reasonable time after the notice.
4. Right to Make Payment which the Lessor is Bound to make and which he Neglects to Pay and
Recover the Same
The lessor is bound to make any payment to the revenue in respect of the property. If the
lessor does not pay it and if the lessee is interested in the payment, interest or he can recover it
from the lessor by filing a separate civil suit.
5. Right to Fixtures
According to Sec.108 (h) of the Act, the Lessee can remove all things, which he has attached
to the earth without causing any injury to the leased property. This right is available to lessee
even after the termination of the lease period and while he is in possession of the property
and not afterwards.
6. Right to Products from Land
According to S.108 (i) of the Act, the lessee or his legal representative is entitled to
gather all crops planted or sown by the lessee on the determination of a lease of uncertain
duration by any means except the fault of the lessee.
7. Right to Alienate his Interest
According to S.108 (j) of the Act, the lessee may alienate his Interest either absolutely or
by way of a sub-lease.
LIABILITIES OF THE LESSEE
S.108 (k) to (o) of the Act deal with Liabilities of the Lessee, they are;
1. The lessee is liable to disclose facts in regard to the interest of the lessor of which he
has no knowledge, but of which the lessee is aware.
2. He should pay the rent at proper time and place.
3. He should restore the property at the end of the term in as good condition as he has
received it subject to reasonable wear and tear.
4. He should allow the lessor and his agent to enter upon the property to inspect its
condition.
5. He should inform the lessor about any encroachments made, any proceedings started
for recovery of the property.
6. He should not commit any act, which will have effect of destroying the property or
injuring the property permanently and should not use property for any purpose for which it was
not let.
Distinguish Between Lease & License
S.52 of the Indian Easement Act defines a license
1. In a lease there is transfer of interest in the property.
In the case of a license there is no transfer of interest.
2. A lease gives the tenant right to exclusive possession.
But a license confers no such right on the licenses.
3. A lease is transferable and heritable.
A license being purely a personal privilege is non-transferable and non-heritable.
4. A lease unlike a license is not revocable.
5. A lessee can sue trespassers and strangers in his own name.
A Licensee cannot sue trespassers and strangers.
6. A lease in some cam requires registration.
But a license does not.
7. Death of either party does not affect a lease.
A license is terminated by death of either party.
License: S.52 of the Indian Easement Act defines License, where one person
grants to another or to a definite number of persons a right to do or continue to do in or
upon the immovable property of the granter, something which would in the absence of
such right be unlawful.
E X C H A N G E
S.118 of the T.P. Act defines an exchange, "Where two persons mutually transfer the
ownership of one thing for the ownership of another, neither thing or both things being money
only, the transaction is called an exchange".
In an exchange the ownership of the thing is transferred in consideration of the thing
taken in exchange. The two ownerships should be mutually exclusive. In a partition this
condition is not satisfied. A partition is therefore, not an exchange.
Formalities
The formalities of a sale are applicable to an exchange. Each party to an exchange has a
dual capacity. He is a seller as to that which he gives and a buyer, as to that which he takes.
Examples
1) A sells a house worth Rs.10, 000/- to B and B transfers his wetland worth Rs.7,
000/- and pays Rs.3, 000/- in cash it is an exchange. The fact that party of the consideration is in
money is immaterial. There is a mutual transfer of ownership. So this is an exchange.
2) 'A' gave under a document his shares in a company X in consideration of B's shares in
company Y. It is an exchange.
SALE AND EXCHANGE
Like sale exchange is a transfer of ownership. Like sale exchange is an absolute transfer.
The only distinguishing point between sale and exchange is that which a sale is always for a
price, which means money only. In exchange, there is no price, but are specific things transferred
for another, (another thing).
Money may, however, be added to the thing to equalize the consideration. There is no
unpaid seller's lien in exchange.
Exchange is the fourth kind of transfer contemplated by the transfer of Property Act. The
definition of exchange in S.118 is not limited to Immovable property but it, extends also to
movables. Thus there must be an exchange of Fountain Pen for Book or Furniture for Food or of
a House for another House.
Exchange How Affected?
The 2nd para of S.118 prescribes the mode in which a transfer of property in completion
of an exchange can be affected. It must be in the manner provided for the transfer of such
property by sale. When the exchange is of movable thing mere delivery is enough to complete
the transfer. Where it is Immovable property or where one of the Items is Immovable and the
value of any such property is of Rs.100/- or more, the transfer will be completed only by a
registered instrument.
Gift
Gifts are the 5th kind of transfer of property contemplated by the T.P. Act. S.122 of the
T.P. Act define the term 'Gift', Accordingly gift is the transfer of certain existing movable or
immovable property made voluntarily and without consideration by one person, called the
'Donor', to another, called the donee, be accepted on behalf of the donee. Thus a gift is a
voluntary and gratuitous transfer of ownership in a property in favour of another person.
The element of consideration is totally absent in it.
Acceptance When to be Made
According to Sec.122 the donee must accept the gift during the lifetime of the donor and
while donee is still capable of living. If the donee dies before acceptance the gift is void.
Elements of a Gift
1. A gift is a transfer of ownership in a property
2. The property mat be in existence
3. The property may be movable or immovable
4. The transfer must be made voluntarily and without consideration
5. The property must be accepted by or on behalf of the person to whom it is transferred.
Donor
The person who transfers the property by way of gift is known as donor. The donor must
be a person competent to contract. Therefore a minor can't make a valid gift.
Donee
The person in whose favour property transfer by gift is known as donee. Any one a
major, a minor, an impotent person is lunatic or idiot can be donee.
Gift How Made
(In the case of immovable property)
According to S.123, of the Act, Gift can be made only by a registered instrument. It must
be signed by the donor and attested by at least two witnesses.
In the case of a gift of movable, transfer may be effected either by a registered instrument
or by mere delivery.
The donee or somebody on behalf of the donee must accept it. According to Sec.122 such
acceptance must be made during the lifetime of the donor, the gift must be registered.
In the case of a Gift of Immovable property, registered document signed by the donor or
any person on his behalf and attested by at least two witnesses is a necessary formality.
But Gift is complete on acceptance by the donee. So if the donor refuses to get the deed
of gift registered after acceptance by the donee, the donee can get it compulsorily registered
under the Registration Act before the time expires for registration. If the donor dies before
registration also the donee can get it registered.
In Kalyana Sundaram V Karuppa Mooppanar
28
, A Hindu adopted a son, who was adopted after the execution of the gift deed and acceptance of the same by the donee and before its registration questioned the binding nature of the gift, It was hold that gift was complete as soon as it was accepted by the donee and that
registration was a formality which when complied with, made the donee's title good from the
date of execution of the document.
The Importance of this case is that at the time of acceptance, donor must be alive. It is not
necessary that donor must be alive at the time of registration.
28
1927,50 Map 103 P.C.
Consent of the donor is not necessary for the registration of the gift.
The Mohammedan Gift is completely exempted from the provisions of the T.P. Act.
Onerous Gift
S.127 of the TP. Act deals with 'onerous gifts'.
The word 'Onerous' means a thing, which is coupled with some difficulty. A gift may not
always be a purely beneficial character, but may at times be burdened with an obligation. It is
then called an onerous gift.
S.127 is based upon the simple principle (that those who, wants the roses must not fear
the thorns). The maxim is 'Quisensit Commodum Sentire Debt at Onous' which means he who
receives the advantage must also suffer the burden.
Example
'A' made a Gift of good house and dilapidated house (Onerous house) to B.
Universal Donee
S.128 of the T.P. Act defines a Universal Donee. A Universal Donee is one who takes the
entire property of the donor and as such the donee will be liable to clear all the debts liability of
the donor at the time of gift.
Example
'X' is an owner of the property M; He borrows Rs.5 lakh from 'Y'. After that he transfers
the property M to 'Z' by gift, Then 'Z' shall be liable to pay Rs.5 lakh to Y out of the property, If
the universal donee were a minor, he would be under no liability unless he retained the property
after attaining majority.
When Gift May be Suspended or Revoked
Sec.126 enumerates some of the condition under which the donor may revoke gifts, but
the section is not exhaustive
1. Suspension or Revocation by Agreement:
Under Para 1 of Sec.126, a gift may be suspended or revoked by an agreement between
the donor and the donee.
2. The suspension or revocation may take place on the happening of the event and not on
the will of the donor, if the happening of the event is dependant on the will of the donor
suspension or revocation of gift will be a valid one. It is further necessary that the condition
imposed must be a valid condition. It must not be illegal, impossible or opposed to public policy.
3. A gift can be revoked if the gift is made by undue influence, coercion, fraud or misrepresentation.
In Allcard V Skinner
29
, Allcard had joined a sisterhood in 1862; she executed a gift deed in respect of her property under the Influence of the lady superior in charge of sisterhood. She left the sisterhood in 1879. In 1885 she brought the suit for setting aside the gift deed. It was held that undue Influence is a valid ground for
avoiding the gift. However in this case the donor had brought the suit after a long time. The long
lapse of time showed that she had affirmed the gift by her conduct the gift was not therefore set
aside.
DONATIO MORITURUS CAUSA
A gift of movable property in contemplation of death is called a ' Donatio Moriturus
Causa '. The special feature of such a death-bed-gift is that it is recoverable If the donor recovers
from his illness. This condition id implied and need not be specifically stated. In Muslim law
there is a similar
29
1886 36 ch.145.
