FINAL NOTES PROPERTY LAW- E.

ANISHA REDDY

The institution of property comprises of a bundle of rights which can be disaggregated

into distinct entitlements owned by different persons.
Property rights: the owners are free to use the property as they wish. They have the
right to exclude others from it or grant them access to it. They have the power to
transfer title.- to pass the powers of ownership to someone else. They are also immune
from having the property taken away from them without their consent, or they must be
adequately compensated if the property is taken by the state for public purposes.
Hence, we typically presume that the owner has all such rights.
Why must we have property rights?
1) It acts as an incentive to work
2) Incentive to maintain and improve things
3) Incentive to transfer things
4) Avoidance of dispute and of efforts to protect or to take things.
5) Protection against risk and
6) Achievement of a desired distribution of wealth

What is eminent domain?

The term was coined by Hugo Grotius in 1625 and was defined in the following manner:

“The property of subject is under the eminent domain of the state, so that the state or
he who acts for it may use and even alienate and destroy such property, not only in
cases of extreme necessity... but for ends of public utility, to which ends those who
found civil society must be supposed to have intended that private ends should give
way. But it is to be added that when this is done the state is bound to make good the
loss to those who lose their property”.

The Fundamental Right to Property:

Article 19(f) – right to acquire, hold and dispose of property, subject to reasonable
restrictions

Art.31 (as originally enacted)

Ø No person shall be deprived of his property save by authority of law

Ø Public purpose + authority of law + compensation (to be fixed / principles
specified)

Acquisition and requisitioning of property – entry 42, Concurrent List (after the
Seventh Amendment, 1956)

• Shift in the debate from the Constituent Assembly to that of the Courts which
eventually led to the abolition of the fundamental right to property and insertion of
th
Art.300A (44 Amendment to the Constitution)
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

RIGHT TO PROPERTY UNDER THE CONSTITUTION OF INDIA

The Indian Constitution is an admixture of positive and negative rights. One can think of the
Fundamental Rights as being the negative component and the Directive Principles as the
positive component. Much of the conflict especially in relation to property has been expressed
as interplay between the positive attempt of the State to engineer a certain economic, social
and political configuration resulting in the violation of negative liberties or rights as a
consequence. Property has been a particular target in this contest and the outcome of this
attack has delineated the distribution of powers across the three branches of the government –
if not necessarily in general, then definitely with respect to the governance of property rights
in relation to the State1.

The wrangle over property was evident even while the Constituent Assembly was framing the
Constitution of India. In framing the constituent rules on property, the Assembly had a clear
model in the American Constitution in front of it. As is well known, the Fifth Amendment of
the American Constitution states “…nor shall any person … be deprived of life, liberty, or
property without due process of law; nor shall private property be taken for public use
without just compensation.” If indeed the Indian Constitution was to guarantee similar rights,
the question that arose before the members of the Assembly was how to structure the frame
that could constrain these rights for the social good. However some of the strongest
apprehensions in this regard were in relation to property -it was felt that if such a clause were
allowed, the legislative power to effect land reforms would stand diminished. In deference to
such voices, it was decided to remove any direct association between due process and the
right to property2.

This process culminated in making property a Fundamental Right in the Constitution – all
Indians had the right ‘to acquire, hold and dispose property’ – according to Article 19(1)(f),
albeit a right that could be deprived under Article 31. This Article as initially constituted, said
that no one could be deprived of their property except by law; the law must set a
compensation or principles on which such compensation is paid; property acquisition laws
must get assent of the President; police powers were provided in relation to property; and
property legislation which was not subject to any subsequent judicial questioning on
compensation was to be legislated in a stipulated time frame.

However, over the next thirty years these constituent rules were progressively chipped away,
culminating with the Forty Fourth Amendment Act1978 by which Articles 19(1) (f) and
Article 31 were deleted from the Indian Constitution. The Forty Fourth Amendment, having
removed property as a fundamental right also located it as a much weaker statutory right in
Article 300-A, where it now reads, as ‘No person shall be deprived of his property save by
authority of law’. Among other things, a particularly profound significance of this action is

1
Singh, J., (Un)Constituting Property: The Deconstruction of the ‘Right to Property’

in India Centre for the Study of Law and Governance, CSLG Working Paper Series

CSLG/WP/04-05, JNU

2
Austin, G., Working a Democratic Constitution, The Indian Experience, Oxford University Press,
New Delhi, 1999
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

that by removing the right to property as a fundamental right, no one has the right to approach
the Supreme Court under Article 32 (this Article confers the right to approach the Supreme
Court if it is felt that one’s fundamental rights are being violated) if the right to property is
violated.

The current position of the Supreme Court on interpretation on the right to property can be
gleaned from a one of the few direct judgments on property after the Forty Fourth
Amendment , particularly the Jilubhai case3. The case dealt with mines taken by the State
under legislated laws from erstwhile revenue farmers, and upheld the right of the State to do
so under Article 300-A, not entertaining any discussion on adequacy of compensation.21
Among other things it is unequivocally held that the right to property under Article 300-A is
not a ‘basic feature or structure of the Constitution’ and that the “Legislature has power to
acquire the property of private person exercising the power of eminent domain by a law for
public purpose”.

INTERPRETATION OF COMPENSATION FOR THE ACQUISITION OR REQUISITION OF

PROPERTY

The power of interpretation by the courts is more forcefully exerted in those countries where
the Constitution is made as the supreme law of the land and where it cannot be amended
except by a special amendatory procedure. From a historical point of view if we look to the
constitutional developments in U.S.A., Australia and Canada, it may be said with all certainty
that these Constitutions have at times been interpreted to give the meanings which their
makers may have not even dreamt of. And the instances do not lack where the interpretation
of constitutional provisions by the courts has caused much difficulties to the people and to
those representatives of the people who run the government.3 The makers of the Indian
Constitution knew all these facts and they tried their best to minimise the jurisdiction of the
courts to judicially review the laws in a supreme Constitution. However, as the position
emerged later later on, perhaps, they failed to convey their intention in the Constitution as it
came before the courts for interpretation. An example of this relates to the matter of
compensation for the acquisition or requisition of property dealt with in Article 31(2) of the
Constitution4.

Article 31(2) of the Indian Constitution as it originally stood, was in the following words:

“No property, movable or immovable including any interest in, or in any company owning
any commercial or industrial undertaking, shall be taken possession of or acquired for public
purposes under any law authorising the taking of such possession or such acquisition, unless
the law provides for compensation for the property taken possession of or acquired and either
fixes the amount of the compensation, or specifies the principles on which, and the manner in
which, the compensation is to be determined and given.”

3
supra note 65
4
One other provision relevant to this and where also the word ‘compensation’ was used was Entry
42 of List III of Schedule VII which read: “Principles on which compensation for property acquired or
requisitioned for the purposes of the Union or of a State or for any other public purpose is to be
determined, and the form and the manner in which such compensation is to be given.”
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Although so many cases arose with respect to Article 31 of the Constitution but the question
directly involving the interpretation of the term “compensation” used in Article 31(2) for the
first time arose in the State of West Bengal v. Mrs. Bela Banerjee5.The main challenge came
on the ground of denial of “compensation” under the West Bengal Land Development and
Planning Act, 1948 in violation of Article 31(2) of the Constitution in as much as the Act laid
down a ceiling of the compensation at the market value of property on December 31, 1946,
for all future acquisitions, in howsoever far future it was to be made. The opinion of the
Supreme Court was expressed in the following words by Sastri, C.J.:—

“While it is true that the legislature is given the discretionary power of laying down the
principles which should govern the determination of the amount to be given to the owner for
the property appropriated such principles must ensure that what is determined as payable
must be compensation, that is, a just equivalent of what the owner has been deprived of.
Within the limits of this basic requirement of full indemnification of the expropriated owner,
the Constitution allows free play to the legislative judgment as to what principles should
guide the determination of the amount payable. Whether such principles take into account all
the elements which make up the true value of the property appropriated and exclude matters
which are to be neglected, is a justiciable issue to be adjudicated by the court.”

This view taken by the Supreme Court of the word “compensation” in Article 31(2) gave a
heavy blow to the framers of the Constitution as it was very different from what the framers
of the Constitution had thought at the time of making the Constitution:-

“The next clause says that the law should provide for compensation for the property and
should either fix the amount of compensation or specify the principles under which or the
manner in which the compensation is to be determined. The law should do it. Parliament
should do it. There is no reference in this to any judiciary coming into the picture. Much
thought has been given to it and there has been much debate as to where the judiciary comes
in. Eminent lawyers have told us that on a proper construction of this clause, normally
speaking, the judiciary should not and does not come in. Parliament fixes either the
compensation itself or the principles governing that compensation and they should not be
challenged except for one reason, where it is thought that there has been a gross abuse of the
law, where in fact there has been a fraud on the Constitution.”6

Although the Constituent Assembly debates cannot govern the interpretation of the clear
words of the Constitution, yet in ambiguous cases as has been laid down earlier, they may
guide the courts though in a very restricted manner.

However, as the Supreme Court’s view on the interpretation of compensation in Bela

Banerjee case was contrary to the socialistic policies of the great leaders of the country, soon
after the decision in the case the Constitution (Fourth Amendment) Act, 1955 was moved in
the Parliament which came into force on April 27, 1955 leaving Article 31(2) in another
form7.

5
AIR 1954 SC 170
6
Constituent Assembly Debates, Vol. IX, p. 1193.

7
(2) No property shall be compulsorily acquired or requisitioned save for a public purpose and
save by authority of law which provides for compensation for the property so acquired or
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

The amended Article for the first time directly came for interpretation before the Supreme
Court in VajraveluMudaliarv. Special Deputy Collector8. Interpreting the amended Article
31(2) Justice Subba Rao went back to MrsBela Banerjee case which had been followed for
testing the validity of the laws passed prior to the amendment and said:

“The fact that Parliament used the same expression, namely, ‘compensation’ and ‘principles’
as were found in Article 31 before the Amendment is a clear indication that it accepted the
meaning given by this court to those expressions in MrsBela Banerjee’s case. . . . It follows
that a Legislature in making a law of acquisition or requisition shall provide for a just
equivalent of what the owner has been deprived of or specify the principles for the purpose of
ascertaining the ‘just equivalent’ of what the owner has been deprived of. . . .”

Then justifying his above view even after the amendment the learned judge summarised the
position of law as below:—

“If the legislature, though it ex facie purports to provide for compensation or indicates the
principles for ascertaining the same, but in effect and substance takes away a property
without paying compensation for it, it will be exercising power which it does not possess. If
the legislature makes a law for acquiring a property by providing for an illusory
compensation or by indicating the principles for ascertaining the compensation which do not
relate to the property acquired or to the value of such property at or within a reasonable
proximity of the date of acquisition or the principles are so designed and so arbitrary that
they do not provide for compensation at all, one can easily hold that the Legislature made the
law in fraud of its powers. Briefly stated the legal position is as follows. If the question
pertains to the adequacy of compensation, it is not justiciable, if the compensation fixed or
the principles evolved for fixing it disclose that the Legislature made the law in fraud of
power in the sense we have explained, the question is within the jurisdiction of the court.”

The underlined portion of the above observation represents a view, which does not go in line
with the interpretation of the term ‘compensation’ adopted by the learned Judge. Even if it be
accepted that ‘compensation’ means ‘just equivalent’ the closing part of Article 31(2) that “no
such law shall be called in question in any court on the ground that the compensation
provided by that law is not adequate” makes it clear that the consideration for the property
taken cannot be judged by the court whether it is adequate or just equivalent or not. The court
was emphasising more upon the literal meaning of the term ‘compensation’ in disregard of
the mischief behind the Amendment.
From the individual’s point of view the approach which the learned Judge took in this case
may be appreciated but in wider context of social justice it looks with great respect, a little

requisitioned and either fixes the amount of the compensation or specifies the principles on which,
and the manner in which, the compensation is to be determined and given and no such law shall be
called in question in any court on the ground that the compensation by that law is not adequate.

8
AIR 1965 SC 1017
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

apriori approach of the court9.The court, however, left the position a little obscure by its
concluding lines underlined above because it did not clearly related to the non-justiciable
issue of inadequacy of compensation with the power of the court to judge whether the
compensation is ‘just equivalent’ or not. That task, however, was completed by the learned
Judge in Union of India v. Metal Corporation of India Ltd10.In that case the validity of Metal
Corporation of India (Acquisition of Undertaking) Act, 1965 was challenged. The Act
provided for the acquisition of the Metal Corporation of India after providing the
compensation for the sum total of the value of the properties and assets of the Corporation
calculating on the basis of: (a) actual cost of the unused machinery and plant etc. and (b)
written down value of the used machinery, etc. Citing BelaBanerjee, NamashivayaMudaliar,
Jeejeebhoyand Vajravelu decisions Chief Justice Subba Rao held the Act unconstitutional on
the following proposition of law:
“The law to justify itself has to provide for the payment of a ‘just equivalent’ to the land
acquired or lay down principles which will lead to that result. If the principles laid down are
relevant to the fixation of compensation and are not arbitrary, the adequacy of the resultant
product cannot be questioned in a court of law. The validity of the principles, judged by the
above tests, falls within judicial scrutiny, and if they stand the tests, the adequacy of the
product falls outside its jurisdiction. Judged by the said tests, it is manifest that the two
principles laid down in the Act, namely: (i) compensation equated to the cost price in the case
of unused machinery in good condition, and (ii) written-down value as understood in the
income tax law is the value of the used machinery, are irrelevant to the fixation of the value of
the said machinery as on the date of acquisition. It follows that the impugned Act has not
provided for ‘compensation’ within the meaning of Article 31(2) of the Constitution and,
therefore, it is void.”

In the year 1969 the matter again came before the Supreme Court in State of Gujarat v.
Shantilal11. In this case the Supreme Court declared the observations of Justice Subba in
Vajravelu case “as obiter and not binding” and also declared “that the Metal Corporation case
was wrongly decided and must be overruled”.
In Shantilal’s case the validity of the Bombay Town Planning Act, 1958, was challenged. The
main challenge came on the ground that compensation within Article 31(2) means a just
equivalent of the land expropriated and payment computed on the market value at a date
many years before the date on which the land was acquired was inconsistent with the
constitutional guarantee under Article 31(2). Rejecting the contention of the petitioners Chief
Justice Hidayatullah said:

“It is certainly out of the question that the adequacy of compensation (apart from
compensation which is illusory or proceeds upon principles irrelevant to its determination)
should be questioned after the Amendment of the Constitution. The Amendment was expressly
made to get over the effect of the earlier cases which had defined compensation as just
equivalent. Such a question could not arise after the amendment.”

9
For an appreciation and criticism see Mr Justice Subba Rao and Property Rights, 9 JILI, p. 568 by T.S.
Rama Rao; Mohd. Ghouse, 8 JILI, p. 274; RajendraNayak, 8 JILI, p. 212; Upendra Bakshi, 9 JILI, p.
323 at 392-94
10
AIR 1967 SC 634
11
1969(1) SCC 509
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

And further giving a detailed judgment on behalf of the court, Justice Shah observed:

“In our view, Article 31(2) as amended is clear in its purport. If what is fixed or is determined
by the application of specified principles is compensation for compulsory acquisition of
property, the courts cannot be invited to determine whether it is a just equivalent of the value
of property expropriated.”

Justifying the provisions of the Act relating to the determination of compensation the learned
Judge held:

“If what is specified is a principle for determination of compensation, the challenge to that
principle on the ground that a just equivalent of what the owner is deprived is not provided, is
excluded by the plain words of Article 31(2) of the Constitution.”

Explaining the meaning of the term ‘specification of principles’ he observed:

“Specification of principles means laying down general guiding rules applicable to all
persons or transaction governed thereby . . . compensation determined on the basis of market
value prevailing on a date anterior to the date of extinction of interest is still determined on a
principle specified.”

However, hardly a year had passed to the Shantilal case that the Supreme Court by a Special
Bench of eleven judges, including Justice Shah, gave a landmark opinion on February 10,
1970 by a majority of ten to one in the famous Bank Nationalisation case12. In this case the
validity of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969 was
challenged.

Speaking for the majority of the Court Justice Shah accepted both the contentions of the
petitioners. He referred to the dictionary meaning of the word “compensation” and came to
the conclusion that Article 31(2) before and after it was amended guaranteed a right to
compensation for compulsory acquisition of property and that by giving to the owner, for
compulsory acquisition of his property, compensation which was illusory, or determined by
the application of principles which were irrelevant, the constitutional guarantee of
compensation was not complied with. Referring to the Vajravelu and Shantilal cases he said
that there was not much difference between the two opinions. The legislature according to
both the decisions was not the final authority with respect of compensation under Article
31(2).

The unanimity of the Supreme Court in holding above views took the position exactly to the
point which, to the researcher’s mind, the Fourth Amendment meant to emphasise. The
decision removed all the doubts, which, with respect, the contrary observations made in
Vajravelu and followed in Metal Corporation cases had created. In the light of the Golak Nath
case and the broader perspective of a permanent constitutional structure of a socialistic era
and in the land the people of which have pledged to establish a democratic socialism the
decision gave right direction to this constitutional aspect by following a right and more
reasonable interpretation of Article 31(2) of the Constitution.

12
R.C. Cooper v. Union of India, 1970 (2) SCC 298
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

1) Bela Banerjee v. State of West Bengal- AIR 1954 SC 170

Immigrants who had migrated into West Bengal due to communal disturbances in East
Bengal were to be settled. The government therefore, passed the West Bengal Land
Development and Planning Act, 1948. It provided for the acquisition and
development of land.
S. 8 of the Act limited the amount of compensation so as not to exceed the market
value of the land on December 31, 1946 (ceiling) no matter when the property was
being compulsorily acquired. Due to Ar. 31(2) of the Constitution, the Parliament
justified its acquisition for a public purpose.
This was challenged in the Court and HC declared certain provisions of the Act as
unconstitutional and void. The SC held that “the law should provide for ‘just’
compensation – just means what the owner has been deprived of. Parliament should
do it - either fix the amount of compensation or specify the principles. There is no
reference in this to any judiciary coming into the picture” – the court will only enter
when the principles have to be interpreted – just or fraudulent
Parliament suffered a blow so it came up with the 4th Amendment of the Constitution
Article 31(2) to include the words- “no such law shall be called in question in any
court on the ground that the compensation by that law is not adequate”. Therefore the
Parliament specifically excluded the right of the Courts to decide upon the level of
compensation

Constitution (Fourth Amendment) Act, 1955:

Consequence of Bela Banerjee: Constitution (Fourth Amendment) Act, 1955,

amended Art. 31(2) which now reads as:

“No property shall be compulsorily acquired or requisitioned save for a public

purpose and save by authority of law which provides for compensation for the
property so acquired or requisitioned and either fixes the amount of compensation or
specifies the principles on which and the manner in which, the compensation is to be
determined and given; and no such law shall be called in question in any court on the
ground that the compensation provided by that law is not adequate.”

2) Vajravelu Mudaliar v. Special Deputy Collector- AIR 1965 SC 1017

The petitioners‘ (Vajravelu) lands were notified for acquisition for the Purpose of
housing schemes. He initiated proceedings in respect of compensation payable in
accordance with the provisions of the Land Acquisition (Madras Amendment) Act,
1961. The constitutional validity Of this Act was challenged. It was contested that after
the 4th Amendment the adequacy of compensation was non-justiciable.
HELD: For determining compensation in respect of any property acquired, there may
be many possible modes or principles of valuation; where the adoption of one principle
may give a higher and of another, a lesser value, the Court cannot say that the law
should have adopted one principle and not the other, for this would relate only to
the question of adequacy. On the other hand, if a law lays down principles which are
not relevant to the property acquired or to the value of the property at or about the time
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

it is acquired, it may be said that they are not principles contemplated by Art.
31(2). If a law says that though a house is acquired, it shall be valued as land, or that
though a house site is acquired, it shall be valued as agricultural land, or that though
it was acquired in 1950, its value in 1930 should be given, or though 100 acres are
required, compensation should be given only of 50 acres, the principles do not pertain
to the domain of adequacy and in such cases the validity of the principles could be
scrutinized. Therefore the Court would have jurisdiction to deal with the matter if the
legislature, though ex-facie purporting to provide for compensation or indicating the
principles for its ascertainment, in fact and substance takes away property without
providing compensation, or provides for illusory compensation, or for its
ascertainment on arbitrary principles, for in that case the legislature would be enacting
a law in fraud of its power under Art. 31(2).
-The Court however, did not comment on the adequacy of the compensation provided
in this case

3) Union of India v. Metal Corporation of India Ltd- AIR 1967 SC 634

The Metal Corporation of India (Acquisition of Undertaking) Act, 1965, was enacted
for acquiring the Metal Corporation of India which developed zinc and lead mines.
The purpose was for the Central Government to exploit, to the fullest extent possible,
zinc and lead deposits in and around the Zawar area in the State of Rajasthan and to
utilize those minerals to serve the common good
The Schedule of the Act specified the compensation - shall be an amount equal to the
sum total of the value of the properties and assets of the company on the date of
commencement of this Act less the sum total of the liabilities and obligations of the
company
Under Art. 31(2), no property shaft be compulsorily acquired Except under a law
which provides for compensation an either fixes the amount of compensation or
specifies the principles on which and the manner in which the compensation is to be
determined and given. If the compensation is illusory or if the principles prescribed
are irrelevant to the value of the property at or about the time of its acquisition, the
law is bad. The law, to justify itself, has to provide for the payment of a "just
equivalent" to the property acquired, or lay down principles which are not arbitrary
but which are relevant to the fixation of compensation. It is only when the
principles stand this test, that the adequacy of the resultant compensation falls outside
judicial scrutiny under the second limb of Art. 31(2) (which is that it is non-
justiciable). With regard to the fixation of the value of the machinery. In the case of
unused machinery, if it was purchased in 1950 for Rs. 100 and, for some reason, had
not been used in the working of the Undertaking but had been maintained in good
condition, it may cost Rs. 1000 in 1965. A compensation of Rs. 100 for that
machinery could not be said to be -a "just equivalent" of it. Similarly, in the case of
used machinery, if it was purchased in 1950 for Rs. 1000, the aggregate of all the
depreciation may exhaust the sum of Rs. 1000 in ten years It could not, however, be
said that after the tenth year, the machinery had no value and that the owner was not
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

to be given any compensation. Indeed, such a machinery, because of subsequent rise

in prices, may be sold in 1965 for Rs. 10,000. The totality of the compensation
payable for, machinery is the major part of the undertaking, the entire Undertaking is
acquired as a unit.

4) State of Gujarat v. Shantilal 1969(1) SCC 509

The validity of Bombay Town Planning Act, 1955 was brought up. It stated that the
real owner of a plot is substituted by the ownership in the reconstituted plot and these
reconstituted plots, need not be of the same dimensions as the original land and are
generally smaller. If the owner of the original land is not allotted a plot at all, he shall
be paid the value of the original plot, at the date of the declaration of intention to make
a scheme.
The Court held that (1) there is a mandatory requirement to provide compensation and
the principal objects of town planning legislation is to provide for planned and
controlled development and use of land for better living conditions & sanitation;
(2)The Act specified principles for compensation. A challenge to that principle, on the
ground that a just equivalent of what the owner was deprived of is not provided, is
excluded by Art. 31(2) after the Constitution 4th Amendment. (3) It was not necessary
to provide for compensation for the entire land of which a person is deprived.
Specification of principles means laying down general guiding rules applicable to all
persons or transactions. Compensation determined on the basis of market value
prevailing on a date anterior to the date of acquisition is still determined on a principle
specified. In Bela Banerjees’s case 'compensation‘ meant a 'just equivalent' but after
the 4th Amendment adequacy of compensation is not justiciable.

5) Bank Nationalisation Case (R.C. Cooper v. Union of India, 1970 (2) SCC 298)
Parliament enacted the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1969 to acquire certain banks in order to serve better the needs of
development of the economy in conformity with the national policy and objectives -
nationalized all the banks-
Court overturned the decision in Varjavelu and Shantilal – looked into the dictionary
meaning of compensation
A 31(2) guaranteed a right to compensation for compulsory acquisition of property
and that by giving to the owner, for compulsory acquisition of his property,
compensation which was illusory - (just compensation – low price for a prime
location) or determined by the application of principles which were irrelevant, the
constitutional guarantee of compensation was not complied with and the court could
interfere. These constant tussles between the Courts and Parliament led to right to
property becoming a constitutional right from a fundamental right.

Legislature’s reactions to the Bank Nationalization case...

th
Constitution (25 Amendment) Act, 1971
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

th
Ø Art.31(2) – “compensation” replaced with amount • Constitution (44
Amendment) Act, 1978
Ø Art. 19(1)(f) and Art.31 were abolished in 1978
Ø Art.300A was inserted, which reads as follows:

“Persons not to be deprived of property save by authority of law. – No Person shall be

deprived of his property save by authority of law.”

Land Acquisition Act, 1894:

Colonial law on land acquisition – process of acquisition can be bifurcated into four
stages.

ØFirst Stage :

1) Publication of a preliminary notification by the Government that land in a

particular locality is needed or may be needed for a public purpose. [s 4(1)]
2) Entry of authorised officers on such land for the purpose of survey and
ascertaining whether it is suitable for the purpose in view. [s 4(2)]
3) Filing of objections to the acquisition by persons interested and enquiry by the
Collector. [s 5-A]

ØSecond Stage:

1) Declaration of intended acquisition by the Government. [s 6(1)]

2) Publication of declaration as required by the Act. [s 6(2)]
3) The said declaration shall be conclusive evidence that the land is needed for a
public purpose, as the case may be; and, after making such declaration the
Appropriate Government may acquire the land in manner hereinafter
appearing. [s 6(3)] •Collector to take order from the Government for
acquisition and land to be marked out measured and planned. [ss 7 and 8]

Stage 3:

1) Public notice and individual notices to persons interested to file their claims for
compensation. [s 9]
2) Enquiry into claims and award by the Collector. [s 11-15] (timeline for award
– two years from publication of declaration and power to correct any clerical
errors)
3) Special powers of the Government in case of urgency. [s 17]

Stage 4:

1) Taking of possession of the land by the Collector [s 16]

2) Reference to Court [ss 18-28].
3) Payment of Compensation [ss 31-34]
ØCompensation [s. 23-24]
• Factors to be considered: market-value of the land at the date of the
publication of the notification under s. 4(1); 12% interest paid for period
between notification and award; 30% as consideration for compulsory nature
of acquisition
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

• Factors to be neglected: include any disinclination of the person interested to

part with the land acquired

Public Purpose:

1) Land Acquisition Act, 1894 defines the term in an inclusive manner – taking over
land for town planning, housing schemes, by a corporation controlled by the
government, development scheme sponsored by the government, premises for a
public office.
2) Interpretation by courts has led to further dilution
3) Nand Kishor Gupta v. State of U.P. ((2010) 10 S.C.C. 282), the Supreme
Court stated that “merely because the benefit goes to a particular section of the
society, the acquisition does not cease to be for public purpose”.

Problems with the colonial law...

Ø Monetary compensation – neglects the fact that cash cannot compensate for all
kinds of loss
Ø Market basis for computing compensation : “the logic of market holds good
as long as people are willing to sell their land at a desired price” – Swagato
Sarkar
Ø Absence of a commitment / obligation to rehabilitate and resettle people
Ø Disregard for the consent of people involved / lack of creating a participative
framework
Ø What would be the potential impact of the proposed development project –
socially and economically?
Ø “Persons interested” is limited only to those individuals who claim an interest
in the compensation offered or have a right of easement over the land – who
all does it leave out?

Right to Fair Compensation and Transparency in Land Acquisition,

Rehabilitation and Resettlement Act, 2013:

Ø Colonial law replaced by the abovementioned legislation in 2013 - The Act said its
objective was to transform the process of land acquisition into a “humane, participative,
informed and transparent” process.
Ø Public Purpose: includes acquisition of land for a PPP project; acquisition of
land for private companies for public purpose
Ø Consent: from 70 per cent of affected families in case of lands being acquired for
a PPP project - from 80 per cent of affected families when acquired for a private
company
Ø Affected family: inter alia owners, tenants, persons whose primary source of
livelihood stands affected by acquisition and were working for three years in the
affected area, forest dwellers.
Ø Social Impact Assessment: Upon there being an intention to acquire a SIA is to
be conducted in consultation with the Panchayat / Municipality / Municipal
Corporation.
Ø Preliminary notification – objections to be heard by the Collector
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Ø Rehabilitation and Resettlement Scheme

Ø Declaration: conclusive evidence that land is required for a public purpose
Ø Compensation: hiked up to four times and twice the market value in rural areas
and urban areas, respectively (12% interest + solatium of 100%)
Ø Land for land principle – upon acquisition of multi-crop irrigated land
Ø Possession: to be taken after payment of compensation and rehabilitation and
resettlement payments – displacement can occur only after R&R process is
completed

Recent amendments to the regime...

Amendment to the 2013 Act by way of an ordinance - relaxed the consent and Social
Impact Assessment survey requirements for projects in the following areas: defense and
defense production, rural infrastructure (including rural electrification), affordable
housing, industrial corridors, social infrastructure projects including PPPs in which
ownership rests with the government.

Ø Rationale of amendments - to mitigate “procedural difficulties”

Ø 13 previously exempt statutes – brought within ambit of the law.
Ø Compensation and resettlement and rehabilitation norms untouched.

Introduction to TPA, 1882:

Movable Vs. Immovable Property:

Scheme of the Legislation:

Ø Preliminary matters (scope and extent of the act, definitions)

Ø General principles of transfer of any property (5 to 9)
Ø Detailed provisions of transfer of any property (10 to 34) – deal with how
interest in property may be created
Ø Election and Apportionment (35 to 37)
Ø Principles of transfer of immoveable property (38 to 53A)
Ø Sale of Property (54 to 57)
Ø Mortgage (58 to 104) • Lease (105 to 117)
Ø Exchange (118 to 121) • Gift (122 to 129)
Ø Actionable Claims (130 to 137)

Ambit of the Legislation:

Preamble: Whereas it is expedient to define and amend certain parts of the law relating
to the transfer of property by act of parties.

Ø Transfer effected by operation of law are not governed by this Act. A transfer by
operation of law may take place in various ways, e.g., an insolvency, forfeiture, or
sale in execution of a decree.
Ø TPA only covers inter vivos transfers which is a transfer made during the
lifetime of a party. Thus, it does not cover transfers made after the lifetime which
are covered under the succession law.
Ø Considering that the legislation is not exhaustive, in the absence of legislation,
courts take into account principles of justice, equity and good conscience.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Movable Vs. Immovable property:

Ambit of the law: General rules of transfer pertain to both kinds of property, whereas
TPA lays down rules for the specific transfers of immovable property only.

Procedure for transfer: Immovable property: properly executed and attested written
agreement + registration requirement (as applicable); Movable property: simple
delivery of possession of the property + an intention to convey the title by the owner
to the recipient

Limitation period: Immovable property: 12 years; Movable property: 3 years.

IMMOVABLE PROPERTY:

Sec.3, TPA: In this Act, unless there is something repugnant in the subject or context,-
immovable property does not include standing timber, growing crops or grass

The General Clauses Act, 1897: Immovable property shall include land, benefits to
arise out of land and, things attached to the earth, as permanently fastened to anything
attached to the earth

The Registration Act, 1908: Immovable property includes land, buildings, hereditary
allowances, right to ways, lights, ferries, fisheries or any other benefit to arise out of land,
and things attached to earth, or permanently fastened to anything which is attached to
the earth, but not standing timber, growing crops, or grass

LAND - BENEFITS ARISING OUT OF LAND/ PROFITS À PRENDRE:

Ø Land: includes ground, soil or earth; houses and other buildings upon it; air space above
it; mines and minerals beneath it
Ø Depends on whether all rights or a particular right passes. For instance,
the Duncan Industries case – what all does the sale of a fertilizer business entail?
Ø 12) Ananda Behra v. State of Orissa (1955) 2 SCR 919
Facts: Chilka lake which was once the estate of the Raja vested in the State of Orissa
under the Orissa Estates Abolition Act, 1951 and ceased to exist in its original form.
The petitioners carry on the business of catching and selling fish from fisheries within
the lake. That before the vesting of the estate the petitioners had entered into contracts
with the Raja, licensing them for catching and appropriating all the fish from the
fisheries. The State refused to recognize these licenses and the petitioners filed writ
petition on the ground that their fundamental rights under articles 19(1)(f) and
31(1) were infringed.

Issue: Right to fishery - Movable or Immovable property ?

Decision: If the petitioners' rights are no more than the right to obtain future goods
under the Sale of Goods Act, then that is a purely personal right arising out of a
contract to which the State is not a party and in any event a refusal to perform the
contract that gives rise to that right may amount to a breach of contract but cannot be
regarded as a breach of any fundamental right.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

It is clear that what was sold was the right to catch and carry away fish in specific
sections of the lake over a specified future period. That amounts to a license to enter
on the land coupled with a grant to catch and carry away the fish, that is to say, it is a
profit a prendre. In England this is regarded as an interest in land because it is a right
to take some profit of the soil for the use of the owner of the right. In India it is
regarded as a benefit that arises out of the land and as such is Immovable property.

For this there needs to be a registered deed and if not so, the petitioners have no right
to enforce their fundamental right.

TREE – TIMBER STANDING TIMBER:

Ø Tree: ‘rooted to the earth’ and thus, constitutes immovable property

Ø Timber tree: tree suitable for building houses, bridges, ships etc.,
whether on the tree or cut and seasoned
Ø Standing timber: a tree that is in a state fit for these purposes and,
further, a tree that is meant to be converted into timber so shortly
that it can already be looked upon as timber for all practical purposes
even though it is still standing. If not, it is still a tree because, unlike
timber, it will continue to draw sustenance from the soil.
6) Shantabai v State of Bombay, AIR 1958 SC 532
Facts - A lease deed (unregistered) in the favor of the wife (Petitioner) for a period of
12 years Right to enter upon certain areas in the land to cut certain trees. Certain
restrictions were placed by the lessor on the cutting and felling of the trees. The
petitioner enjoyed her rights until the Madhya Pradesh Addition of Proprietary Rights
Act was passed and she was stopped from cutting of trees. Filed a writ petition.

Supreme Court held:

Lease vs License there are no words of transfer or conveyance – it does not confer
rights of management – amounts to a license to enter on the land coupled with a grant
to cut certain trees and carry away the wood. In a lease, one enjoys the property but
has no right to take it away. In a profit a prendre one has a license to enter on the land,
not for the purpose of enjoying it, but for removing something from it, namely, a part
of the produce of the soil.

Standing timber v Timber – standing timber must be a tree that is in a state fit for
these purposes (building houses, bridges) and, further, a tree that is meant to be
converted into timber so shortly that it can already be looked upon as timber for all
practical purposes even though it is still standing. If not, it is still a tree because,
unlike timber, it will continue to draw sustenance from the soil.

Cardinal rule – is the tree drawing sustenance from the soil so long as it continues to
stand and live; and that physical fact of life cannot be altered by giving it another
name and calling it " standing timber ". But the amount of nourishment it takes, if it is
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

felled at a reasonably early date, is so negligible that it can be ignored for all practical
purposes and though, theoretically, there is no distinction between one class of tree
and another, if the drawing of nourishment from the soil is the basis of the rule, the
law is grounded…..

Decision- profit a prendre - is a grant of the produce of the soil "like grass, or turves
or trees ". It is not a "transfer of a right to enjoy the immoveable property" itself, but
a grant of a right to enter upon the land and take away a part of the produce of the soil
from it. In a lease, one enjoys the property but has no right to take it away. In a profit
a prendre one has a licence to enter on the land, not for the purpose of enjoying it, but
for removing something from it.

Now, how does the document in question regard this. In the first place, the duration of
the grant is twelve years. It is evident that trees that will be fit for cutting twelve years
hence, will not be fit for felling now. Therefore, it is not a mere sale of the trees as
wood. Such trees cannot be regarded as timber that happens to be standing because
timber, as such, does not draw nourishment from the soil. If, therefore, they can be
left for an appreciable length of time, they must be regarded as trees and not as
timber. The difference lies there. The result is that, though such trees as can be
regarded as standing timber at the date of the document, both because of their size and
girth and also because of the intention to fell at an early date, would be moveable,
property for the purposes of the Transfer of Property and Registration Acts, the
remaining trees that are also covered by the grant will be immoveable property, and as
the total value is Rs. 26,000, the deed requires registration. Being unregistered, it
passes no title or interest. If the document is construed as conveying to her any part or
share not being registered under the Indian Registration Act, the document does not
affect the immoveable property or give her any right to any share or interest in the
immoveable property. If the document is construed as purely a license granted to her
to enter upon the land, then that license must be taken to have become extinguished as
soon as the grantor's proprietary rights in the land vested in the State. If the document
is construed-as having given her a profits-a-prendre which is an interest in land, then
also the document will not affect the immoveable property and will not operate to
transmit to the petitioner any such profits-a-prendre, as the document has not been
registered.

1) State of Orissa v. Titaghur Paper Mills Company Limited, AIR 1985 SC 1293:

Facts: The respondent company entered into agreements with the State of Orissa for
felling, cutting, obtaining and removing bamboos from the forest areas.This was for
the purpose of converting bamboo into paper pulp or for purposes connected with the
manufacturing of paper.
Later the Government issued notifications, declaring that the bamboos agreed to be
severed are liable to be taxed on the turnover of the Purchaser. Respondent filed
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

various writ petitions in HC challenging the validity of the notifications. HC quashed

the notification and the judgment of the HC is appealed in the SC.
The State contended that the subject matter are “goods” and that is what is made
taxable, Respondents claimed that by such notification the state was attempting to
make a new class of goods not known to law and thus unconstitutional.
Issue: Whether the contract was for movable or immovable property?
Held: SC observed that the contract was not an agreement to sell bamboos standing
in the contract areas with an accessory license to enter upon such areas as for the
purpose of felling and removing the bamboos nor is it for a particular felling season
only. It is an agreement for a period ranging from fourteen, thirteen and eleven years
with the option to renew the contract for further terms of twelve years.
• It is an agreement for a long period extending to fourteen years, thirteen years
and eleven years with respect to different contract areas with an option to the
Respondent to renew the contract for a further term of twelve years and it
embraces not only bamboos which are in existence at the date of the contract
but also bamboos which are to grow and come into existence thereafter
• Under the Contract, the Respondent has the right to use all lands, roads and
streams within as also outside the contract areas for the purpose of free ingress
to and egress from the contract areas.
• It is also given the right to make dams across streams, cut canals, make water
courses, irrigation works, roads, bridges, buildings, tramways and other work
useful or necessary for the purpose of its business of felling, cutting, and
removing bamboos for the purpose of converting the same into paper pulp or
for purposes connected with the manufacture of paper
• Thus, the terms and conditions of the contract show that it is not a contract of
sale of goods. It confers upon the Respondent a benefit to arise out of land and
thus grants a profit a prendre and thus an immovable property.

Things attached to the earth:

• Different categories:
Ø ‘rooted in earth’: except standing timber, growing crops or grass
Ø ‘embedded in the earth’: walls and buildings
Ø ‘attached to what is so embedded in the earth for the permanent
beneficial enjoyment of that to which it is attached’
Ø Doctrine of fixtures : tests for assessing the same are as follows –
ü Mode of attachment and consequences of detachment: Has
the thing or machinery gone down because of its sheer weight?
Or, is there any external aid required to put it there? How easily
can that object be detached? Can removal cause damage to the
principal property?
ü Intention: This test will depend upon the facts and
circumstances of each case. Was the intention to fix the
attachment permanently or for a sufficiently long time?
ü By whom attached: The presumption is that nobody would want
to make a permanent improvement of the land belonging to
someone else.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Ø Things permanently attached to what is embedded in the earth for permanent

beneficial enjoyment of that to which it is attached.
ü It must be a permanent attachment, i.e., intended to be used in
perpetuity or till the life of the attachment.
ü Its attachment constitutes a permanent improvement to the thing to
which it is attached.

7) Duncan Industries Ltd. v State of Uttar Pradesh, (2000) SCC 633

Facts: A co. ICI India Ltd. Executed a deed of conveyance in favor of Chand Chhap
Fertilizer & Chemicals Ltd. (Appellants) for the sale of its fertilizer business for a sale
consideration of Rs. 70 cores. It was to be sold as a going concern. Dispute with
regard to payment of stamp duty. Registrar concerned complained that the relevant
Stamp Act was not complied with as the machinery was immovable property. The HC
held machinery was immovable property so the appellants challenged it on the ground
that the intention of the parties was to treat the machinery and plant as movables and
their value could not have been considered for stamp duty

Issue: Whether the plant and machinery sold to the Appellant co. were immovable
property attracting stamp duty?

Decision: The SC held that whether a machinery imbedded in the earth is movable
property or immovable property, depends upon the facts and circumstances of each
case. Primarily the court will take into consideration the intention of the parties
whether such embedment was intended to be temporary or permanent.

Like, the definition of “fertilizer business” clearly shows that the intention of the
vendor was to transfer all properties that comprised the fertilizer business.

• A careful perusal of the agreement of sale and the conveyance deed along with
the attendant circumstances and taking into consideration the nature of
machineries involved clearly shows that the machineries which have been
embedded in the earth to constitute a fertilizer plant in the instant case, are
definitely embedded permanently with a view to utilize the same as a fertilizer
plant.
• The description of the machines as seen in the Schedule attached to the deed
of conveyance also shows without any doubt that they were set up
permanently in the land in question with a view to operate a fertilizer plant
and the same was not embedded to dismantle and remove the same for the
purpose of sale as machinery at any point of time.
• The facts as could be found also show that the purpose for which these
machines were embedded was to use the plant as a factory for the manufacture
of fertilizer at various stages of its production. Hence, the contention that these
machines should be treated as movables cannot be accepted.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

8) Triveni Engineering & Industries Limited v. Comm. of Central Excise (2000)

7 SCC 29:

Facts: The appellants deal in turbo alternators which has two components - steam
turbine and Generator The appellants manufacture steam turbine in their factories
where excise duty is paid on them under the Act. They purchase duty paid generators
which are delivered at the site of the customer. show cause notices issued to them by
the Collectors of Central Excise stating that turbo alternators are liable to excise. The
appellants claimed that turbo alternator generator comes into existence on its being
fixed permanently on the land as such it is not an excisable good but an immovable
property. The assessee filed two appeals against the orders of the said Collectors on
the question of levy of excise duty on turbo alternator

Held: There can be no doubt that if an article is an immovable property, it cannot be

termed as 'excisable goods' for purposes of the Act. From a combined reading of the
definition of immovable property' in Section 3 of the Transfer of Property Act,
Section 3(26) of the General Clauses Act, it is evident that in an immovable
property there neither mobility nor marketability as understood in the Excise
Law. Whether an article is permanently fastened to anything attached to the earth
require determination of both the intention as well as the factum of fastening to
anything attached to the earth and this has to be ascertained from the facts and
circumstances of each case.

The marketability test requires that the goods as such should be in a position to be
taken to the market and sold, it follows that to take turbo alternator to the market it
has to be separated into its components--turbine and generator—but then it would not
remain turbo alternator + wont function if not fixed to the ground – Immoveable

MOVABLE PROPERTY

Ø Definition- According to the Registration Act, 1908, it includes property of every

description except immovable property, but including standing timber, growing crops
and grass.
Ø Growing crop – vegetable growth
Ø Growing crops include paan leaves, sugarcane, tendu leaves, or timber, but does
not include adjat, tendu plants, or a right to rear lac.
Ø Grass- analysis is same as for standing timber – intention to sever within a short
time.
Ø Mahadev Prasad v Enayab Ilahi AIR 1951 All 608 :

“It has long been settled that an agreement for the sale and purchase of growing grass,
growing timber or underwood, or growing fruit, not made with a view to their immediate
severance and removal from the soil and delivery as chattels to the purchaser, is a
contract for the sale of an interest in land.”
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

9) The Stock Exchange, Ahmedabad vs Asstt. Commissioner Of Income AIR 2001

SC 1071:
Facts: The Stock Exchange, Ahmedabad, the appellant, admitted Rajesh Shah as its
member on 19th February, 1988. He died on 7th February, 1994. On 12th February,
1994, heirs and legal representatives of Rajesh Shah wrote to the Stock Exchange that
they were unable to meet the liabilities of the deceased.

The Governing Board of the Stock Exchange is said to have passed a resolution dated
12th February, 1994 declaring Rajesh Shah, the deceased member, as a deemed
defaulter and further resolving that his membership rights vested in Stock Exchange
be disposed of by inviting offers within a minimum floor price of Rs.25 lakhs. In
respect of the order of provisional attachment, the stand of Stock Exchange is that
under its Rules, Bye-laws and Regulations on the death or default of a member,
member's right of nomination ceases and it vests in the exchange and belongs
absolutely to the exchange free of all rights, claims or interests of such member or any
person claiming through such member and the Governing Board is entitled to deal
with or dispose of such right of membership as it may think fit.

Issue: Whether right of membership confers upon the member any right of property
and after his demise devolved upon his legal representatives and heirs or it was a
personal permission in favor of the deceased and right of nomination of the legal
representative and heirs after his death has ceased and the said right has vested in the
Exchange?

Holding: The membership right in question was not the property of the assessee. The
right of membership is merely a personal privilege granted to a member, it is non-
transferable and incapable of alienation by the member or his legal representatives
and heirs except to the limited extent as provided in the rules on fulfillment of
conditions provided therein. In case of death or default of a member his right of
nomination shall cease and vest in the Exchange. In the case in hand, on the death of
Rajesh Shah his right of nomination ceased and vested in the Exchange and his legal
representatives and heirs did not exercise the right of nomination by expressing their
inability to meet the liabilities of the deceased.

Ratio: The right of membership is merely a personal privilege granted to a member

and not a right of property.

Attestation: The purpose of attestation is to verify whether the execution by the

transferor was voluntary. Its definition is contained in Sec.3 of TPA. Animo attestandi-
pre- requisite for a signature to be considered as attestation.

Notice:

“A person is said to have notice of a fact when he actually knows that fact, or when,
but for willful abstention from an enquiry or search which ought to have made, or
gross negligence, he would have known it.”
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Ø bona fide purchaser without notice

Ø Kinds of notice , 1. Actual notice 2. Constructive / implied notice

• Rule of caveat emptor / ‘buyer beware’ – places a duty on transferee to make

inquiries, inspect documents in the possession of transferor / statutory authorities to
assesses existence of a charge, competence of transferor, any other claims to property.

• What is the threshold that the buyer has to satisfy? Gross negligence

Ø Wilful abstention
Ø Lloyds Bank v PF Guzdar & Co – two banks, to who the property had been
mortgaged by the property owner – was the second bank guilty of willful
abstention / gross negligence?
Ø So, what are the duties that the law imposes on a transferee? Øhe must verify
competence of transferor (no one can pass a title better than the one he has)
Ø he must inspect the documents - actual notice of deed is constructive notice of
the contents
Ø he must satisfy himself of the absence of a charge on the property
• Status of outstanding municipal taxes? v
• 3. Notice to the agent – course of agency + capacity + not fraudulently
concealed

Regaistration: Registration of Immovable Propeety (as may be mandated under law)

operates as a constructive notice. On the flip, if registration is not compulsory under
law, the fact of registration does not operate as a constructive notice.

Stamp duty Law: Gamut of laws – Indian Stamp Act, 1899 passed by the Union along
with several state legislations. It Provides for the instruments that are required to be
stamped under law. Lease deed, conveyance deed and mortgage deed are examples of
agreements that are required to be stamped under law. General principle as contained
in Sec.17 of Indian Stamp Act, 1899: All instruments chargeable with duty and
executed by any person in India shall be stamped before or at the time of execution

CASE BRIEF OF TCS CASE:

Transfer of Property- Sec.5, TPA: definition for the term is contained in Section 5.
“living person” includes a company/ association/ body of individuals, whether
incorporated/not. “ in present/ in future”. Also, a transfer to one or more other living
persons, or to himself.

2) V. N. Sarin v. Ajit Kr. Poplai AIR 1966 SC 432

Facts: Respondent 1 (Ajit Kr. Poplai) became the owner of a bungalow after partition
of some coparcenary property. The appellant had been living as a tenant in this
bungalow had been inducted into it as a tenant and his landlord was respondent 2
(Respondent 1’s father) before the partition of this property. After respondent No. 1
got this Property by partition, he applied to the Rent Controller for the eviction of the
appellant on the ground the he required the premises bona fide for his own residence
and that of his wife and children who are dependent on him. It was contended by the
appellant that:
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

a. Respondent 1 was not his landlord,

b. even if he was his landlord, he had obtained the property through the partition,
which was a transfer of property,
c. he had no bona fide requirement of the property.
Issue: Whether the partition of the coparcenary property among the coparceners could
be said to be an acquisition by transfer under Section 14 (6) of the Delhi Rent Control
Act?

Section 14(6): It provides that where a landlord has acquired any premises by transfer,
no application for the recovery of possession of such premises shall lie under sub-
section (1) on the ground specified in clause (e) [bona fide requirement] of the
proviso thereto, unless a period of five years has elapsed from the date of the
acquisition.

Holding: The appellant’s eviction was decreed as the respondent had a bona fide
requirement and this requirement was not struck down by s. 14(6) as the partition was
not a transfer. It was stated that the purpose behind s. 14(6) was to protect tenants. A
landlord unable to show bona fide requirement, wanting to evict his tenant, would sell
his property to another person who could in turn evict the tenant by showing bona fide
requirement. However, a tenant would be protected from being evicted after such a
sale under s. 14(6) for five years.

Therefore, Ajit Kr. Poplai wanted to prove that there was no transfer and that his
requirement being bona fide, he could claim under s. 14(1)(e). On the other hand,
Sarin wanted to prove that there was a transfer, as this would have brought the case
under s. 14(6), preventing his eviction for 5 years even if Poplai had a bona fide
requirement.

Why partition isn’t transfer (in the case of a transfer, the title to the property which
the purchaser acquires by transfer must not vest in him prior to such transfer and here
the erstwhile coparceners had a prior title):

The process of partition, therefore, involves the transfer of joint enjoyment of

properties by all the coparceners into an enjoyment in severality by them of the
respective properties allotted to their shares. Having regard to this basic character of
joint Hindu family property, that each coparcener has an antecedent title to the
said property, though its extent is not determined until partition takes place. That
being so, partition really means that whereas initially all the coparceners have
subsisting to the totality of the property of separate titles of the individual coparceners
in respect of several items of properties allotted to them respectively. If that be the
true nature of partition, it would not be easy to uphold the broad divided Hindu
family property must necessarily mean transfer of the property to the individual
coparceners.

Ratio: Partition of a joint family property among coparceners does not amount to a
transfer of property.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Kenneth Solomon v. Dan Singh Bawa, AIR 1986 Del 1 :

Facts: Mrs. CL Sury was Dan Singh Bawa’s tenant. She died in October, 1967. The
landlord brought an application against the present appellant Kenneth Solomon for
recovery of possession of the tenancy premises. The eviction was claimed under
proviso (b) to Sub Section (1) of Section 14 of the Delhi Rent Control Act, 1958 (for
short 'the Act) on the allegations that the tenant had left no heir and had in her life
time parted with the possession of the premises in dispute in favor of the appellant
without the written consent of the landlord. It was contended that the tenancy had
devolved upon Solomon through Sury’s will and hence possession had been parted
with.

Issue: Whether the tenancy rights were disposed under the will? Whether the act of
bequeathing the tenancy rights by making a will would amount to parting with
possession (volitional) of the premises within the meaning of the provisions contained
in proviso (b)?

Holding: 1. Right of the lessee to possess the immovable property under s. 105 of the
TP Act was an interest in immovable property and would be covered under the
expression 'all my moveable and immoveable properties' used in the residuary clause
of the will. The word 'Property' includes all legal rights of a person except his
personal rights, which constitutes his status or personal condition. The tenancy rights
would definitely be included in the words 'all my moveable and immoveable
properties'. The tenancy rights, therefore, devolved on the appellant (Solomon)
under the will.

Section 14(1)(b)—exception to the rule that the landlord cannot evict the tenant: If the
tenant parts with the possession of the leased property without the written consent of
the landlord.

2. Yes, she had parted with possession. On wills and whether they constitute parting
with possession: A will is revocable and the transfer under it would come into play
only after the death of the testator (hence not inter vivos and not under s. 5 of TP Act)
and at that point of time it has the effect of vesting the property subject matter of the
will in the devisee. Though the possession was parted with only after the death of the
testator, the process of parting with possession started in her lifetime when she
executed the will declaring her intention (hence volitional) to dispose the tenancy
rights in favor of the appellant. The act, of course, matured on her death. But the fact
remains that the process started in her lifetime. This vesting (after the death of the
testator) would amount to parting with possession within the meaning of the
provisions contained in proviso (b). The landlord was, therefore, entitled to claim
eviction as the testator had parted with the possession without the written
consent of the landlord.

Ratio: Though a will does not constitute a transfer under s. 5 of the TP Act because
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

the transfer is not inter vivos and it can be revoked at any time before the death of the
testator, bequeathing tenancy rights under it constitutes parting with possession

What may be transferred?

Sec.6 sets out that property of any kind may be transferred, except as otherwise
provided by TPA/any other law in force. Sec.6(a) provides that the following
cannot be transferred:

Ø chance of an heir apparent succeeding to an estate, i.e. the rule of spes

successionis, which imploes that the transfer is void- abinitio.
Ø The chance of a relation obtaining a legacy on the death of a kinsman

Section 43(TPA): bona fide transferee without notice.

“Where a person fraudulently/erroneously represents that he is authorized to transfer

certain immovable property and professes to transfer such property for consideration
such transfer shall, at the option of the transferee, operate on any interest which the
transferor may acquire in such property at any time during which the contact of
transfer subsists. Nothing in this section shall impair the right of transferees in good
faith for consideration without notice of the existence of the said option.”

Jumma Masjid, Mercara v. Kodimaniandra Deviah, AIR 1962 SC 847

Facts:

There was a joint family consisting of three brothers, Santhappa, Nanjundappa and Basappa.
Of these, Santhappa died unmarried, Basappa died in 1901, leaving behind a widow
Gangamma, and Najundappa died in 1907 leaving him surviving his widow Ammakka, who
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

succeeded to all the family properties as his heir. On the death of Ammakka, which took place
in 1910, the estate devolved on Basappa, Mallappa and Santhappa, the sister's grandsons of
Nanjundappa as his next reversioners.

By a sale deed dated November 18, 1920, which was rectified in 1921, the three reversioners,
Basappa, Nallappa and Santhappa, sold the suit properties to one Ganapathi, under whom the
respondents claim, for a consideration of Rs. 2,000.

When Ganapathi sued to recover possession of the properties, Gangamma claimed that the
properties in question were the self-acquisitions of her husband Basappa, and that she, as his
heir, was entitled to them contended it. She died in Feb 1933. Thereupon Ganapathi applied
to the revenue authorities to transfer the patta for the lands standing in the name of
Gangamma to his own name, in accordance with the sale deed Ex. III. The appellant
intervened in these proceedings and claimed that the Jumma Masjid, Mercara, had become
entitled to the properties held by Gangamma, firstly, under a Sadakah or gift alleged to have
been made by her on September 5, 1932, and, secondly, under a deed of release executed on
March 3, 1933, by Santhappa, one of the reversioners, relinquishing his half-share in the
properties to the mosque for a consideration of Rs. 300.

By an order the revenue authorities declined to accept the title of the appellant and directed
that the name of Ganapathi should be entered as the owner of the properties. It was contended
by the appellants that when the transfer to Ganapathi had been made, Santhappa (transferor)
only possessed a spes successionis and not the title of the property and hence under s. 6(a) of
the TP Act, this transfer was void. However, another contention in favor of the respondents
was that the respondents had the right of estoppel under s. 43 of the TP Act as Santhappa had
fraudulently represented his right to transfer the property for consideration and so the sale
became operative when the vendors acquired title to the properties on the death of Gangamma
on February 17, 1933.

Issue: Whether a transfer of property for consideration made by a person who represents that
he has a present and transferable interest therein, while he possesses, in fact, only a spes
successionis, is within the protection of s. 43 of the Transfer of Property Act?

Holding: When a person transfers property representing that he has a present interest therein,
whereas he has, in fact, only a spes successionis, the transferee is entitled to the benefit of s.
43, if he has taken the transfer on the faith of that representation and for consideration. In the
present case, Santhappa, the vendor in the sale deed in Ganapathi’s favor, represented that he
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

was entitled to the property in praesenti, and it has been found that the purchaser entered into
the transaction acting on that representation. He therefore acquired title to the properties
under s. 44 of the Transfer of Property Act, when Santhappa became in titulo on the death of
Gangamma on February 17, 1933, and the subsequent dealing with them by Santhappa by
way of release under release deed did not operate to vest any title in the appellant.

It was contended by the appellants that reading spes successionis into s. 43 rendered s. 6(a)
null. While s. 6(a) was meant to declare a contract for the transfer of spes successionis void, s.
43 was meant to ensure that a fraudulent/erroneous misrepresentation regarding the title of the
property with the transferor did not prevent the transfer from happening in case the contract
for this transfer had not been rescinded. One was making the contract of transfer of spes
successionis void while the other was demanding estoppel for the transferee in this regard.
The court, thus, differentiated between the two rights in the following manner.

Section 6(a) Section 43

1. Deals with certain kinds of interests in 1. Deals with representations as to title made
property mentioned therein, and prohibits a by a transferor who had no title at the time of
transfer simpliciter of those interests transfer, and provides that the transfer shall
fasten itself on the title, which the transferor
subsequently acquires.

2. Enacts a rule of substantive law 2. Enacts a rule of estoppel which is one of

evidence

3. For a transfer of what is on the face of it 3. For a transfer of what purports to be an

spes successionis. interest in praesenti.

4. Where the transferee knew as a fact that 4. But where the transferee does act on the
the transferor did not possess the title, which representation, there is no reason why he
he represents he has, then he cannot be said should not have the benefit of the equitable
to have acted on it when taking a transfer. doctrine embodies in s. 43, however
Section 43 would then have no application, fraudulent the act of the transferor might
and the transfer will fail under s. 6(a). have been.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Ratio: Section 43 does not nullify Section 6(a) of the TP Act as the former applies in cases
where there is a misrepresentation with respect to the transfer an interest in praesenti while in
the latter there is no misrepresentation and the transfer is openly of spes successionis.

Kartar Singh (Dead) By Lrs and Others v. Harbans Kaur Smt

Facts: Smt. Harbans Kaur executed a sale deed in favour of the appellant (Kartar Singh) of
alienating the lands on her behalf and behalf of her son (minor), Kulwant Singh. Kulwant
Singh, on attaining majority, filed for a declaration that the sale of his share in the lands
mentioned in the schedule attached thereto by his mother was void and does not bind him.
The decree ultimately was granted declaring that the sale was void as against the minor. But
before taking delivery of the possession, Kulwant Singh died. Harbans Kaur, the mother,
being the heir, succeeded to the estate of the deceased. The appellant, therefore, laid his claim
to the benefit of Section 43 of the Transfer of Property Act, 1882 (for short 'the Act'). The
High Court, while setting aside the decree of the trial court and declared that the sale is void,
refused to grant the remedy under Section 43 of the Act. Thus these appeals by special leave.

Holding: Appeal dismissed.

Ratio: Section 43 does not apply because it was found that the appellant made diligent and
reasonable inquiries into the entitlement of the mother to alienate her son’s estate, therefore, it
cannot be said that the appellant acted reasonably by getting the transfer in his favour.
According to the Guardians and Wards Act, a minor’s estate cannot be alienated without
taking special permission from the district. Therefore, transfer could not have taken place.
Additionally, according to section 43, the rule of estoppel by the deed would only apply if the
transferor misled the transferee. Therefore, section 43 does not apply. Therefore, no costs
would be given to the appellant.

CASE BRIEF OF HAMEEDA V. JAMEELA

v Section 6, TPA- the other things that cannot be transferred under this
section are as follows:
ü A right of re-entry upon breach which is the entitlement of the
owner
ü The interest in the property restricted in its enjoyment to the
owner personally cannot be transferred by him( for instance, the
right of pre-emption)
ü The right to future maintainance
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

ü The mere right to use

ü Neither public office nor the salary of a public officer
ü The stipends allowed to a military naval, air force, civil pensioners
of the government
ü Unlawful object/ consideration

General rules of transfer:

Conditional & unconditional transfers, contingent interest.

Section 7- it basically deals with who is competent to transfer the property. For
instance, in the case of Kartar Singh v. Harbans Kaur, where it discussed about the
guardian’s power to transact in the property on behalf of her minor son.
Section 8- it deals with what does the transfer of property entail. For instance, the
case of Suresh Chand where land and trees and ratio that, “unless a different intention
is expressed/ necessarily implied”.
Section 9- A transfer of property may be made without writing in every case in which
a writing is not expressly required by law.
Restrictions on Alienation:
Sec.10, TPA:

Where property is transferred subject to a condition or limitation absolutely

restraining the transferee or any person claiming under him from parting with or
disposing off his interest in the property, the condition or limitation is void except in
the case of a lease where the condition is for the benefit of the lessor or those claiming
under him :

Provided that property may be transferred to or for the benefit of a woman (not being
Hindu, Muhammedan or Buddhist), so that she shall not have power during her
marriage to transfer or charge the same or her beneficial interest therein.

Ø Different kinds of conditions – condition precedent and condition subsequent

Partial and Absolute restraint:

Ø A condition may operate as an absolute/ partial restraint.

Ø Temporal restriction is one which deals with rstricting transfer of
property for a certain period of time.
ü Transferee not to sell the property for 5 yrs
ü Transferee to not sell the property for 5 yrs but coupled with a right
of pre-emption in favour of the transferor.
Ø Monetary restraint: under this, the transferee can sell the property only at a
stipulated consideration and he is required to remit certain proceeds of sale
consideration to the transferor.
Ø Restrictions pertaining to persons: The transferee can sell the property only
to a stipulated person and only to any of the family members.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Ø Purpose based restrictions: The transferee has to sell the subject property
only for a stipulated purpose.

Syed Mohammad Raza vs Abbas Bandi Bibi (1932) 34 BOMLR 1048

Afzal Husain

W1 W2 Sister

Sughra Bibi Fatima Begam Zainab Bib

(Compromise deed) (children brought the present suit)

1868, Sughra Bibi brought a suit against her cousin Afzal Husain, claiming a half-
share in certain immoveable properties. The litigation ended in a compromise on the
terms that Bibi will marry Afzal

Marriage settlement - both wives - permanent owners as half and half. They shall not
have power to transfer this property to a stranger; but the ownership thereof as family
property shall devolve on the legal heirs of both the wives, and the management and
collections of the entire estate shall be in the hands of their husband, Syed Afzal
Hasan, in his capacity of a husband; if on the part of the husband there is any act of
neglect or estrangement towards either of the wives, then, in that case, the wife's only
remedy will be to have the management of her share through the Court; but during the
lifetime of Afzal Hasan neither of the wives shall have the power on her own
authority to have the management of the share which is owned by her performed by
any member of her father's family, and if in contravention of this agreement the
defendant refuses to marry the plaintiff by way of nikah, then the plaintiff shall in
accordance with this document remain owner of a moiety (a lesser part), and if the
plaintiff acts contrary to the stipulation of nikah, she shall cease to have any rights
whatever. If, divorced - ownership shall remain vested in the wives, as before, subject
to the conditions mentioned above; provided that the divorced wife should regard
herself as an undivorced wife, and like a woman without a husband continue to live in
the house. Whatever property exists at present, or may be acquired in future, shall,
during the lifetime of the husband’s father continue to remain in possession of them
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

and after them the property also shall devolve on the two wives or their descendants
in equal shares.

On the death of Afzal and his first wife, Bibi took possession of her properties and
sold and mortgaged before her death.

Appellants – the party to whom the property was sold

Respondent – children of Afzal’s sister claimed for two-third share in Bibi’s property
stating that she had a partial interest in the property and she could not transfer it to
anyone outside the family

Issue: Bibi contested that it was an absolute condition to not transfer to strangers,
thus transfer to Appellants is valid.

Held: Subordinate Judge examined - Was the restriction placed by the compromise
deed upon Sughra Bibi's power of alienation valid and legally enforceable? Held that
the restriction was invalid and inoperative. In appeal, the Court interpreted the deed
and stated - under the express words of the document, with a restriction against
alienation to "a stranger" there is no doubt that "stranger" means any one who is not a
member of the family, and appellants are admittedly strangers in this sense. Unless,
therefore, this restriction can for some reason be disregarded, they have no title to the
properties which can prevail against the respondent.

It seems clear that after the passing of the Transfer of Property Act in 1882, a partial
restriction upon the power of disposition would not, in the case of a transfer inter
vivos, be regarded as repugnant. In view of the terms of this section, and in the
absence of any authority suggesting that before the Act a different principle was
applied by the Courts in India, their Lordships think that it would be impossible for
them to assert that such an agreement as they are now considering was contrary to
justice, equity and good conscience.

On the assumption that Sughra Bibi took an absolute estate subject only to this
restriction, the restriction was not absolute, but partial; it forbids only alienation to
strangers, leaving her free to make any transfer she pleases within the ambit of the
family.

- The respondents became entitled to two-third

17) K. Muniswamy v. K. Venkataswamy, AIR 2001 Kant. 246

Facts: Appellant & Respondent – brothers. Appellant filed a suit for partition seeking
half the share. In 1969 – partitioned the properties – half to parents and ¼ to both the
brothers. The half share of the parents was to be enjoyed by the parents during their
lifetime in the manner they like and after their death, the property will devolve on the
sons equally. 1977 – parents sold their share in favor of Respondent. After death
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

of parents, appellant brought a suit for partition stating absolute restraint of parents to
sell through a life interest.

Issue: Whether life interest is hit by S. 10?

Held: Family settlement or partition – a restrictive covenant partially curtailing

properties right could be agreed upon, however, creating the absolute bar against the
alienation is not permissible even according to the tenets of Hindu Law. A life interest
can be created though a gift or Will but it is impossible to create total restraint
through a sale deed, where a consideration has been paid.

Provisions of S. 10 would not apply to FS and Partition – no transfer of title.

However, on the ground of sound public policy, total restraint on the right of
alienation in respect of immovable property, which prevents free circulation, is to be
held void, but, any partial restraint is valid and binding. The restrictive covenants
have to be carefully and cautiously interpreted – where express, no difficulty.
However, while implied restrictions if they are to be read in to the terms of the
document should be so clear and unambiguous to suggest the one and only inference
in favor of restrictive covenant set up or pleaded otherwise. If stipulations are
ambiguous susceptible to contrary or alternative meaning, it would not be permissible
to read into the said stipulation by inference.

In the instant case, it is possible to assume from the stipulations that an absolute estate
was granted in favor of the parents in view of the terms that they should enjoy the
property ‘in the manner they like’, in the event of they dying intestate and that full or
any part of the property available is left for intestate succession, in such a situation,
the sons would get the share equally, otherwise not.

16) Zoroastrian Co-operative Housing Society Ltd. V. District Registrar, Co-op.

Societies (Urban) (2005) 5 SCC 632 :
Facts: The Petitioner society was registered under the Bombay Co-operative
Societies Act, 1925 with the object of constructing houses. They had allotted plots to
members for residential construction. The bye-laws were framed restricting
membership to Parsis and if further, these houses were sold had to be only to Parsis.
Respondent who owned a plot in the Society began to negotiate with a builders’
association for sale of his plot – non-Parsi Injunction filed by Petitioner

Issue: Is it Absolute restraint under S. 10?

Held: HC - It has been submitted from the reading of the aforesaid provisions that
membership has to be open and cannot be restricted without sufficient cause and
that such restriction on the ground of religion would obviously be contrary to the
provisions contained in the aforesaid provisions of law. It would be clear that a
restriction based on religion, race or caste contained in a bye-law, on the member's
right in a co-operative housing society to transfer his membership coupled with his
right to alienate his interest in the immovable property would be bad in law.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Constitution does not permit discrimination on the basis of religion. Condition illegal
– Petition dismissed

SC disagreed and stated that Under the Indian Contract Act, a person has the freedom
to enter into a contract. The bye-laws of a cooperative society setting out the terms of
membership to it, is a contract entered into by a person when he seeks to become a
member of that society. Even the formation of the society is based on a contract. The
restriction imposed, is generally for retaining the identity of the society and to carry
forward the object for which the society was originally formed.

In our view, the High Court made a wrong approach to the question of whether a bye-
law could be ignored by a member and whether the Authorities under the Act and the
court could ignore the same on the basis that it is opposed to public policy being
against the constitutional scheme of equality or non-discrimination relating to
employment, vocation and such. The appellant Society was formed with the object of
providing housing to the members of the Parsi community, a community admittedly a
minority.

S. 10 cannot have any application to transfer of membership. Transfer of membership

is regulated by the bye-laws. The bye-laws in that regard are not in challenge and
cannot effectively be challenged in view of what we have held.

S. 10 relieves a transferee of immoveable property from an absolute restraint placed

on his right to deal with the property in his capacity as an owner thereof. As per S. 10,
a condition restraining alienation would be void. The Section applies to a case where
property is transferred subject to a condition or limitation absolutely restraining the
transferee from parting with his interest in the property. For making such a condition
invalid, the restraint must be an absolute restraint. It must be a restraint imposed while
the property is being transferred to the transferee. Here, respondent No.2 became a
member of the Society on the death of his father. He subscribed to the bye-laws. He
accepted Section 30 of the Act and the other restrictions placed on a member.
Respondent No.2 was qualified to be a member in terms of the bye-laws. His father
was also a member of the Society. The allotment of the property was made to
appellant in his capacity as a member. There was really no transfer of property to
respondent No.2. He inherited it with the limitations thereon placed by Section 31 of
the Act and the bye-laws. His right to become a member depended on his possessing
the qualification to become one as per the bye-laws of the Society. He possessed that
qualification. The bye-laws provide that he should have the prior consent of the
Society for transferring the property or his membership to a person qualified to be a
member of the Society. These are restrictions in the interests of the Society and its
members and consistent with the object with which the Society was formed. He
cannot question that restriction. It is also not possible to say that such a restriction
amounts to an absolute restraint on alienation within the meaning of S. 10.

Section 11- Restrictions repugnant to interest created

 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Where, on a transfer of property, an interest therein is created absolutely in favor of

any person, but the terms of the transfer direct that such interest shall be applied or
enjoyed by him in a particular manner , he shall be entitled to receive and dispose of
such interest as if there were no such direction.

Where any such direction has been made in respect of one piece of immoveable
property for the purpose of securing the beneficial enjoyment of another piece of such
property, nothing in this section shall be deemed to affect any right which the
transferor may have to enforce such direction or any remedy which he may have in
respect of a breach thereof.

18) Tulk v. Moxhay (1848) 2 Ch. 774 or Tulk v. Moxhay, All ER Rep. 9
Facts: The Plaintiff, owner of a vacant piece of ground in Leicester Square as well as
of several other houses forming the Square. The Plaintiff sold Leicester Square with
the restriction that it be maintained in a certain form as a public “pleasure ground”.
The deed restriction was covenant for heirs and assigns requiring that the land be
maintained as a square garden. The said piece of land passed in to the hands of the
Defendant, Moxhay, by diverse intermediary conveyances with the same clause. The
defendant admitted he was aware (notice) of the covenant but since his contract did
not explicitly contain the clause, he wished to alter the character of the Square
Garden, and thought to built upon it.The Plaintiff, owner of adjoining buildings,
sought for an injunction.
Held: Lord Cottenham granted injunction on the grounds that the vendee could not
violate the contract, but he could sell it and the purchaser from him may violate the
contract that the Court had no power to interfere. It was observed that if this
contention was accepted, it would be impossible for an owner of land to sell any part
of it without the risk of rendering what he retains worthless. It was observed that the
question is not whether the covenant runs with the land, but whether party shall be
permitted to use the land in a manner inconsistent with the contract entered into by his
vendor, with notice of which he made the purchase.

Section 40: Burden of obligation imposing restriction on the use of the land:

Ø Negative covenant- It runs with the land, binds a subsequent transferee who
has notice of the same
Ø Positive covenant- It does not run with the land and also binds only the
transferor and transferee and not aby subsequent transferee.
Ø Personal covenant- It does not run with the land.

Section 12- Condition making interest determinable on insolvency/ attempted

alienation: Where property is transferred subject to a condition or limitation making
any interest therein, reserved or given to or for the benefit of any person, to cease on
his becoming insolvent or endeavoring to transfer or dispose of the same, such
condition or limitation is void.

Nothing in this section applies to a condition in a lease for the benefit of the lessor or
those claiming under him.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Section 19- Vested Interest: Where, on a transfer of property, an interest therein is

created in favour of a person without specifying the time when it is to take effect, or in
terms specifying that it is to take effect forthwith or on the happening of an event which
must happen, such interest is vested, unless a contrary intention appears from the terms
of the transfer.

A vested interest is not defeated by the death of the transferee before he obtains
possession.

Explanation. —An intention that an interest shall not be vested is not to be inferred
merely from a provision whereby the enjoyment thereof is postponed, or whereby a prior
interest in the same property is given or reserved to some other person, or whereby
income arising from the property is directed to be accumulated until the time of
enjoyment arrives, or from a provision that if a particular event shall happen the interest
shall pass to another person.

§ Postponement of enjoyment – A condition postponing enjoyment does not

prevent vesting immediately but is itself void for repugnancy after the transferee
has attained majority.
Example: A transfers property to B in trust for C, and directs B to give
possession of the property to C when he attains the age of 25. C has a vested
interest and is entitled to possession at the age of 18.
§ Prior interest – prior interest does not postpone vesting of the subsequent
interest. For instance, a fund is bequeathed to A for life, and after his death to B
§ Death of transferee- A vested interest becomes property of transferee and can
be transferred by him even before he has obtained possession. Thus, one of the
factors in determining nature of interest is whether the property devolves on the
heirs of the transferee or reverts to the estate.

Contingent Interest: Where, on a transfer of property, an interest therein is created in

favor of a person to take effect only on the happening of a specified uncertain event, or
if a specified uncertain event shall not happen, such person thereby acquires a contingent
interest in the property. Such interest becomes a vested interest, in the former case, on
the happening of the event, in the latter, when the happening of the event becomes
impossible.

Exception. —Where, under a transfer of property, a person becomes entitled to an

interest therein upon attaining a particular age, and the transferor also gives to him
absolutely the income to arise from such interest before he reaches that age, or directs
the income or so much thereof as may be necessary to be applied for his benefit, such
interest is not contingent.

Vested Vs. Contingent Interest:

Ø Vested interest is of 2 kinds namely, one vested in possession and the other
vested in interest.

20) Rajes Kanta Roy v Santi Debi AIR 1957 SC 255:

 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Facts: Ramani Kanta Roy had three sons, Rajes, Rabindra and Ramendra. One of the
sons, Rabindra died childless leaving a widow, Santi Debi. After his death, father,
Ramani bequeathed some of Rabindra’s properties. His wife, Santi Debi, filed a suit
for a declaration that she was entitled to the property. However, Ramani, Rajes and
Ramendra, filed a suit against Santi for a declaration that the marriage was void as
they fell under DOPR. While this suit was on, father, Ramani executed a trust deed of
his properties with Rajes as the trustee.The conditions of the trust deed were such that
(a)Specified lots were marked for each of the two sons

(b) The income out of their respective property was to be used to discharge the debt of
the father and on the death of the father the trust would end and the properties would
be allotted to the sons as marked

(c) Any surplus income remained was to go to the person to whose lot it belonged to

(d) If any son died, before the trust was terminated, his interest was to devolve on his
heirs.

The suit b/w Santi and Rajes, Ramani and Ramendra was finally compromised on the
terms that Santi Debi would receive a monthly allowance of Rs. 475/- from the
properties & on default of payment, Santi Debi could realize it through Court. On
default, she filed an application to realize the arrears of her allowance. Execution was
asked for by way of attachment and sale of immovable of Rajes and Ramendra they
received under the Trust Deed. Rajes argued that the interest he derived in the
properties of Ramani was contingent and thus, could not be attached.

Order was passed by the Subordinate Judge in favor of Santi. Appeal by Rajes was
dismissed by HC. Filed for appeal before SC.

Held: There can be no doubt that the question is really one of intention to be gathered
from a comprehensive view of all the terms of a document. A Court has to approach
the task of construction in such cases with a bias in favor of a vested interest unless
the intention to the contrary is definite and clear. It is, therefore, necessary to consider
the entire scheme of the deed of trust in the present case, having regard to the terms
therein, and to gather the intention therefrom.

The arrangements under the Trust deed taken together clearly indicate that what is
postponed is not the very vesting of the property in the lots themselves but that the
enjoyment of the income thereof is burdened with certain monthly payments and with
the obligation to discharge debts therefrom notionally pro rata, all of which taken
together constitute application of the income for his benefit – this is what explanation
to S. 19 and Exception to S. 21 state – bias towards vested interest.

While, therefore, the settlor does appear to have attached considerable importance to
the liquidation of debts,there is nothing to show that he was apprehensive that the
debts would remain undischarged out of his properties and its income and that he
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

contemplated the ultimate discharge of his debts to be such an uncertain event as to

drive him to make the accrual of the interest to his sons under the deed to depend
upon the event of the actual discharge of his debts.

The Court held that the interest taken by the sons under the trust deed was vested and
not a contingent interest, therefore, attachable under a court’s decree.

Exercise: Vested Vs. Contingent Interest.

Identify the nature of the following interests:

Ø A legacy is bequeathed to D in case A, B and C shall all die under the age of
18 – what is the nature of D’s interest?
Ø Bequest to a daughter for life and after her death to her lawful children who
being a son shall attain the age of 21, or who being a daughter shall attain that
age or marry – what is the nature of the interest of the son?
Ø A bequeaths to B Rs.100, to be paid upon his attaining the age of 18. On A’s
death does the legacy become vested in B?
Ø A fund is bequeathed to A for life, and after his death to B. On the testator’s
death, the legacy to B confers which kind of interest?

21) Saraju Bala Debi v Jyotirmoyee Debi (1931) 33 BOMLR 1257:

Facts

- Raja Kali Narayan Roy Chowdhury executed three leases in favor of his
daughter Kripamoyee Debi of certain properties for her maintenance.
- The three leases were executed on March 22, 1865; June 10, 1867; and March
5, 1877.
- All three leases were very similar in nature (with slight difference – not
important for the case).
- There were certain restrictions on the property. There was a strict definition
for the heirs of Kripamoyee; it didn’t include descendants of her daughters,
adopted sons, etc.
- Also, the lease deed provided that the right of transfer by sale or gift has
certain restrictions. The lands could be gifted for religious purposes to the
Guru/Purohit not exceeding 5 pakhis in each act. If there was a necessity and a
sale/mortgage had to be made, the lease deed provided that Kripamoyee or her
heirs would have to sell the land to the Raja or his heirs at the value specified
in the lease deed; it could not be sold/transferred/mortgaged to anyone else.
- There was alse a defeasance clause in the lease deed stating that upon the
death of Kripamoyee whereby she doesn’t leave any heirs, the taluk will revert
to the Raja or his heirs.
- The Raja dies in 1878 and Kripamoyee dies in 1920, without heirs – but she
leaves a will.
- The executrix of the will (Respondent No. 1) entered into possession of the
leasehold properties and divided them among the other respondents who are
the legatees under the said will.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Procedural History

- On April 15, 1925, the plaintiffs, who are the appellants here, instituted the
present suit in the Court of the Subordinate Judge of Dacca.
- They alleged that they were the nearest heirs of the Raja and that Kripamoyee
took only an interest for her life in the property. In addition, by the defeasance
clause, the properties should be reverted to them.
- Both Courts in India took the view that Kripamoyee took an absolute estate of
inheritance under the leases and she was entitled to dispose of the properties as
per her will.
- The plaintiffs have appealed to His Majesty in Council.
Issue: Have the plaintiffs acquired any right in the properties after the death of
Kripamoyee? Did she take an absolute estate of inheritance and did she have the right
to dispose of the properties as per her will?

Holding : The appeal is dismissed. The Lordships uphold the decision of the two
Courts in India that the leases gave Kripamoyee an absolute estate of inheritance
which she could dispose of as she pleased.

Analysis

- According to the words of the 3 lease deeds, Kripamoyee had the absolute
estate of inheritance because they constituted her as the ‘malik’ of the
properties and that imports full proprietary rights (unless there is something in
the context to indicate an intention to the contrary).
- Such intention on the part of the Raja could be found in the conditions subject
to which the grant was made. But the Lordships do not think that those
conditions cut down the absolute estate into one for life.
- First condition: that the estate should not pass to the heirs of her daughters. In
the opinion of the Court, this is an attempt to alter the legal course of
succession to an absolute estate and is therefore void.
- Second condition: that they can’t transfer except for religious purposed under
specific conditions. This is adjudged to be an attempt to restrict the powers of
an absolute owner than enlarge the powers of a life tenant. It is void.
- Third condition: right of pre-emption to the Raja and his heirs. This condition
implies a power of sale rather than negating it, and is inconsistent with the
notion of an estate for life.
- Therefore, she had an absolute estate of inheritance and could dispose it as she
liked.

19) Ma Yait v The Official Assignee (1930) 32 BOMLR 125:

Facts: Plaintiff, Ebrahim Moolla, the eldest son. Defendants were trustees of the
settlement made by the plaintiff’s father in 1908 and pleaded that they had an interest
in the property under the deed. The defendants contended that the transfer in favor of
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

son was invalid by reason of it being in breach of clause (a) of S. 6 of TPA – spes
successionis

Issue - whether the rights that were given to the eldest son, were a possibility of a like
nature of an heir-apparent succeeding to an estate?

Held - That turns upon the construction of the settlement.

The father transferred to the trustees a large amount of property, in trust, to allow the
during his lifetime to manage his property, and to have the sole benefit of the income
both from the immovable and movable property. That after his death, 4 schedules
were to operate as per which Rs. 1,000 out of the income out of the property per
month was to be paid to the widow, and the remainder to be divided amongst the
children, including the eldest son. This arrangement would last as long as the
youngest child turned 21 yrs of age.

After the youngest child attained the age of twenty, property was to be sold, and the
proceeds were to be divided in equal shares between the children then surviving, the
issue of any child who was dead to represent his father's share. The property falling
under the fourth schedule was not to be distributed until the death of the youngest
child, and it was to be divided then, amongst the children living at that date.

Now, it is plain that the result of this disposition was to create first of all, a vested
interest in all the children in the income of the property, secondly, it created a
contingent interest in all the children in the corpus in respect of all the property until,
at any rate, the youngest child reached the age of twenty.

When the youngest child reached the age of twenty, the children who were alive at
that date obtained a vested interest and a right to have the proceeds distributed among
them as to the property in the first, second and third schedules. As to the property of
the fourth schedule, all the children took a contingent interest until the death of the
youngest child, and, as soon as the youngest child died, the children then surviving,
and, of course, their issue, obtained a vested right to have the property distributed
among them. That is a very plain and ordinary settlement, and it gives very plain and
well-understood rights to all the parties who benefit under the settlement: a vested
right in the income, contingent rights in the corpus; and it appears to their Lordships
to be plain that the contingent interest which the children took, whether they took it
under the first, second and third schedules or under fourth schedule, was something
quite different from a mere possibility of a like nature of an heir-apparent succeeding
to the estate, or the chance of a relation obtaining a legacy. It is a well ascertained
form of property. It certainly has been transferred in this country for generations-in
respect of which it is quite possible to raise money and to dispose of it any way that
the beneficiary chooses.

Transfer to members of a class who attain a particular age- Section 22: “Where,
on a transfer of property, an interest therein is created in favour of such members only
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

of a class as shall attain a particular age, such interest does not vest in any member of
the class who has not attained that age.”

Section 23- Transfer Contingent on happening of specified uncertain event-

“Where on a transfer of property, an interest therein is to accrue to a specified person
if a specified uncertain event shall happen, and no time is mentioned for the
occurrence of that event, the interest fails unless such event happens before, or at the
same time as, the intermediate or precedent interest ceases to exist. For example, A
makes a gift to B and after him to C, if C attains the age of 15 years on the date of B’s
death. If when B dies, C is two years old, transfer in favor of C fails.

Section 24- “Where, on a transfer of property, an interest therein is to accrue to such

of certain persons as shall be surviving at some period, but the exact period is not
specified, the interest shall go to such of them as shall be alive when the intermediate
or precedent interest ceases to exist, unless a contrary intention appears from the
terms of the transfer.”

Illustration

A transfers property to B for life, and after his death to C and D, equally to be divided
between them, or to the survivor of them. C dies during the lifetime of B. D survives
B. At B's death the property passes to D.

Section 25- Conditional Transfer : “An interest created on a transfer of property and
dependent upon a condition fails if the fulfilment of the condition is impossible, or is
forbidden by law, or is of such a nature that, if permitted, it would defeat the
provisions of any law, or is fraudulent, or involves or implies injury to the person or
property of another, or the court regards it as immoral or opposed to public policy.

Illustrations:

(a) A lets a farm to B on condition that he shall walk a hundred miles in an hour. The
lease is void.

(b) A gives Rs. 500 to B on condition that he shall marry A's daughter C. At the date
of the transfer C was dead. The transfer is void.

(c) A transfers Rs. 500 to B on condition that she shall murder C. The transfer is void.
(d) A transfers Rs. 500 to his niece C, if she will desert her husband. The transfer is
void.

Section 26- Fulfilment of condition precedent

Where the terms of a transfer of property impose a condition to be fulfilled before a

person can take an interest in the property, the condition shall be deemed to have been
fulfilled if it has been substantially complied with.

Illustrations

(a) A transfers Rs. 5000 to B on condition that he shall marry with the consent of C, D
and E. E dies. B marries with the consent of C and D. B is deemed to have fulfilled
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

the condition.

(b) 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
the marriage. B has not fulfilled the condition.

Section 27- Conditional transfer to one person coupled with transfer to another
on failure of prior disposition: “Where, on a transfer of property, an interest therein is
created in favour of one person, and by the same transaction an ulterior disposition of
the same interest is made in favour of another, if the prior disposition under the transfer
shall fail, the ulterior disposition shall take effect upon the failure of the prior disposition,
although the failure may not have occurred in the manner contemplated by the
transferor.

But, where the intention of the parties to the transaction is that the ulterior disposition
shall take effect only in the event of the prior disposition failing in a particular manner,
the ulterior disposition shall not take effect unless the prior disposition fails in that
manner.

Illustrations

(a) A transfers Rs. 500 to B on condition that he shall execute a certain lease within three
months after A's death, and, if he should neglect to do so, to C. B dies in A's life-time.
The disposition in favour of C takes effect.

(b) A transfers property to his wife; but, in case she should die in his life-time, transfer to
B that which he had transferred to her. A and his wife perish together, under
circumstances which make it impossible to prove that she died before him. The
disposition in favour of B does not take effect.

Section 28- Ulterior transfer conditional on happening/ not happening of a

specified event: “On a transfer of property an interest therein may be created to
accrue to any person with the condition superadded that in case a specified uncertain
event shall happen such interest shall pass to another person, or that in case a
specified uncertain event shall not happen such interest shall pass to another person.
In each case the dispositions are subject to the rules contained in sections 10, 12, 21,
22, 23, 24, 25 and 27.”

Section 29- Fulfillment of condition subsequent: “An ulterior disposition of the

kind contemplated by the last preceding section cannot take effect unless the
condition is strictly fulfilled.

Illustration

A transfers Rs. 500 to B, to be paid to him on his attaining his majority or marrying,
with a proviso that, if B dies as minor or marries without C's consent, Rs. 500 shall go
to D. B marries when only 17 years of age, without C's consent. The transfer to D
takes effect.

Section 30: Prior disposition not affected by invalidity of ulterior disposition: “ If

the ulterior disposition is not valid, the prior disposition is not affected by it.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Illustration: A transfers a farm to B for her life, and, if she does not desert her
husband to C. B is entitled to the farm during her life as if no condition had been
inserted.

Section 31: Condition that transfer shall cease to have effect in case specified
uncertain event happens or does not happen: “ Subject to the provisions of section
12, on a transfer of property an interest therein may be created with the condition
superadded that it shall cease to exist in case a specified uncertain event shall happen,
or in case a specified uncertain event shall not happen”.

Illustrations: (a) A transfers a farm to B for his life, with a proviso that, in case B cuts
down a certain wood, the transfer shall cease to have any effect. B cuts down the
wood. He loses his life-interest in the farm.

(b) A transfers a farm to B, provided that, if B shall not go to England within three
years after the date of the transfer, his interest in the farm shall cease. B does not go to
England within the term prescribed. His interest in the farm ceases.

Section 32: Such condition must not be invalid-“ In order that a condition that an
interest shall cease to exist may be valid, it is necessary that the event to which it
relates be one which could legally constitute the condition of the creation of an
interest”.

Section 33: Transfer conditional on performance of act, no time being specified

for performance- “ Where, on a transfer of property, an interest therein is created
subject to a condition that the person taking it shall perform a certain act, but no time
is specified for the performance of the act, the condition is broken when he renders
impossible, permanently or for an indefinite period, the performance of the act.”

Section 34: Transfer conditional on performance of act, time being specified-

“Where an act is to be performed by a person either as a condition to be fulfilled
before an interest created on a transfer of property is enjoyed by him, or as a condition
on the non-fulfilment of which the interest is to pass from him to another person, and
a time is specified for the performance of the act, if such performance within the
specified time is prevented by the fraud of a person who would be directly benefited
by non- fulfilment of the condition, such further time shall as against him be allowed
for performing the act as shall be requisite to make up for the delay caused by such
fraud. But if no time is specified for the performance of the act, then, if its
performance is by the fraud of a person interested in the non-fulfilment of the
condition rendered impossible or indefinitely postponed, the condition shall as against
him be deemed to have been fulfilled.”

Transfer of Unborn persons and the rule against perpetuity (Section

13-18, TPA 1882)
Section 13- Transfer to unborn person: “Where, on a transfer of property, an
interest therein is created for the benefit of a person not in existence at the date of the
transfer, subject to a prior interest created by the same transfer, the interest created for
the benefit of such person shall not take effect, unless it extends to the whole of the
remaining interest of the transferor in the property.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Section 20: Transfer to unborn person: “Where unborn person acquires vested
interest on the transfer for his benefit. Where, on a transfer of property, an interest
therein is created for the benefit of a person not then living, he acquires upon his
birth, unless a contrary intention appear from the terms of the transfer, although he
may not be entitled to the enjoyment thereof immediately on his birth.
How can one transfer property to an unborn person?
Ø Prior interest- life estate in favour of living persons
Ø Subsequent interest- absolute estate in favor of an unborn person
Ø During lifetime of life-estate holder, if person is born, what is the nature of
his interest? Does he get possession of the property?
ü Iiustration1: A, on 1st Jan 1980 executes a deed by which he creates a life
interest in his property in favor of his brother Br anf further provides, that
this property is to vest absolutely in favor of his brother’s first child UB. Br,
was unmarried on the date of the transfer. He took possession of the
property, got married and UB was born in 1985. Br was alive until 2000.
• What if UB was born in 1985 but died in 1987?
• What if UB was never born?
ü Illustration 2: A made a gift of her property to B for her life and then to her
eldest daughter absolutely. The dead further provided that if B had only sons,
the sons would only enjoy a life estate in the property, if B had no children, the
property would vest in favor of Z.
§ Can Z make a successful claim if B has no children?
Rule against perpetuity:
The resultant compromise because of the opposing tensions at play between the
owners and the government is the rule against perpetuities. The tying up of property
for an indefinite period is not encouraged except for a short period. The twin aspects
of the rationale behind the rule against perpetuity is a) vesting timeline + b) power to
alienate.
Section 14-Rule against perpetuity: “ No transfer of property can operate to create an
interest which is to take effect after the lifetime of one / more persons living at the
date of such transfer, and the minority of some person who shall be in existence at the
expiration of that period, and to whom, if he attains full age, the interest created is to
belong.”
Illustration1: A fund is bequeathed to A for his life and after his death to B for his life
with a direction that after B’s death it shall be divided amongst such of B’s children
as shall attain the age of 18 but that if no child is of 18 yrs of age, the fund shall go to
C.
§ WHAT is the effect of such disposition? Does it offend the rule against
perpetuity?
§ What if the example employed also included a life interest in favour of one/more
other persons?
A transfers his property in 1985 to B for life, then to C for life, then to D for life,
then to E for life and then to E’s such daughter UD who should first attain the
age of 18 yrs. B,C,D AND E were living on the date of the transfer.
A-1985-B (LIFE INTEREST) dies in 1990
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

§ On these facts, when does UD get a vested interest in the property?

§ When does she get possession of the property from E?
Section 18- Exceptions to the rule against perpetuity: “The restrictions in sections
14, 16 and 17 shall not apply in the case of a transfer of property for the benefit for
the public in the advancement of religion, knowledge, commerce, health, safety or
any other object beneficial to mankind.
When all does the rule against perpetuity not apply?
Ø To personal agreements. For example, the shebaits of a temple agree to
appoint the family of C as pujaris from generation to generation to perform the
services of the temple and make provision for the expenses and remuneration of
the office. The agreement is valid and not affected by the rule against perpetuity.
Indeed, the ruke presupposes that there is a transfer of property.
Section 15-Transfer to a class- “Transfer to class, some of whom come under
sections 13 and 14- If, on a transfer of property, an interest therein is created for the
benefit of a class of persons with regard to some of whom such interest fails by reason
of any of the rules contained in Section 13 and 14, such interest fails in regard to
those persons only and not in regard to the whole class. Applies to situations where
transfer contemplated is to a class of persons.
Transfer to take effect on failure of prior interest: “Where, by reason by any of the
rules contained in Sections 13 and 14, an interest created for the benefit of a person/to
a class of persons fails in regard to such person/ the whole of such class, any interest
created in the same transaction and intended to take effect after/ or upon failure of
such prior interest also fails.
Section 17- Direction for accumulation: “Where the terms of a transfer of property
direct the income arising from the property shall be accumulated either wholly/in part
during a period longer than:-
a) The life of the transferor/or
b) A period of 18 yrs from the date of the transfer, such direction shall, save as
hereinafter provided, be void to the extent to which the period during which the
accumulation is directed exceeds the longer of the aforesaid periods, and at the
end of such last-mentioned period the property and the income thereof shall be
disposed of as if the period during which the accumulation has been directed to
be made had elapsed.
Equitable rules when rights conflict:( Sec 38-43 and 48-50)

Section 38- Transfer by person authorized only under certain circumstances to

transfer: “Where any person, authorized only under circumstances in their nature
variable to dispose of immovable property, transfers such property for consideration,
alleging the existence of such circumstances, they shall, as between the transferee on
the one part and the transferor and other persons (if any) affected by the transfer on
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

the other part, be deemed to have existed, if the transferee, after using reasonable care
to ascertain the existence of such circumstances, has acted in good faith.”

Illustration: A, a Hindu widow, whose husband has left collateral heirs, alleging that
the property held by her as such is insufficient for her maintenance, agrees, for
purposes neither religious nor charitable to sell a field, part of such property, to B. B
satisfies himself by reasonable enquiry that the income of the property is insufficient
for A’s maintenance, and that the sale of the field is necessary, and acting in good
faith, buys the field from A.

Section 39- Transfer where third person is entitled to maintenance: “Where a

third person has a right to receive maintenance, or a provision for advancement or
marriage, from the profits of immovable property, and such property is transferred,
the right may be enforced against the transferee, if he has notice thereof or if the
transfer is gratuitous; but not against a transferee for consideration and without notice
of the right, nor against such property in his hands.”

Illustration: A father having a son and a daughter leaves the property in favour of the
son through a will and provides that the son would pay a monthly amount of
Rs.10,000 out of the income coming from the property to the daughter for her
maintenance. The son goes ahead and transfers the property to Mr. X for
consideration. Mr. X has no direct knowledge of the obligation of the son to pay the
daughter maintenance out of the property. However, had he made reasonable
enquiries he would have known about the claim.

Section 40-Burden of obligation imposing restriction on the use of land: “Where,

for the more beneficial enjoyment of his own immovable property, a third person has,
independently of any interest in the immovable property of another or of any
easement thereon, a right to restrain the enjoyment in a particular manner of the latter
property, or

Or of obligation annexed to ownership but not amounting to interest or easement -

Where a third person is entitled to the benefit of an obligation arising out of contract
and annexed to the ownership of immovable property, but not amounting to an
interest therein or easement thereon,( Illustration: A contracts to sell Sultanpur to B.
While the contract is still in force he sells Sultanpur to C, who has notice of the contract.
B may enforce the contract against C to the same extent as against A.)

Such right or obligation may be enforced against a transferee with notice thereof
or a gratuitous transferee of the property affected thereby, but not against a
transferee for consideration and without notice of the right or obligation, nor
against such property in his hands.”

Section 41- Transfer by an ostensible owner: “Where, with the consent, express or
implied, of the persons interested in immovable property, a person is the ostensible
owner of such property and transfers the same for consideration, the transfer shall not
be voidable on the ground that the transferor was not authorised to make it:

PROVIDED that the transferee, after taking reasonable care to ascertain that the
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

transferor had power to make the transfer, has acted in good faith.”

Illustration: H (husband) is the owner of the property and the revenue records show
his name as the true owner. However, H entrusts the powers of management and
maintenance of the property to his wife W as he travels overseas frequently. W talks
to all potential buyers and negotiates the price with them. W proceeds to sell the
property to Z for consideration after having engaged in extended negotiations.

Ø Can H claim to be the true owner and thus set aside the sale of property to Z?
Ø Are the facts complete in order to reach a conclusion under Section 41?

Section 42- Transfer by person having authority to revoke former transfer:

“Where a person transfers any immovable property, reserving power to revoke the
transfer, and subsequently transfers the property for consideration to another
transferee, such transfer operates in favor of such transferee (subject to any condition
attached to the exercise of the power) as a revocation of the former transfer to the
extent of the power.

◦ Illustration - A lets a house to B, and reserves power to revoke the lease if, in the
opinion of a specified surveyor, B should make a use of it detrimental to its value.
Afterwards A, thinking that such a use has been made, lets the house to C. This
operates as a revocation of B’s lease subject to the opinion of the surveyor as to B’s
use of the house having been detrimental to its value.

Section 43- Transfer by unauthorized person who subsequently acquires interest

in the property transferred: “Where a person fraudulently or erroneously represents
that he is authorized to transfer certain immovable property and professes to transfer
such property for consideration, such transfer shall, at the option of the transferee,
operate on any interest which the transferor may acquire in such property at any time
during which the contract of transfer subsists.

Nothing in this section shall impair the right of transferees in good faith for
consideration without notice of the existence of the said option”

◦ Illustration: A, a Hindu who has separated from his father B, sells to C three fields,
X, Y and Z, representing that A is authorized to transfer the same. Of these
fields Z does not belong to A, it having been retained by B on the partition;
but on B’s dying A as heir obtains Z. C, not having rescinded the contract of
sale, may require A to deliver Z to him.

◦ Section 48: Priority of rights created by the transfer: “Where a person purports
to create by transfer at different times rights in or over the same immovable
property, and such rights cannot all exist or be exercised to their full extent
together, each later created right shall, in the absence of a special contract or
reservation binding the earlier transferees, be subject to the rights previously
created. Illustration: X enters into a lease with Z for a period of five years.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

While the lease is still subsisting, X sells the property to A. What happens to
A’s interests as an owner? Exceptions to rule of priority - procedure
prescribed by law not complied with for effectuating prior transfer

Section 49- Transferee’s right under policy: “Where immovable property is

transferred for consideration, and such property or any part thereof is at the date of the
transfer insured against loss or damage by fire, the transferee, in case of such loss or
damage, may, in the absence of a contract to the contrary, require any money which
the transferor actually receives under the policy, or so much thereof as may be
necessary, to be applied in reinstating the property”

Section 50- Rent bona fide paid to holder under defective title

No person shall be chargeable with any rents or profits of any immovable property,
which he has in good faith paid or delivered to any person of whom he in good faith
held such property, notwithstanding it may afterwards appear that the person to whom
such payment or delivery was made had no right to receive such rents or profits.

Illustration: A lets a 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.

Lis pendens, fraudulent transfer and part performance (Sec 52, 53 and 53(A))

Lis pendens: Lis (action/suit) + Pendens (pending)- Section 52: “During the
pendency in any court…. Of any suit/ proceeding which is not collusive and in which
any right to immovable property is directly and specifically in question, the property
cannot be transferred / otherwise dealt with by any party to the suit/ proceeding so as
to affect the rights of any other party thereto under any decree/ order which may be
made therein, except under the authority of the court and on such terms as it may
impose.

Understanding pendens - section 52 (explanation)- For the purposes of this section,

the pendency of a suit/proceeding shall be deemed to commence from the date of the
presentation of the plaint/ the institution of the proceeding in a court of competent
jurisdiction, and to continue until the suit/ proceeding has been disposed of by a final
decree/ order has been obtained, or has become unobtainable by reason of the
expiration of any period of limitation prescribed for the execution thereof by any law
for the time being in force.

Ø Filing of plaint+ appeal+ execution proceedings

Ø Article 136 proceedings are also covered here.

Again the court of competent jurisdiction may be territorial, pecuniary etc. what if
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

court returns a suit for want of pecuniary jurisdiction and later admits when filed
before the competent court, is a transfer during this interim period hit by the rule of lis
pendens?

ü Collusive suit: the collusive maintenance suit by a hindu wife against her
husband.
ü Specific right to immovable property which is directly and specifically in question
ü Party to the suit.
ü Also, another imporatnt point to be noted is that, this rule covers absolute and
partial transfers pertaining to only immovable property.

Jayaram Mudaliar v. Ayyaswami, AIR 1973 SC 569:

Facts: Jayaram bought certain leasehold property from Munniswami for Rs. 10,500/-
under a sale deed and certain other properties by auction to enable Munniswami to
pay off his debt. Ayyaswami, brother of Munniswami bought an action against the
sale stating it was under lis pendens as a suit for partition was filed. Jayaram claimed
that sales were outside the purview of the doctrine of lis pendens (partition suit) they
were for the discharge of pre-existing liabilities of the Hindu joint family of which
Munisami was the karta - had to be met out of the properties which were the subject
matter of the partition suit. It was urged that where properties are liable to be sold for
payment of such debts as have to be discharged by the whole family, only those
properties would be available for partition in the pending suit which are left after
taking away the properties sold for meeting the pre-existing liabilities of the joint
family. Munniswami stated that he had acquired the property by his own funds and
they were not joint property, so Ayyaswami had no share. Ayyaswami pleaded –
joint property - transfers as fraudulent and not for a legal necessity + lis pendens
Issue: Involuntary sale excluded from lis pendens - S. 52 does not apply to
transferors who alienate property on behalf of the whole of the Hindu Family – those
properties should be outside the purview of suit of partition
Held: expressing the majority opinion in Ram Sanehl Lal and Anr. v. Janki Prasad
and Ors ...the language of Section 52 has been held to be applicable not only to
private transfers but also to Court sales held in execution of decrees. This is now well-
settled.
The suggestion made on behalf of the appellant, that attachment of some schedule 'B'
property before judgment in the purchaser's mortgage suit could remove it from the
ambit of Lis pendens, is quite unacceptable. The alienation by a Karta is for a legal
necessity and it binds the whole of the family. If the alienation is not proper then only
will the properties of Munniswami be attached alone. TC and Appellate Court had
held that the property was joint property. It is a general rule which seems to have been
recognized in all regular systems of jurisprudence, that during the pendence of an
action, of which the object is to vest the property or obtain the possession of real
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

estate, a purchaser shall be held to take that estate as it stands in the person of the
seller, and to be bound by the claims which shall ultimately be pronounced. Lis
pendens literally means a pending suit; and the doctrine of lis pendens has been
defined as the jurisdiction, power, or control which a court acquires over property
involved in suit, pending the continuance of the action, and until final judgment
therein.It is evident that the doctrine, as stated in Section 52, applies not merely to
actual transfers of rights which are subject-matter of litigation but to other dealings
with it "by any party to the suit or proceeding, so as to affect the right of any other
party thereto". Hence, it could be urged that where it is not a party to the litigation but
an outside agency, such as the tax collecting authorities of the Government, which
proceeds against the subject-matter of litigation, without anything done by a litigating
party, the resulting transaction will not be hit by Section 52. Again, where all the
parties which could be affected by a pending litigation are themselves parties to a
transfer or dealings with property in such a way that they cannot resile from or disown
the transaction impugned before the Court dealing with the litigation, the Court may
bind them to their own acts. All these are matters which the Court could have
properly considered. The purpose of Section 52 of the Transfer of Property Act is not
to defeat any just and equitable claim but only to subject them to the authority of the
Court which is dealing with the property to which claims are put forward – Appeal
dismissed

Supreme General Films Exchange Ltd v. Maharaja Sir Brijnath Singhji Deo, AIR
1975 SC 1810:

Facts: Owner of cinema theatre (Bhatia) took a loan from former Maharaja (of Rs.
2,50,000/-) – he kept cotton bale as security, Security was insufficient so cinema
theatre was mortgaged in the favor of the Maharaja. Maharaja filed a suit to recover
the money and a compromise deed was agreed b/w the 2 to sell the theatre. In the
meanwhile, Central Bank of India, another creditor of the owner filed a suit for
attachment. The Supreme General Films Co. was a lessee of the cinema. The original
lease was drawn in 1940 expired in 1946 but the company continued as a tenant.
The company filed a suit in 1954 for specific Performance of the agreement to lease –
compromise deed entered & a fresh lease in1956 in favor of the Co.

Issue: The lease of 1956 was void as it was struck by S. 52 of the Transfer of
Property Act and s. 64 of the CPC.

Held: The trial court decreed in favor of Maharaja and Bank. The Co. appealed in
HC and was dismissed.SC – The lease-deed of 1956 purported to confer upon the
defendant-appellant new rights. Indeed, there are good grounds for suspecting that the
compromise in the suit for specific performance was adopted as a device to get
round legal difficulties in the execution of the lease of 1956 in favor of the Co. We
are unable to accept the argument, that the lease was merely an enforcement of an
antecedent or pre-existing right. We think that it purported to create entirely new
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

rights pendente lite. It was, therefore, struck by the doctrine of lis-pendens, as

explained by this Court in Jayaram Mudaliar v. Ayyaswami, embodied in Section 52
of TPA.

Section 53(A)- part performance: “ Where any person contracts to transfer for
consideration any immovable property by writing signed by him or on his behlf from
which the terms necessary to constitute the transfer can be ascertained with
reasonable certainty, and the transferee has, in part performance of the contract, taken
possession of the property/ any part thereof, or the transferee, being already in
possession, continues in possession in part performance of the contract and has done
some act in furtherance of the contract, and the transferee has performed or is willing
to perform his part of the contract, then, notwithstanding that 2[***] where there is an
instrument of transfer, that the transfer has not been completed in the manner
prescribed therefor by the law for the time being in force, the transferor or any person
claiming under him shall be debarred from enforcing against the transferee and
persons claiming under him any right in respect of the property of which the
transferee has taken or continued in possession, other than a right expressly provided
by the terms of the contract: Provided that nothing in this section shall affect the
rights of a transferee for consideration who has no notice of the contract or of the part
performance thereof.]

Illustration: agreement to sell property to take effect in the beginning of the financial
year- transferee has been evicted from his earlier leased premises- transferor permits
him to occupy the property to be transferred to him in April under the exceptional
circumstances between February and March.

§ Doctrine of part performance- sword/ shield?

Section 53(1)- fraudulent transfer: “Every transfer of immoveable property made

with intent to defeat or delay the creditors of the transferor shall be voidable at the
option of any creditor so defeated or delayed. Nothing in this sub-section shall impair
the rights of a transferee in good faith and for consideration. Nothing in this sub-
section shall affect any law for the time being in force relating to insolvency. A suit
instituted by a creditor (which term includes a decree-holder whether he has or has
not applied for execution of his decree) to avoid a transfer on the ground that it has
been made with intent to defeat or delay the creditors of the transferor shall be
instituted on behalf of, or for the benefit of, all the creditors.” Illustration 1: A man of
extravagant and dissolute habits was persuaded to reform and make a settlement of
his property on his wife and children. He subsequently relapsed and incurred debts.
The settlement was held not voidable by subsequent creditors. Illustration 2:A, a
trader was in embarrassed circumstances. He secretly executed a usufructuary
mortgage of all his property to his uncle B, the consideration being a fictitious book
debt. One of the terms of the mortgage was that B should pay the allowances to the
iwfe and children out of such usufruct. The mortgage was voidable under Section 53
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

as it put of all A’s property out of the reach of the creditors and reserved a benefit for
A. moreover, the secrecy with which he effected the transaction was evidence of
fraudulent intention.

Section 53(2)- “Every transfer of immoveable property made without consideration

with intent to defraud a subsequent transferee shall be voidable at the option of such
transferee. For the purposes of this sub-section, no transfer made without
consideration shall be deemed to have been made with intent to defraud by reason
only that a subsequent transfer for consideration was made”

Abdul Shukoor v. Arji Papa Rao AIR 1963 SC 1150

Facts: A partnership firm which was not doing well and had contracted quite a large
volume of debts entered into a deed of dissolution dated March 31, 1949, in which it
was stated that the book-debts, stock in trade, immovable properties and other assets
including the goodwill of the firm were of the value of Rs. 2,90,000/-, and owed debts
to the extent of Rs. 2.5 lakhs. It was agreed between the partners that the 3rd partner
Abdul Shukoor Saheb should go out of the partnership taking with him one item of
property in Vaniyambadi valued at Rs. 20,000/- while the suit tannery which was
estimated as of the same value was to become the sole property of the 4th partner.
Soon after this deed of dissolution the 4th partner entered into an agreement with the
plaintiff for the sale to him of the suit property for a sum of Rs. 19,000/- and later
executed the deed of sale in 1949. On the execution of the sale deed the plaintiff
entered into possession and he claimed to have effected improvements to the property.

One creditor - Arji Papa Rao-filed for the recovery of a sum of Rs. 12,950/- against
the firm and its partners and obtained a decree with interest and costs. Soon after
filing the plaint he obtained an order for attachment of the suit property. The plaintiff
claimed that he purchased the property bonafide and for its full value, that since its
purchase he having entered into possession, was in enjoyment thereof in his own
right, paying the rates and taxes due and had effected valuable improvements and that
the property was not liable to be attached as belonging to the partnership or any of its
partners.

Issue: that the sale was a sham, a pretended Sale without any consideration and not
intended to pass any title to the plaintiff and in the alternative that even if it were a
real transaction supported by consideration and intended to pass title to the plaintiff,
still the same was, having regard to the circumstances, a fraud upon the creditors and
therefore voidable at his instance

What is to be noticed is that the plaintiff and the 4th defendant were both members of
the same community- labbais of North Arcot district, a fairly small and well- knit
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

community several of whom are engaged in the hides and skins business. The
significance of the 'plaintiff and his vendors being members of the same community
and well-known to each other consists in this, that the plaintiff might have been
chosen because of his willingness to take the sale without any searching enquiry as to
the circumstances necessitating it and because there would be less publicity in the
transaction being put through between them-such as for instance inspection of the
property or enquiries in the locality as regards value etc., which would take place if
the sale was to be to a total stranger which would attract the attention of the firm's
creditors. The next circumstance is as regards the pressure exerted on the 3rd and 4th
defendants by the creditors immediately prior to the impugned sale and which, in the
normal course of events, would be relevant, as providing that the sale was effected in
order to put the property beyond the reach of creditors by converting it into cash. No
evidence led to indicate why exactly the 4th defendant desired with some urgency to
dispose of the property at that juncture.
Though the properties were at Vizianagaram, the document was registered at Madras
and the suggestion made to the plaintiff was that this was meant as a measure of
secrecy to keep this alienation from the knowledge of the firm's creditors. The
explanation offered by the plaintiff was that having regard to the distance between the
native places of the two parties from Vizianagaram and the proximity of these to
Madras and the fact that both the Plaintiff, as well as the executants were at Madras it
was found more convenient to have the document presented for registration at Madras
instead of incurring the expenses of a journey to Vizianagaram for having it registered
there. The 4th defendant had his agent at Vizianagaram and similarly the plaintiff
himself had his men there to look after his bidi business. There was no impediment in
these circumstances and no expenses of traveling involved if only the 4th defendant
had executed a PoA in favour of some one at Vizianagaram to present the document
for registration
The narrow question is whether the plaintiff was a transferee in good faith. There
might be some force in this submission that there is no specific finding to that effect
but that does not in any way assist the appellant. Where fraud on the part of the
transferor is established i.e. by the terms of paragraph (i) of s. 53(1) being satisfied,
the burden of proving that the transferee fell within the exception is upon him and in
order to succeed he must establish that he was not a party tothe design of the
transferor and that he did not share the intention with which the transfer had been
effected but that he took the sale honestly believing that the transfer was in the
ordinary and normal course of business. When once the conclusion is reached that the
transfer was effected with the intent on the part of the transferor to convert the
property into cash so as to defeat or delay his creditors, there cannot be any doubt on
the evidence on record that the plaintiff shared that intent. For this purpose the
following circumstances may be pointed out (1) The plaintiff and the vendor belong
to the same community, a small, compact and well-knit one and they must obviously
have known each other having been in trade for several years in several places in
common and must therefore have been well acquainted with the financial and
business affairs of each other.
One matter which would be of considerable relevance and significance would be the
enquiries that the plaintiff made before he took the transfer. He no doubt led evidence
to show that he consulted his lawyers about the title-of the vendor; but any attempt at
an enquiry of the 4th defendantas to why he was effecting the sale of the only
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

immovable property of the firm which was allotted to him under the-deed of
dissolution is absent. It stands to reason that the plaintiff must be fixed with notice of
the design in pursuance of which the transfer was effected. If the object of a transferor
who is heavily indebted was to convert his immovable property into cash for keeping
it away from his creditors and knowing it the transferor helped him to achieve that
purpose it has naturally to be held that he shared that intention and was himself a
party to the fraud. Even when the plaintiff was fixed with notice that the firm's
business had been running at a loss and had accumulated debts, as disclosed by the
recitals in the deed of dissolution, which was placed in his hands, the purchaser did
not insist that the consideration which he was paying should be utilized for the
discharge of at least some of the debts. We are satisfied that the Plaintiff was not a
transferee in good faith and that the transfer itself was a scheme by the transferor with
the knowledge and concurrence of the transferee to put the property out of the reach
of the creditors.

Sale and Exchange (Section 54-55, 118-121)

Sale- the definition is contained in section 54, TPA. It can be broken as: transfer of
ownership + consideration(paid/promised). There is also a transfer of ownership.
Again, the essential elements under sale are as under:

Ø 1. Parties to the transaction o

ü Competence of both buyer and seller – Sec.7 and Sec.6(h)(3), TPA
ü Persons under disability – whether execution was his /her mental act?
Ø 2. Subject matter o
ü Sale of which kind of property is governed by this legislation?
ü Tangible and Intangible property – what is the difference in applicable
procedure?
Ø 3. Price / consideration
Ø money consideration for sale – if no monetary consideration, what happens?
Ø price or means of ascertaining the price must be stipulated
Ø Fry on Specific Performance states the law as follows:

In all sales it is evident that the price is an essential ingredient, and that where it is
neither ascertained nor rendered ascertainable, the contract is void for
incompleteness, and incapable of enforcement. It is not however necessary that the
contract should in the first instance determine the price, it may either appoint a way
in which it is to be determined or it may stipulate for a fair price.

Section 4- Transfer/ conveyance: In essence, the ultimate test is, as laid down by the
Madhya Pradesh HC in Sukaloo v. Punau and endorsed in Vidhyadar v Manikrao :

“The real test is the intention of the parties. In order to constitute a "sale", the parties
must intend to transfer the ownership of the property and they must also intend that
the price would be paid either in present or in future. The intention is to be gathered
from the recital in the sale deed, conduct of the parties and the evidence on record.”

Vidhyadhar vs Manikrao & Anr., AIR 1999 SC 1441

 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Facts: Defendant No. 2 (A), owner of 4.04 acres of land at plot No. 15 of Kasba
Amdapur, District Buldana, on 24th of March, 1971, took a loan of Rs. 1500 from
Defendant No. 1 (B) on execution of a mortgage deed and delivered possession of the
property. There was a stipulation in the document that if the entire amount of Rs.
1500 was returned to B before 15th of March, 1973, the property would be given back
to A. The Property was subsequently transferred by A in favour of Plaintiff,
Vidhyadhar, for a sum of Rs. 5,000 by a registered sale deed dated 19.6.1973
A claims that he had offered the entire amount to B but the latter did not accept. He
had also sent a money order which was refused. It was pleaded that since the
document executed by A in favour of B was a mortgage by conditional sale, the
property was liable to be redeemed. It was also pleaded that if it was held by the
Court that the document did not create a mortgage but was an out and out sale, the
Plaintiff as a transferee of A, was entitled to a decree for re-conveyance of the
property as A had already offered the entire amount of sale consideration to B which,
the latter, had refused and which amount the plaintiff was still prepared to offer to B
and was also otherwise ready and willing to perform his part of the contract.
The Plaintiff, instituted a suit against the A and B for redemption of the mortgage by
conditional sale or in the alternative for a decree for specific performance of the
contract for repurchase.
B contended that the sale deed executed by A in favour of the plaintiff, was fictitious
and the whole transaction was a bogus transaction as only Rs. 500 were paid as sale
consideration to A.
Issue: Is it a contract for mortgage by conditional sale or a contract for re-purchase?
B himself was not a party to the transaction of sale between A and the plaintiff. He
himself had no personal knowledge of the terms settled between A and the plaintiff.
The transaction was not settled in his presence nor was any payment made in his
presence. Nor, for that matter, was he a scribe or marginal witness of that sale deed.
Could, in this situation B have raised a plea as to the validity of the sale deed on the
ground of inadequacy of consideration or part-payment thereof? A alone, who was the
executant of the sale deed, could have raised an objection as to the validity of the sale
deed on the ground that it was without consideration or that the consideration paid to
him was highly inadequate. In Lal Achal Ram v. Raja Kazim Hussain Khan (1905) 32
Indian Appeals 113, the Privy Council laid down the principle that a stranger to a sale
deed cannot dispute payment of consideration or its adequacy. This decision has since
been considered by various High Courts and a distinction has been drawn between a
deed which was intended to be real or operative between the parties and a deed which
is fictitious in character and was never designed as a genuine document to effect
transfer of title. In such a situation, it would be open even to a stranger to impeach the
deed as void and invalid on all possible grounds. Thus, the whole question would
depend upon the pleadings of the parties, the nature of the suit, the nature of the deed,
the evidence led by the parties in the suit and other attending circumstances. For
example, in a landlord-tenant matter where the landlord is possessed of many
properties and cannot possibly seek eviction of his tenant for bona fide need from one
of the properties, the landlord may ostensibly transfer that property to a person who is
not possessed of any other property so that that person, namely, the transferee, may
institute eviction proceedings on the ground of his genuine need and thus evict the
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

tenant who could not have been otherwise evicted. In this situation, the deed by which
the property was intended to be transferred, would be a collusive deed representing a
sham transaction which was never intended to be acted upon. It would be open to the
tenant in his capacity as defendant to assert, plead and prove that the deed was
fictitious and collusive in nature.
In the instant case, the property which was mortgaged in favour of B was transferred
by A, owner of the property, to plaintiff. This transfer does not, in any way, affect the
rights of B who was the mortgagee and the mortgage in his favour, in spite of the
transfer, subsisted.
It is pertinent to note that the transaction between the A and B itself was a money-
lending transaction and that the sale-deed was a mortgage sale. Therefore, the B
cannot become the owner of the property.
But it would appear as though that all this discussion is worthless in view of the fact
that A himself admitted in his deposition that he executed the sale deed in favour of
the plaintiff and accepted the price. On the fact of these admission, there cannot be
any other circumstance which would assist the Court to hold that the document
executed in favour of the plaintiff by A as bogus, sham and without consideration,
notwithstanding the fact that the circumstances and the facts of the case infallibly
point that the document of sale does not convey the real transaction that had taken
place between plaintiff and A.
Section 54 of TPA which provides - "Sale" is a transfer of ownership in exchange for
a price paid or promised or part- paid and part-promised…….
The definition indicates that in order to constitute a sale, there must be a transfer of
ownership from one person to another, i.e., transfer of all rights and interests in the
properties which are possessed by that person are transferred by him to another
person. The transferor cannot retain any part of his interest or right in that property or
else it would not be a sale. The definition further says that the transfer of ownership
has to be for a "price paid or promised or part-paid and part-promised". Price thus
constitutes an essential ingredient of the transaction of sale. The words "price paid or
promised or part-paid and part-promised" indicate that actual payment of whole of the
price at the time of the execution of sale deed is not sine qua non to the completion of
the sale. Even if the whole of the price is not paid but the document is executed and
thereafter registered, if the property is of the value of more than Rs. 100/-, the sale
would be complete. There is a catena of decisions of various High Courts in which it
has been held that even if the whole of the price is not paid, the transaction of sale
will take effect and the title would pass under that transaction. To cite only a few, in
Gyatri Prasad v. Board of Revenue and Ors. (1973) Allahabad Law Journal 412, it
was held that non-payment of a portion of the sale price would not effect validity of
sale. It was observed that part payment of consideration by vendee itself proved the
intention to pay the remaining amount of sale price.
To the same effect is the decision of the Madhya Pradesh High Court in Sukaloo and
Anr. v. Punau. The real test is the intention of the parties. In order to constitute a
"sale", the parties must intend to transfer the ownership of the property and they must
also intend that the price would be paid either in presenti or in future. The intention is
to be gathered from the recital in the sale deed, conduct of the parties and the
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

evidence on record. Applying these principles, it will be seen that A executed a sale
deed in favour of the plaintiff, presented it for registration, admitted its execution
before the Sub-Registrar before whom remaining part of the sale consideration was
paid and, thereafter, the document was registered. The additional circumstances are
that when the plaintiff instituted a suit on the basis of his title based on the aforesaid
sale deed, who was the vendor, admitted in his written statement, the whole case set
out by the plaintiff and further admitted in the witness box that he had executed a sale
deed in favour of the plaintiff and had also received full amount of consideration.
These facts clearly establish that a complete and formidable sale deed was executed
by A in favour of the plaintiff and the title in the property passed to plaintiff.
S. 55 (4)(b) Where the ownership of the property has passed to the buyer before
payment of the whole of the purchase-money, to a charge upon the property in the
hands of the buyer, any transferee without consideration or any transferee with notice
of non- payment, for the amount of the purchase-money, or any part thereof
remaining unpaid, and for interest on such amount or part from the date on which
possession has been delivered.
Clause (b) extracted above provides that where the ownership of the property is
transferred to the buyer before payment of the whole of the sale price, the vendor is
entitled to a charge on that property for the amount of the sale price as also for interest
thereon from the date of delivery of possession. Originally, there was no provision
with regard to the date from which interest would be payable on the amount of unpaid
purchase money. This clause obviously applies to a situation where the ownership in
the property has passed to the buyer before the whole of the purchase money was paid
to the seller or the vendor. Since the title in the property had already passed to the
plaintiff, even if the balance amount of sale price was not paid, the sale would not
become invalid. The property sold would stand transferred to the buyer subject to the
statutory charge for the unpaid part of the sale price.
The document is headed as MORTGAGE BY CONDITIONAL SALE. It is
mentioned in this deed that the immovable property which was described in areas and
boundaries was being mortgaged by conditional sale in favour of B for a sum of Rs.
1500 out of which Rs. 700 were paid at home while Rs. 800 were paid before the Sub-
Registrar. The further stipulation in the deed is that the aforesaid amount of Rs. 1500
would be returned to defendant No. 1 on or before 15th March, 1973 and the property
would be re-conveyed to A. If it was not done then B would become the owner of the
property.
Mortgage by conditional sale is defined under Section 58(c) as under:
(c) Where the mortgagor ostensibly sells the mortgaged property - on condition that
on default of payment of the mortgage-money on a certain date the sale shall become
absolute, or on condition that on such payment being made the sale shall become
void, or on condition that on such payment being made the buyer shall transfer the
property to the seller, the transaction is called a mortgage by conditional sale and the
mortgage a mortgagee by conditional sale:
Provided that no such transaction shall be deemed to be a mortgage, unless the
condition is embodied in the document which effects or purports to effect the sale.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

The Proviso to this clause was added by Section 19 of the Transfer of Property
(Amendment) Act, 1929 (XX of 1929). The Proviso was introduced in this clause
only to set at rest the controversy about the nature of the document; whether the
transaction would be a sale or a mortgage. It has been specifically provided by the
Amendment that the document would not be treated as a mortgage unless the
condition of repurchase was contained in the same document. The basic principle is
that the form of transaction is not the final test and the true test is the intention of the
parties in entering into the transaction. If the intention of the parties was that the
transfer was by way of security, it would be a mortgage. The Privy Council as early as
in Balkishen Das and Ors. v. Legge, 27 Indian Appeals 58, had laid down that, as
between the parties to the document, the intention to treat the transaction as an out
and out sale or as a mortgage has to be found out on a consideration of the contents of
document in the light of surrounding circumstances.
The contents of the document have already been considered which indicate that A had
executed a mortgage by conditional sale in favour of B. He had promised to pay back
Rs. 1500 to him by a particular date failing which the document was to be treated as a
sale deed. The intention of the parties is reflected in the contents of the document
which is described as a mortgage by conditional sale. In the body of the document, the
mortgage money has also been specified. Having regard to the circumstances of this
case as also the fact that the condition of repurchase is contained in the same
document by which the mortgage was created in favour of B, the deed in question
cannot but be treated as a mortgage by conditional sale.
So far as the contention of the learned Counsel for B that the mortgage money was
not paid within the time stipulated in the document and, therefore, the transaction,
even if it was a mortgage, became an absolute sale, is concerned, the finding of the
Courts below is that this money was tendered to B who refused to accept it. A had
thus performed his part of the agreement and had offered the amount to B so that the
property may be re-conveyed to him but B refused to accept the money. He, therefore,
cannot complain of any default in not paying the amount in question within the time
stipulated in the deed. Since there was no default on the part of A, the document
would not convert itself into a sale deed and would remain a mortgage deed. The suit
for redemption was, therefore, properly filed by the plaintiff who was the assignee of
A.
(OR)
RATIO: Section 54 doesn’t mention complete payment of amount at the time of the
execution of the sale deed. “Price paid or promised or part paid and part promised”
Actual payment of full price at the time of the execution of the sale deed is not a sin
qua non for completion of sale. Consider intention of the parties to figure out whether
a transaction amounts to a sale deed.

FACTS:
Vidhyadhar, the appellant referred to as plaintiff, had instituted a suit against the
respondents, who shall hereinafter be referred to as defendant Nos. 1 and 2
respectively, for redemption of the mortgage by conditional sale or in the alternative
for a decree for specific performance of the contract for repurchase which was
decreed by the Trial Court The decree was upheld by the Lower Appellate Court by
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

its judgment but the High Court, set aside both the judgments and passed a unique
order to which a reference shall be made presently in this judgment.

Defendant No. 2 was the owner of the whole Plot executed a document styled as
"Kararkharedi"(MORTGAGE BY CONDITION SALE) in favour of defendant
No. 1 for a sum of Rs. 1500 and delivered possession thereof to the latter. There
was a stipulation in the document that if the entire amount of Rs. 1500 was
returned to defendant No. 1 before 15th of March, 1973, the property would be
given back to defendant No. 2.

The same land subsequently was transferred by defendant No. 2 in favour of the
plaintiff for a sum of Rs. 5,000 by a registered sale deed dated 19.6.1973. After
having obtained the sale deed, the plaintiff (to whom the property had been sold
by the defendant 2) pleaded that since the document, executed by defendant No. 2
in favour of defendant No. 1, was a mortgage by conditional sale, the property
was liable to be redeemed. Defendant 1 claimed that the mortgage was carried out
by payment of full consideration of 1500 rupees and therefore it would amount to
a sale of the property. It important to note that the plaintiff had already paid little
amount of consideration and had made sufficient arrangements to pay the entire
consideration amount the defendant. The defendant tried to negative the second
transaction between the defendant 2 and the plaintiff on the grounds that the
entire consideration for the sale of the property had not been paid and the sale
deed was fictitious,collusive or not intended upon.

ISSUE: Whether the transaction by the defendant 2 was an out to out sale or mortgage
and whether the plaintiff’s part payment of the amount to the defendant would amount
to a sale.

ARGUMENTS : Defendant 1 and 2 had an agreement amongst themselves for a

mortgage with condition sale. On completion of the mortgage the property had to be
returned to defendant 2. He had the right to enter into an individual contract of sale
with the plaintiff. Mere fact that the entire amount had not been paid at the time of the
execution of sale deed does not mean the transfer was fraudulent. Intention of both the
parties – defendant 2 and plaintiff was to enter into a contract of sale and possession
had already been given to the plaintiff on part payment. Sale deed had been executed
and registered and therefore transfer of title had taken place and therefore defendant 1
cannot claim his right of mortgage by condition sale as an absolute sale. LAWFUL
OWNER OF THE PROPERTY WAS NOW THE PLAINTIFF.

DECISION:
For the reasons stated above, the appeal is allowed (BY THE PLAINTIFF) and
the impugned judgment passed by the High Court is set aside. The judgment and
decree passed by the Trial Court as upheld by the Lower Appellate Court are
restored but without any order as to costs.

Section 54- Sale – how should it be made

Suraj Lamp and Industries Pvt. Ltd. v. State of Haryana and Anr. 2011 (11) SC
438:
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Issue: The ill-effects of what is known as General Power of Attorney Sales or Sale
Agreement/General Power of Attorney/Will transfers. Both the descriptions are
misnomers as there cannot be a sale by execution of a power of attorney nor can there
be a transfer by execution of an agreement of sale and a power of attorney and will.
Held; These kinds of transactions were evolved to avoid prohibitions/conditions
regarding certain transfers, to avoid payment of stamp duty and registration charges
on deeds of conveyance, to avoid payment of capital gains on transfers, to invest
unaccounted money ('black money') and to avoid payment of 'unearned increases' due
to Development Authorities on transfer. The modus operandi in such SA/GPA/WILL
transactions is for the vendor or person claiming to be the owner to receive the agreed
consideration, deliver possession of the property to the purchaser and execute the
following documents or variations thereof:
(a) An Agreement of sale by the vendor in favor of the purchaser confirming the
terms of sale, delivery of possession and payment of full consideration and
undertaking to execute any document as and when required in future Or
An agreement of sale agreeing to sell the property, with a separate affidavit
confirming receipt of full price and delivery of possession and undertaking to execute
sale deed whenever required.
(b) An Irrevocable General Power of Attorney by the vendor in favor of the purchaser
or his nominee authorizing him to manage, deal with and dispose of the property
without reference to the vendor Or
A General Power of Attorney by the vendor in favor of the purchaser or his nominee
authorizing the attorney holder to sell or transfer the property and a Special Power of
Attorney to manage the property.
(c) A will bequeathing the property to the purchaser (as a safeguard against the
consequences of death of the vendor before transfer is effected).
These transactions are not to be confused or equated with genuine transactions where
the owner of a property grants a power of Attorney in favor of a family member or
friend to manage or sell his property, as he is not able to manage the property or
execute the sale, personally.
Recourse to `SA/GPA/WILL' transactions is taken in regard to freehold properties,
even when there is no bar or prohibition regarding transfer or conveyance of such
property, by the following categories of persons:
(a) Vendors with imperfect title who cannot or do not want to execute registered
deeds of conveyance.
(b) Purchasers who want to invest undisclosed wealth/income in immovable
properties without any public record of the transactions. The process enables them to
hold any number of properties without disclosing them as assets held.
(c) Purchasers who want to avoid the payment of stamp duty and registration charges
either deliberately or on wrong advice. Persons who deal in real estate resort to these
methods to avoid multiple stamp duties/registration fees so as to increase their profit
margin.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Whatever be the intention, the consequences are disturbing and far reaching,
adversely affecting the economy, civil society and law and order. Firstly, it enables
large scale evasion of income tax, wealth tax, stamp duty and registration fees thereby
denying the benefit of such revenue to the government and the public. Secondly, such
transactions enable persons with undisclosed wealth/income to invest their black
money and also earn profit/income, thereby encouraging circulation of black money
and corruption.
This kind of transactions has disastrous collateral effects also. For example, when the
market value increases, many vendors (who effected power of attorney sales without
registration) are tempted to resell the property taking advantage of the fact that there
is no registered instrument or record in any public office thereby cheating the
purchaser. When the purchaser under such `power of attorney sales' comes to know
about the vendor's action, he invariably tries to take the help of musclemen to `sort
out' the issue and protect his rights.
On the other hand, real estate mafia many a time purchases properties which are
already subject to power of attorney sale and then threaten the previous `Power of
Attorney Sale' purchasers from asserting their rights. Either way, such power of
attorney sales indirectly lead to growth of real estate mafia and criminalization of real
estate transactions.
It also makes title verification and certification of title, which is an integral part of
orderly conduct of transactions relating to immovable property, difficult, if not
impossible, giving nightmares to bonafide purchasers wanting to own a property with
an assurance of good and marketable title.
Court had therefore requested the learned Solicitor General to give suggestions on
behalf of Union of India. This Court also directed notice to States of Delhi, Haryana,
Punjab, Uttar Pradesh to give their views on the matter. The four states have
responded and confirmed that SA/GPA/WILL transfers required to be discouraged as
they lead to loss of revenue (stamp duty) and increase in litigations due to defective
title. In general, the measures are: (i) to amend Registration Act, 1908 and (ii) amend
the stamp laws subjecting agreements of sale with delivery of possession and/or
irrevocable powers of attorney in favor of non-family members authorizing sale, to
the same stamp duty as deed of conveyance.
The State of Haryana took a further positive step by reducing the stamp duty on deeds
of conveyance from 12.5% to 5%. The reduction of the stamp duty, may result in an
immediate reduction in the revenue by way of stamp duty, in the long run it will be
advantageous for two reasons: (i) parties will be encouraged to execute registered
deeds of conveyance/sale deeds without any under valuation, instead of entering into
SA/GPA/WILL transactions; and (ii) more and more sale transactions will be done by
way of duly registered sale deeds, disclosing the entire sale consideration thereby
reducing the generation of black money to a large extent. When high stamp duty is
prevalent, there is a tendency to undervalue documents, even where sale deeds are
executed. When properties are undervalued, a large part of the sale price changes
hand by way of cash thereby generating 'black' money.
The court discussed the relevance of Registration - safety and security to transactions
relating to immovable property, even if the document is lost or destroyed. It gives
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

publicity and public exposure to documents thereby preventing forgeries and frauds in
regard to transactions and execution of documents. Registration provides information
to people who may deal with a property, as to the nature and extent of the rights
which persons may have, affecting that property. In other words, it enables people to
find out whether any particular property with which they are concerned, has been
subjected to any legal obligation or liability and who is or are the person/s presently
having right, title, and interest in the property. It gives solemnity of form and
perpetuate documents which are of legal importance or relevance by recording them,
where people may see the record and enquire and ascertain what the particulars are
and as far as land is concerned what obligations exist with regard to them. It ensures
that every person dealing with immovable property can rely with confidence upon the
statements contained in the registers (maintained under the said Act) as a full and
complete account of all transactions by which the title to the property may be affected
and secure extracts/copies duly certified.
In India, the word 'transfer' is defined with reference to the word ‘convey’. The word
'conveys' in Section 5 of Transfer of Property Act is used in the wider sense of
conveying ownership....that only on execution of conveyance ownership passes from
one party to another which an ATS/GPoA does not pass.
Agreement to sell which is not a registered deed of conveyance will not confer any
title nor transfer any interest in an immovable property. According to Transfer of
Property Act, an agreement of sale, whether with possession or without possession, is
not a conveyance. Similarly, A power of attorney is not an instrument of transfer in
regard to any right, title or interest in an immovable property. The power of attorney
is creation of an agency whereby the grantor authorizes the grantee to do the acts
specified therein, on behalf of grantor, which when executed will be binding on the
grantor as if done by him. A will is the testament of the testator. It is a posthumous
disposition of the estate of the testator directing distribution of his estate upon his
death. It is not a transfer inter vivos. So long as the testator is alive, a will is not be
worth the paper on which it is written, as the testator can at any time revoke it. Since
these documents do not ‘convey’ title, any transfer on the basis of these documents is
not recognized by the law. Only a registered conveyance deed will effect a transfer.
Sale versus Agreement to sell

Ø Agreement to sell / Contract of sale – Where does the title vest? Is there an
interest in the suit property or does it only confer an enforceable right in the
parties?
Ø Executory contract vs. executed contract
Ø Does an agreement to sell have to be in writing under law? Why?
Ø Under an agreement to sell what is the buyer entitled to?

Exchange:

Definition is contained in Section 118, TPA: “ When 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”. A transfer of property in
completion of an exchange can be made only in manner provided for the transfer of
such property by sale.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Ø vWhat are the essential ingredients of an exchange?

• Mutual transfer of ownership of property (movable / immovable)

• Consideration not being money only – what is the distinguishing factor with sale?
What about cases where money is paid as an equalizer?

Illustration: A transferred to B a house worth Rs.1500 and B transferred to A a field

worth Rs.1000 and Rs.500 in cash. The transaction is an exchange.

• Procedure? Object of exchange must be lawful.

John Thomas and Ors. Vs. Joseph Thomas and Ors., AIR 2000 Ker 408

Facts: Plaintiff and defendant knew to each other for a long time. On 27-4-1982, they
entered into an agreement for mutual exchange of properties. Plaintiff had in his
possession, control and enjoyment of 12 acres of plantation in Poonjar Village and
defendant had 96 cents of land at Palai. As per the agreement, the plaintiff paid to
the defendant additional amount of Rs. 1,00,000/- as equalization of value. No date
for registration was mentioned. The defendant wished to take the ownership of the
property in the name of his children and tried contacting the plaintiff over and
over again for registration. The plaintiff made frivolous excuses at all times,
avoiding the registration because it was known later that the plaintiff had no title to
the 12 acre property. He sent a notice from the lawyer too, however, no respite. Hence
this suit.
Issue: Whether the agreement executed was a sale deed or exchange deed?
Held: It was next contended by the learned counsel for the appellants that what is
contemplated is only an exchange of the properties under and not a sale and hence,
when the defendant executed the sale deed immediately there has been frustration of
the contract. On a reading of the deed it cannot be said to be a mere exchange. While
the first party has agreed to transfer 12 acres in favour of the second party, the second
party has agreed to transfer 96 cents in favour of the first party. It is further stated that
the documents can be executed in favour of all the persons nominated by the parties.
It contemplates sale deeds by both parties. It is not an exchange that is contemplated.
Several judgments prior to this, however, have held that it does not matter that money
is paid for bringing about an equality of exchange, for the section requires that neither
thing shall be money ‘only’ – Fateh Singh v. Prithi Singh (1930) 28 All LJ 1312, Ram
Badan v Kunwar Singh (1938) All LJ 52

Satyawan v. Raghbir, AIR 2002 P&H 290

Facts: The Plaintiffs Satawan, Mohinder Singh and Ishwar Singh filed suit for
declaration against Raghbir Singh to the effect that they are owners of land situated in
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Panipat (para A), with consequent relief of permanent injunction restraining the
defendant from interfering in the peaceful possession of the plaintiffs over said the
land. It was alleged that plaintiffs were owners in possession of the land detailed in
para A of the plaint and the defendant was owner in possession of the land detailed in
para B of the plaint. Defendant approached the plaintiffs and requested them to
exchange their land with his land representing that it was free from all encumbrances.
The plaintiffs later discovered that there was also loan outstanding against the land in
para B due to Oriental Bank of Commerce Branch and the land was mortgaged with
the said bank. The plaintiffs thereafter, requested the defendant to get the land
detailed in para B of the plaint redeemed by making the repayment of the loan amount
but the defendant refused to do so. The plaintiffs therefore, filed this petition for fraud
and misrepresentation on the grounds that the land detailed in para B of the plaint is
of inferior quality than the land detailed in para A of the plaint and the value of the
land as detailed in para A of the plaint was way higher than the value of land B.
Defendant Raghbir Singh contested the suit urging that it was rather plaintiffs who
had approached him for exchange of their land with his land. It was denied that he had
pleaded that his land was free from all encumbrances. In fact, there was a loan of Rs.
1,10,000/- on the land which was given to them in the said exchange and an entry 'in
this regard was also available in the land records. In fact, defendant is the owner of
the land detailed in para A and he had spent huge amount on installing tube-well in
the said land and had made other improvements. He has already paid the entire loan
amount of the bank in respect of the. It was denied that the land detailed in para B of
the plaint is of inferior quality. In fact, the land given by the defendant to them was of
much better quality being irrigated by canal.
The defendant further stated that the Exchange was not registered, thus not admissible
in court
Issue: whether exchange of immovable property worth Rs.100/- or more than
Rs.100/- can be brought about when there was no registered instrument evidencing
that exchange and further if that transaction of exchange has been recognized by the
Lower Court and the Lower Court has passed a decree recognizing that exchange
whether that decree will require registration so as to be effective and enforceable?
Held;
Raghunath and Ors. v. Kedar Nath, 1969(1) S.C.C. 497, it was held that the document
in question was required to be registered under S. 54 of the Transfer of Property Act
and in the absence of such a registration, it cannot be received in any transaction
affecting the property. It was submitted that exchange is also a transfer of property in
terms of S. 54 of the TPA. If it is a transfer of property in terms of Section 54 of TPA,
such transfer will require registration. Exchange has to be viewed as transaction of
sale, If sale of immovable property worth Rs.100/- or more than Rs.100/- takes place,
it will require registration. Exchange of immovable property will also require
registration. In Gurdial Singh v. Ajmer Singh and Ors. 1987 P.L.J. 124 it was held
that if exchange deed has been written it was compulsorily registrable, the subject
matter of exchange being of the value of Rs.100/- or more than Rs.100/- by virtue of
S. 17 of the Registration Act. The document being unregistered was, therefore,
inadmissible in evidence. There is no difference between exchange and sale. Except
that, in sale, title is transferred from the vendor to the vendee in consideration for
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

price paid or promised to be paid. In exchange, the property of 'X' is exchanged by

"A" with property "Y" belonging to "B". In this manner, the property is received in
exchange of property. There is transfer of ownership of one property for the
ownership of the other. It was submitted that prior to when decree dated 20.10.1992
was not passed, there was no title of "A" in property "Y" and there was no title of "B"
in property "X". It was submitted that for the first time, the right was created in
immovable property by decree and, therefore, that decree required registration.
In my opinion, oral exchange was not permissible as the Registration Act has made it
clear that the documents of which registration is necessary and if not registered are
not admissible as evidence of any transaction affecting any immovable property
comprised therein, and do not affect any such immovable property. Transaction by
exchange which required to be affected through registered instrument if it was to
affect any immovable property worth Rs. 100 or more.

Section-119: Right of party deprived of thing received in exchange- “If any party
to an exchange or any person claiming through or under such party is by reason of
any defect in the title of the other party deprived of the thing or any part of the thing
received by him in the exchange, then, unless a contrary intention appears from the
terms of the exchange, such other party is liable to him or any person claiming
through or under him for loss caused thereby, or at the option of the person so
deprived, for the return of the thing transferred, if still in the possession of such other
party or his legal representative or a transferee from him without consideration.”

Section 120-Rights and liabilities of parties: “Save as otherwise provided in this

Chapter, each party has the rights and is subject to the liabilities of a seller as to that
which he gives, and has the rights and is subject to the liabilities of a buyer as to that
which he takes.”

Section 121- Exchange of money: On an exchange of money, each party thereby

warrants the genuineness of the money given by him.

Section 55- Rights and liabilities of sellers and buyers:

Rights and Liabilities Before completion:

 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Rights and liabilities after completion:

Rights and liabilities of a seller before completion:

Disclosure: material defects in property / title which the buyer could not with
ordinary care discover

Ø What is a material defect? (Discuss 1929 amendment)

Ø not a contract of uberimmae fidei
Ø obligation is with respect to latent defects, of which he is aware – for other
defects, does caveat emptor apply?
Ø How do we read this obligation vis-à-vis Section 3 (registration operating as
constructive notice)?
Ø Production of documents: Documents of title in seller’s possession / power
Answer: To the best of his information, all relevant questions in respect of
property /title.
Ø Conveyance: Obligation to execute a proper conveyance of property

Rights and liabilities of seller and buyer before completion:

Rights and Liabilities of a Seller before completion

Ø Duty of Care: Towards property and documents of title, as an owner of ordinary

prudence
ü Clearance of any outstanding dues: Up to the date of sale •
ü Rents and profits: Until the title in property vests in favour of purchaser
Ø Rights and Liabilities of a Buyer before completion: •
ü To disclose facts materially increasing the value of property •
ü To pay price •
ü Charge for price prepaid
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Case brief of Haryana Financial Corporation V. Rajesh Gupta AIR 2010 SC 338

Case brief of State of Himachal Pradesh V. Motilal Pratap Singh AIR 1981 HP 8

Lease and License (Section 105-109)

What kind of transfer is it?

Definition of lease arrangement is contained in Section 105, TPA:

A lease of immoveable property is a transfer of a right to enjoy such property, made

for a certain time, express or implied, or in perpetuity, in consideration of a price paid
or promised, or of money, a share of crops, service or any other thing of value, to be
rendered periodically or on specified occasions to the transferor by the transferee,
who accepts the transfer on such terms.

Lessor, lessee, premium and rent defined. — The transferor is called the lessor, the
transferee is called the lessee, the price is called the premium, and the money, share,
service or other thing to be so rendered is called the rent.

Ø “The essential characteristic of a lease is that the subject is one which is occupied
and enjoyed and the corpus of which, does not in the nature of things and by
reason of the user, disappear.”- as laid down in the case of, Girdahari Singh v
Megh Lal Pandey (1918) ILR 45 Cal 87:
Ø reversion and leasehold interest
v parties to the lease
v subject matter of the lease
v types of lease namely absolute/primary lease and derivative/sub-lease
v duration of a lease- may be a fixed term/periodical/in perpetuity.
v Consideration for lease amy be money/money’s worth/ service/ anything of
value
v Some of the allied concepts are – tenancy at sufference and tenancy at will

Case brief of Sivayogeswara cotton press v. M.Panchaksharappa, AIR 1962 SC 413

License- what about it?

Definition: Section 52, Indian Easements Act, 1882

“Where one person grants to another, or to a definite number of other persons, a right
to do, or continue to do, in or upon the immovable property of the grantor, something
which would, in the absence of such right, be unlawful, and such right does not
amount to an easement or an interest in the property, the right is called a licence.”

Lease versus license:

Case brief of associated hotels of india ltd. V. r.n.kapoor AIR 1959 sc 1262

CASE BRIEF OF Megh Raj V. DCM AIR 2000 DELHI 332

CASE brief of Cariappa versus Leila Sinha Roy AIR 1984 CAL 105

What is the difference?

 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

License: permission / right to do or continue to do something in or upon the

immovable property of the grantor

Ø Lease: transfer of a right in specific immovable property

Ø Other distinctions:
ü • Transferability and Heritability •
ü Consequence upon death of either party
ü Ending the relationship •
ü Consequence upon sale of underlying property •
ü Rights against a trespasser •
ü Entitlement to any improvements or accessions made to the property

Rights and liabilities of lessor and lesse:

Section 108- observe the similarities with atht of the Section 54 of TPA

Ø Duties of Lessor •
ü Disclosure: material defect not discoverable with ordinary care (108 A (a))
ü Possession - (108 A (b)) •
ü Covenant against interruption of enjoyment of lease - (108 A (c)) v
Ø Rights of Lessee •
ü Right to enjoy accretions to the property - (108 B (d)) •
ü Right to Revoke Lease in the Event of Destruction of Property by fire, etc. -
(108 B (e)) •
ü Right to Repair Property and Claim Costs in the Event of Lessor’s Neglect -
(108 B (f))

Rights and liabilities of lessor and lessee:

Ø Right to Make Payments Obligatory on Lessor - (108 B (g)) •

Ø Right to Remove Fixtures - (108 B (h)) •
Ø Right to the benefit of crops grown by him - (108 B (i)) •
Ø Right to Assign the Lease - (108 B (j))
Ø Liabilities of Lessee •
ü Duty of Disclosure •
ü Obligation to Pay Rent •
ü Duty of Maintaining the Property •
ü Duty to give notice of any encroachment on the Property
ü Duty to use the property in a reasonable manner
ü Duty not to erect permanent structures on the property
ü Duty to re-transfer the possession of property on the determination of tenancy

Section 109- Rights of lessor’s transferee : “If the lessor transfers the property
leased, or any part thereof, or any part of his interest therein, the transferee, in the
absence of a contract to the contrary, shall possess all the rights, and if the lessee so
elects, be subject to all the liabilities of the lessor as to the property or part transferred
so long as he is the owner of it; but the lessor shall not, by reason only of such
transfer cease to be subject to any of the liabilities imposed upon him by the lease,
unless the lessee elects to treat the transferee as the person liable to him:

Provided that the transferee is not entitled to arrears of rent due before the transfer,
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

and that, if the lessee, not having reason to believe that such transfer has been made,
pays rent to the lessor, the lessee shall not be liable to pay such rent over again to the
transferee.

The lessor, the transferee and the lessee may determine what proportion of the
premium or rent reserved by the lease is payable in respect of the part so transferred,
and, in case they disagree, such determination may be made by any court having
jurisdiction to entertain a suit for the possession of the property leased.”

Section 106- Duration in absence of written contract/local usage

(1) In the absence of a contract or local law or usage to the contrary, a lease of
immovable property for agricultural or manufacturing purposes shall be deemed to be
a lease from year to year, terminable, on the part of either lessor or lessee, by six
months' notice; and a lease of immovable property for any other purpose shall be
deemed to be a lease from month to month, terminable, on the part of either lessor or
lessee, by fifteen days' notice.

(2) Notwithstanding anything contained in any other law for the time being in force,
the period mentioned in sub-section (1) shall commence from the date of receipt of
notice.

(3) A notice under sub-section (1) shall not be deemed to be invalid merely because
the period mentioned therein falls short of the period specified under that sub-section,
where a suit or proceeding is filed after the expiry of the period mentioned in that sub-
section.

(4) Every notice under sub-section (1) must be in writing, signed by or on behalf of
the person giving it, and either be sent by post to the party who is intended to be
bound by it or be tendered or delivered personally to such party, or to one of his
family or servants at his residence, or (if such tender or delivery is not practicable)
affixed to a conspicuous part of the property.

Section 110- Exclusion of day on which term commences: “Where the time limited
by a lease of immoveable property is expressed as commencing from a particular day,
in computing that time such day shall be excluded. Where no day of commencement
is named, the time so limited begins from the making of the lease.

Duration of lease for a year- Where the time so limited is a year or a number of
years, in the absence of an express agreement to the contrary, the lease shall last
during the whole anniversary of the day from which such time commences.

Option to determine lease-Where the time so limited is expressed to be terminable

before its expiration, and the lease omits to mention at whose option it is so
terminable, the lessee, and not the lessor, shall have such option.

Section 111- Determination of a lease

Ø Various modes by which a lease may come to an end •

ü Efflux of time •
ü Happening of a certain specified event •
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

ü Termination of the lessor’s interest

ü Interest of lessor and lessee getting vested in the same person

Ownership of the property which is the subject matter of tenancy is certainly a larger
estate than the tenancy itself and naturally larger than the sub-tenancy. If the sub-
tenant acquires the entire interest of the owner in the whole of the estate forming the
subject matter of the sub-tenancy, the sub-tenancy merges into ownership and the
estate of the sub-tenant stands enlarged into that of a full owner.

§ Implied Surrender (look at illustration in the bare act) •

§ Express Surrender •
§ Forfeiture (voidable – requirement of serving a notice) •
§ Expiry of Notice

Case brief of dhanpal chettiar versus yesodai ammal AIR 1979 SC 1745

CASE BRIEF OF Shanti Devi versus Amal Kumar AIR 1981 SC 1550

Case brief of laxmidas bapudas v. rudravva 2001 (2) SCC 409

Section 107- Lease how made: “A lease of immoveable property from year to year,
or for any term exceeding one year or reserving a yearly rent, can be made only by a
registered instrument.

All other leases of immoveable property may be made either by a registered

instrument or by oral agreement accompanied by delivery of possession.

Where a lease of immoveable property is made by a registered instrument, such

instrument or, where there are more instruments than one, each such instrument shall
be executed by both the lessor and the lessee:

Provided that the State Government may from time to time, by notification in the
Official Gazette, direct that leases of immoveable property, other than leases from
year to year, or for any term exceeding one year, or reserving a yearly rent, or any
class of such leases, may be made by unregistered instrument or by oral agreement
without delivery of possession.

Mortgage and charge:

What is a mortgage?

The Definition is contained in Section 58: “A mortgage is the transfer of an interest in

specific immoveable property for the purpose of securing the payment of money
advanced or to be advanced by way of loan, an existing or future debt, or the
performance of an engagement which may give rise to a pecuniary liability.

The transferor is called a mortgagor, the transferee a mortgagee; the principal money
and interest of which payment is secured for the time being are called the mortgage-
money, and the instrument (if any) by which the transfer is effected is called a
mortgage-deed. Generally, there are 2 parties to a mortgage namely the mortgagor
and the mortgagee.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

A covenant against alienation may be said to be a covenant divesting the executant of

a document of a portion of his interest in the property in question, but it does not vest
that interest in anyone else.

Case brief of mohiree bibi v. dharamdas ghose(1903) ILR 30 Cal

Whether a mortgage?

Ø Substance over form

Ø Intention of parties
Ø Illustrations:
Ø A takes a consideration of Rs.1,50,000 for his property which is worth the
same amount and there is no time fixed for the repayment of money in the
deed which is described as a mortgage deed. Presumption is that it is a sale
rather than a mortgage.
Ø If a sale deed is executed of a house for Rs.2,50,000 for a house which is
otherwise valued at Rs.10,00,000 and the transferee does not go for mutation
or pay property taxes (borne by transferee post transfer), presumption would
be that of mortgage, as opposed to sale.

Interests of mortgagor and mortgagee, whether assignable?

Ø Yes, the interests of mrtgagor and mortgagee are assignable

Ø Assignment of mortgagor’s interest: sub-mortgage in favor of a third party or
mortgagee
Ø Sale of mortgagor’s interests: transferee would then have the right of
redemption as he steps into the shoes of the mortgagor
Ø Mortgagee’s interests being transferred- the liability to pay any urther
money/get back loan amount/ suit for foreclosure.

Section 59- Mortgage when to be by assurance: “Where the principal money

secured is one hundred rupees or upwards, a mortgage other than a mortgage by
deposit of title deeds can be effected only by a registered instrument signed by the
mortgagor and attested by at least two witnesses.

Where the principal money secured is less than one hundred rupees, a mortgage may
be effected either by a registered instrument signed and attested as aforesaid or
(except in the case of a simple mortgage) by delivery of the property.”

Section 58: Kinds of mortgage- The different kinds of mortgage envisaged under the
TPA are:

1) Simple Mortgage- Where, without delivering possession of the mortgaged

property, the mortgagor binds himself personally to pay the mortgage-money,
and agrees, expressly or impliedly, that, in the event of his failing to pay
according to his 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, in payment of the mortgage-money, the transaction is called a
simple mortgage and the mortgagee a simple mortgagee.
§ What is transferred to mortgagee? Right to cause the property to be sold
§ What is reserved with mortgagor? Absolute ownership, possession, right to
rents and profits from the property mortgaged
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

§ Remedies of mortgagee? Money decree (Sec.68) / Suit for sale

2) Mortgage by Conditional Sale - Where, the mortgagor ostensibly sells the

mortgaged property- on condition that on default of payment of the mortgage-money
on a certain date the sale shall become absolute, or on condition that on such payment
being made the sale shall become void, or on condition that on such payment being
made the buyer shall transfer the property to the seller, the transaction is called a
mortgage by conditional sale and the mortgagee a mortgagee by conditional sale:

Provided that no such transaction shall be deemed to be a mortgage, unless the

condition is embodied in the document which effects or purports to effect the sale.

ü What is transferred to mortgagee? Conditional ownership (possession, in some

cases)
ü Rights of mortgagor: Right of redemption that subsists notwithstanding that
the stipulated time has lapsed
ü Note the language in the proviso to Section 58 (c)
ü Distinguish between a mortgage by conditional sale and re-purchase
agreements.
In a sale with a condition of repurchase there is no lending borrowing
arrangement – only a personal right to purchase
ü Mortgage by conditional sale vis-à-vis re-purchase agreements:
v Mortgage by conditional sale is an ostensible sale which is actually a
mortgage – right of redemption subsists notwithstanding that the mortgagor
has failed to pay at the time stated unlike in a re-purchase agreement
v Amount of consideration varies – in case of mortgage, it is far below the value
of the property in the market unlike in case of sale
v Documentation: single document in case of mortgage with conditional sale

Case brief of vidyadhar v. manikrao, AIR 1999 SC 1441:

2) Usufructuary Mortgage:

“Where the mortgagor delivers possession or expressly or by implication binds

himself to deliver possession of the mortgaged property to the mortgagee, and
authorizes him to retain such possession until payment of the mortgage-money, and to
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 in payment of the mortgage-
money, or partly in lieu of interest or partly in payment of the mortgage-money, the
transaction is called an usufructuary mortgage and the mortgagee an usufructuary
mortgagee.”

Ø No personal liability – generally no time period stipulated continues until

interest / mortgage money is paid back
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Ø What is transferred to mortgagee? Possession

Ø Remedies of mortgagee? Entitled to be retain possession until mortgage
money is paid back + appropriate rents and profits in lieu of money owed
Ø Pursuant to a usufructuary mortgage, does the mortgagee become the
landlord?

3) English Mortgage

“Where 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 will re- transfer it to the mortgagor upon payment of the mortgage-
money as agreed, the transaction is called an English mortgage.

Ø Basic ingredients: Mortgagor binds himself + transfer of mortgaged property +

Proviso that property will be reconveyed upon payment of mortgage money.
Ø What is transferred to mortgagee? Ownership? If so, how do we make sense of
Sec.54 which refers to transfer of ownership
Ø Remedies of mortgagee? Sale without court’s intervention as per Section 69 +
Sale with court’s intervention + Money decree
Ø What rights remain with the mortgagor? Right to redeem / right to
reconveyance of property

4) Mortgage by deposit of title deeds:

“Where a person in any of the following towns, namely, the towns of Calcutta,
Madras, and Bombay, and in any other town which the State Government concerned
may, by notification in the Official Gazette, specify in this behalf, delivers to a
creditor or his agent documents of title to immoveable property, with intent to create a
security thereon, the transaction is called a mortgage by deposit of title-deeds.

Ø Basic ingredients: debt + deposit of title deeds + intention that deeds shall be
security for the debt
Ø Does this mortgage require a document in writing?
Ø Note that this mortgage does not involve transfer of possession / ownership
Ø Remedies of mortgagee : Suit for sale under Section 67

5) Anomalous Mortgage
Ø A mortgage which is not a simple mortgage, a mortgage by conditional sale, an
usufructuary mortgage, an English mortgage or a mortgage by deposit of title-
deeds within the meaning of this section is called an anomalous mortgage.
Ø Basically contains elements of more than kind of mortgage
Ø Can you think of some examples? • A possessory mortgage with a personal
covenant to pay • A possessory mortgage with a fixed time period
Ø Remedies of mortgagee: Governed by the terms of the contract and where
contract is silent, by the applicable local usage
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Section 60- RIGHT OF REDEMPTION:

At any time after the principal money has become due, the mortgagor has a right, on
payment or tender, at a proper time and place, of the mortgage-money, to require the
mortgagee

(a) to deliver to the mortgagor the mortgage-deed and all documents relating to the
mortgaged property which are in the possession or power of the mortgagee,

(b) where the mortgagee is in possession of the mortgaged property, to deliver

possession thereof to the mortgagor, and

(c) at the cost of the mortgagor either to re-transfer the mortgaged property to him or
to such third person as he may direct, or to execute and (where the mortgage has been
effected by a registered instrument) to have registered an acknowledgment in writing
that any right in derogation of his interest transferred to the mortgagee has been
extinguished :

Provided that the right conferred by this section has not been extinguished by act of
the parties or by decree of a Court.

The right conferred by this section is called a right to redeem and a suit to enforce it is
called a suit for redemption.

Nothing in this section shall be deemed to render invalid any provision to the effect
that, if the time fixed for payment of the principal money has been allowed to pass or
no such time has been fixed, the mortgagee shall be entitled to reasonable notice
before payment or tender of such money.

Redemption of portion of mortgaged property. - Nothing in this section shall entitle a

person interested in a share only of the mortgaged property to redeem his own share
only, on payment of a proportionate part of the amount remaining due on the
mortgage, except only where a mortgagee, or, if there are more mortgagees than one,
all such mortgagees, has or have acquired, in whole or in part, the share of a
mortgagor.

Ø Thre right of redemption is statutory and cannot be taken away by a contract

Ø Whether clog on the right of redemption is void/voidable? VOID
Ø If the mortgagor does not pay the mortgage money, it would amount to an
automatic sale and this is an example of a clog.
Ø When can the right of redemption be exercised? In Bakhtawar v Hussaini AIR
1914 PC 36 :
Ordinarily and in absence of a special condition entitling the mortgagor to
redeem during the term for which the mortgage is created, the right of
redemption can only arise on the expiration of the specified period.

Section 61- right to redeem separately/simultaneously:

“A mortgagor who has executed two or more mortgages in favor of the same
mortgagee shall, in the absence of a contract to the contrary, when the principal
money of any two or more of the mortgages has become due, be entitled to redeem
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

any one such mortgage separately, or any two or more of such mortgages together.”

Ganga Dhar v. Shankar Lal, AIR 1958 SC 770:

Facts; Usufructuary Mortgage executed by Purshottamdas in favor of Dhanurpmal

for a sum of Rs. 6300/-. The mortgaged property was a four roomed shop and the
clause in the deed read as
‘I or my heirs will not be entitled to redeem the property for a period of 85 years.
After the expiry of 85 years we shall redeem it within a period of six months. In case
we do not redeem within a period of six months, then after the expiry of the stipulated
period, my heirs, and legal representatives shall have no claim over the mortgaged
property, and the mortgagee shall have no claim to get the mortgage money and the
lagat (i.e. repairs) expenses that may be due at the time of default. In such case, this
very deed will be deemed to be a sale deed. There will be no need of executing a fresh
sale deed. The expenses spent in repairs and new constructions will be paid along
with the mortgage money at the time of redemption according to account produced by
the mortgagee.“
Purshottam died and his sons, the appellants, wish to redeem the property. The
respondent has called the suit as pre-mature since the to redeem only begins after 85
years.
Issue; Is the term a clog?
Held;
The principle is that a mortgage is a conveyance of land or an assignment of chattles
as a security for the payment of a debt or the discharge of some other obligation for
which it is given. This is the idea of a mortgage and the security is redeemable on the
payment or discharge of such debt or obligation. Any provision inserted to prevent
redemption on payment or performance of the debt or obligation for which the
security was given is what is meant by a clog or fetter on the equity of redemption and
is therefore void. It follows from this, that "once a mortgage always a mortgage ". The
right of redemption, therefore, cannot be taken away. The Courts will ignore any
contract the effect of which is to deprive the mortgagor of his right to redeem the
mortgage.
The term in the mortgage contract, that on the failure of the mortgagor to redeem the
mortgage within the specified period of six months the mortgagor will have no claim
over the mortgaged property, and the mortgage deed will be deemed to be a deed of
sale in favour of the mortgagee, cannot be sustained. It plainly takes away altogether,
the mortgagor's right to redeem the mortgage after the specified period. This is not
permissible. However, what is essential to analyze is the bargaining position of the
parties while entering in the deed and whether the mortgagee exercised his power or
made the mortgagor enter into an oppressive contract taking advantage of his position.
Once the right to redeem has arisen it cannot be taken away. The mortgagor's right to
redeem must be deemed to continue even after the period of six months has expired
and the attempt to confine that right to that period must fail. The term in the mortgage
instrument providing that the mortgage can be redeemed only within the six months
and not thereafter must be held period of to be invalid and ignored. But is it correct to
presume in all situations where the term of a contract is for a long period running into
several year, would necessarily amount to a clog?

It is not necessary for us to go so far as to say that the length of the term of the
mortgage can never by itself show that the bargain was oppressive. We have nothing
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

here to show that the length of the term was in any way disadvantageous to the
mortgagor. It is quite conceivable that it was to his advantage. The suit for redemption
was brought over forty-seven years after the date of the mortgage. It seems to us
impossible that if the term was oppressive, that was not realized much earlier and the
suit brought within a short time of the mortgage. We cannot also ignore, as appears
from a large number of reported decisions, that it is not uncommon in various parts of
India to have long term mortgages. Secondly, the mortgagee was not putting any
pressure on the mortgagor. The fact that the mortgage money was more than the
security and mortgagee was absolutely fine with this, falls in favor of the mortgagee.
No complaint is made that the interest charged, which was to be measured by the rent
of the property, was in any manner high. All these, to our mind, indicate that the
mortgagee had not taken any unfair advantage of his position as the lender, nor that
the mortgagor was under any financial embarrassment. There is nothing in the
mortgage instrument permitting the mortgagee to demand any money, and it is well
settled that the mortgagee's right to enforce the mortgage and the mortgagor's right to
redeem are co-extensive. Thus, the term period of 85 years is not a clog.

Pomal Kanji Govindji v. Vrajlal Karsandas Purohit, AIR 1989 SC 436: (1989) 1
SCC

Facts: The plaintiffs filed a suit alleging that their father, who died in 1956 had
mortgaged the suit property for Rs. 30,000 by a registered mortgage deed dated 20th
April, 1943, in favor of the power of attorney holder and manager of the defendants
Nos. 1 & 2. Defendant No. 3 is the heir of the attorney who was managing the
properties. The mortgage property consisted of two residential houses, shops, etc. The
mortgagees had inducted tenants in the property being defendants Nos. 4 to 9. When
the mortgage took place the economic condition of the father of the plaintiffs was
weak and he was heavily indebted to others. Taking advantage of this, the mortgagees
took mortgage deed from him on harsh and oppressive conditions by getting
incorporated a long term of 99 years for redemption of mortgage, though possession
was handed over to the mortgagees. Moreover, the mortgagees were given liberty to
spend any amount they liked for the improvement of the property and were also
permitted to rebuild the entire Property.

The present suit was filed to redeem the mortgage and to recover actual possession
from the defendants Nos. 4 to 9 who were the tenants inducted by the mortgagees.
Defendant No. 1 alleged that the term of the mortgage was for 99 years, so the suit
filed before the expiry of that period was premature. The defendants Nos. 4 to 9
alleged that the plaintiffs could not evict the the tenants who were protected by the
Bombay Rent Act, because they were inducted by the mortgagees. The defendants
stated that mortgage deed was a usufructuary mortgage for Rs. 20,000, and the
remaining 10,000 were advanced as monthly interest at the rate of ½%. There was a
condition in the mortgage deed that the mortgagor would pay principal amount, as
well as, the interest at the time of redemption. The defendant further stated that
plaintiff No. l was working as an Advocate at the time of the mortgage, so they knew
the legal position; that at the relevant time the prevalent custom in Kutch State was to
take mortgages of long term for 99 years and with such a long term, it was also
necessary to give permission for rebuilding the whole property, for better enjoyment
of it.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Issue: Did terms amount to a clog on equity of redemption of mortgage and did the
mortgagees take any undue advantage as they were not present physically when the
transaction took place through their power of attorney holders.
Held: If the conditions of mortgage deed did not amount to clogs on equity of
redemption, the suit would be clearly premature. Plaintiff No. I had subsequently
become a Civil Judge and if the said terms and conditions of the mortgage were
onerous and oppressive, he would not have sat idle for 29 years. He filed a suit after
29 years and remained silent all this while because he was aware of the said custom in
Kutch. The prices of immovable properties had increased tremendously, therefore, the
suit had been filed with mala fide intention; The Trial Court came to the conclusion
that there was mortgage transaction between the father of the plaintiffs and the
mortgagees and that the terms were harsh and oppressive and amounted to clog on
equity of redemption, so the plaintiffs were entitled to file the suit even before the
expiry of the term of the mortgage; and that the plaintiffs were entitled to recover
possession from the defendants Nos. 4 to 9 who were the tenants inducted by the
mortgagees. The appeals filed by the mortgagees were dismissed and upheld the Trial
Court’s decision. The
Hence, this appeal. The Court held that it will ignore any contract the effect of which
is to deprive the mortgagor of his right to redeem the mortgage. The rights and
liabilities of the mortgagor are controlled by the provisions of section 60 of the
Transfer of Property Act, 1882. Any provision inserted to prevent, evade or hamper
redemption is void. The doctrine "clog on the equity of redemption" is a rule of
justice, equity and good conscience. It must be adopted in each case to the reality of
the situation and the individuality of the transaction. Freedom of contract is
permissible provided it does not lead to taking advantage of the oppressed or
depressed people. The law must transform itself to the social awareness. Poverty
should not be unduly permitted to curtail one’s right to borrow money on the ground
of justice, equity and good conscience on just terms. If it does, it is bad. Whether it
does or does not. however, depends upon the facts and the circumstances of each case.
It is a mixed question of law and fact.

Courts do not look with favour at any clause or stipulation which clogs equity of
redemption. A clog is unjust and unequitable. The principles of English law, which
have been accepted by this Court in this country, looks with disfavor at clogs. S. 60 of
TPA, in India, also recognizes the same position. It is a right of the mortgagor on
redemption, by reason of the very nature of the mortgage, to get back the subject of
the mortgage and to hold and enjoy as he was entitled to hold and enjoy it before the
mortgage. If he is prevented from doing so or is prevented from redeeming the
mortgage, such prevention is bad in law. If he is so prevented, the equity of
redemption is affected by that whether aptly or not, and it has always been termed as a
clog. Such a clog is inequitable. The law does not countenance it. Whether or not in a
particular transaction there is a clog on the equity or redemption, depends primarily
upon the period of redemption, the circumstances under which the mortgage was
created, the economic and financial position of the mortgagor, and his relationship
vis-a-vis him and the mortgagee, the economic and social condition in a particular
country at a particular point of time, customs if any, prevalent in the community or
the society in which the transaction takes place, and the totality of the circumstances
under which a mortgage is created, namely circumstances of the parties, the time, the
situation, the clauses for redemption either for payment of interest or any other sum,
the obligation of the mortgagee to construct or repair or maintain the mortgaged
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

property in cases of usufructuary mortgage to manage as a matter of prudent

management, these factors must be co-related to each other and viewed in a
comprehensive conspectus in the background of the facts and circumstances of each
case, to determine whether these are clogs on equity of redemption. A mortgage is
essentially and basically a conveyance in law or an assignment of chattels as a
security for the payment of debt or for discharge or some other obligation for which
it is given. The security must, therefore, be redeemable on the payment or discharge
of such debt or obligation. Any provision to the contrary, notwithstanding, is a clog or
fetter on the equity of redemption and, hence bad and void. "Once a mortgage must
always remain a mortgage", and must not be transformed into a conveyance or
deprivation of the right over the property.

The law must respond and be responsive to the felt and discernible compulsions of
circumstances that would be equitable, fair and just, and unless there is anything to
the contrary in the Statute, law must take cognizance of that fact and act accordingly.
In the context of fast changing circumstances and economic stability, long-term for
redemption makes a mortgage an illusory mortgage, though not decisive. Even apart
from S. 76(a) of TPA if the words of the mortgage deed clearly and indubitably
express an intention to allow expressly creation of a tenancy beyond the term of the
mortgage, then only the lease created in exercise of the power expressly conferred
by the mortgage deed would be binding on the mortgagor. If the words of the
mortgage deed do not clearly and indubitably disclose the intention to allow expressly
the creation of a tenancy beyond the terms of the mortgage, the mere fact that the
mortgage deed authorizes the mortgagee with possession to induct a tenant would not
create a tenancy binding on the mortgagor after the redemption of the mortgage. In
the instant case, the tenancy rights did not come to be enlarged by the Tenancy
Legislation after the tenant was put into possession by the mortgagee and the tenancy
created in favor of the tenants by the mortgagor did not have the concurrence of the
mortgagor so as to claim tenancy rights even after redemption of the mortgage.

Shri Shivdev Singh & Anr vs Sh.Sucha Singh AIR 2000 SC 1935:

Facts; The disputed property was owned by Prakash Singh who had mortgaged it in favour
of Smt. Basant Kaur for a sum of Rs.7,000/- vide mortgage deed dated 19.3.1968. Smt. Basant
expired and her heirs have stepped in as the mortgagees. Prakash at the time of the mortgage
deed was financially tight and allegedly taking undue advantage of his poor financial
condition and helplessness, the appellants got incorporated a term in the mortgage deed, to
the effect that the mortgage was for a period of 99 years which constituted a clog on the
equity of redemption + the appellants had been enjoying the usufructs of the mortgage for
more than 20 years before the date of the filing of the suit. Logically, the amount would have
been recovered in 26 years since the mortgagees were enjoying the rents of the property.
Issue; Would 99 years time period for redemption amount to a clog?

Held; It is well settled that the right of redemption under a mortgage deed can come to an
end only in a manner known to law. Such extinguishment of the right can take place by a
contract between the parties, by a merger or by a statutory provision which debars the
mortgagor from redeeming the mortgage. A mortgagee who has entered into possession
of the mortgaged property under a mortgage will have to give up possession of the property
when a suit for redemption is filed unless he is able to show that the right of redemption has
come to an end or that the suit is liable to be dismissed on some other valid ground. This
flows from the legal principle which is applicable to all mortgages, namely “Once a
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

mortgage, always a mortgage”. The right of redemption, therefore, cannot be taken away.
The court will ignore any contract the effect of which is to deprive the mortgagor of his right
to redeem the mortgage. One thing, therefore, is clear, namely, that the term in the mortgage
contract, that on the failure of the mortgagor to redeem the mortgage within the specified
period of six months the mortgagor will have no claim over the mortgaged property, and the
mortgage deed will be deemed to be a deed of sale in favour of the mortgagee, cannot be
sustained. It plainly takes away altogether, the mortgagor's right to redeem the mortgage
after the specified period. This is not permissible, for "once a mortgage always a mortgage"
and therefore always redeemable.

Whether in the facts and the circumstances of these cases, the mortgage transaction
amounted to clog on the equity of redemption, is a mixed question of law and fact. Courts do
not look with favour at any clause or stipulation which clogs equity of redemption. A clog on
the equity of redemption is unjust and unequitable. The principles of English law, look with
disfavour at clogs on the equity of redemption. Section 60 of the Transfer of Property Act,
also recognises the same position.

It is a right of the mortgagor on redemption, by reason of the very nature of the mortgage, to
get back the subject of the mortgage and to hold and enjoy as he was entitled to hold and
enjoy it before the mortgage. If he is prevented from doing so or is prevented from redeeming
the mortgage, such prevention is bad in law. If he is so prevented, the equity of redemption is
affected by that whether aptly or not, and it has always been termed as a clog. Such a clog is
inequitable. The law does not countenance it. Bearing the aforesaid background in mind,
each case has to be judged and decided in its own perspective. As has been observed by this
Court that long term for redemption by itself, is not a clog on equity of redemption. Whether
or not in a particular transaction there is a clog on the equity of redemption, depends
primarily upon the period of redemption, the circumstances under which the mortgage was
created, the economic and financial position of the mortgagor, and his relationship vis-à-vis
him and the mortgagee, the economic and social conditions in a particular country at a
particular point of time, custom, if any, prevalent in the community or the society in which the
transaction takes place, and the totality of the circumstances under which a mortgage is
created, namely, circumstances of the parties, the time, the situation, the clauses for
redemption either for payment of interest or any other sum, the obligations of the mortgagee
to construct or repair or maintain the mortgaged property in cases of usufructuary mortgage,
to manage as a matter of prudent management, these factors must be correlated to each other
and viewed in a comprehensive conspectus in the background of the facts and the
circumstances of each case, to determine whether these are clogs on equity of redemption.“
On facts it was held that the mortgage deed being for a period of 99 years was a clog on the
equity of redemption.

Such findings were returned keeping in view the facts and circumstances of the case and the
financial position under which the mortgagor Shri Prakash Singh was placed at the time of
execution of the mortgage deed on 19.3.1968. The appellants were found to be in an
advantageous position qua the mortgagor. They were also found to be deriving the usufructs
of the mortgaged land for a period of over 26 years at the time of filing of the suit on payment
of meager sum of Rs.7,000/- only to the mortgagor.

Sangar Gagu Dhula v. Shah Laxmiben Tejshi, AIR 2001 Guj. 329

Facts: The plaintiff mortgaged his property, being a residential house with
appurtenant land, with the mortgagee. The consideration was a sum of Rs. 11000/-.
The mortgage deed contemplated that this consideration will be repayable by
the mortgagor to the mortgagee on expiry of 99 yrs from the date of the deed of
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

mortgage, and on the consideration being repaid, the mortgagor shall be entitled to
redemption of the property. The mortgage deed was executed on 15th December,
1914. Before the expiry of the stipulated period of 99 years, the heirs of the mortgagor
wished to redeem the property by filing a suit on 5th February,1974.

Issue: The redemption was sought before the expiry of the stipulated period on the
contention that ‘the period of 99 yrs before which redemption could not be enforced
was an oppressive term and would amount to "a clog?
Whether a condition in a mortgage deed which is found by the Court to be a clog is
void ab initio or merely voidable at the instance of the mortgagor?
Limitation period of filing for redemption begins when, from the date of execution of
the mortgage deed or since a clog is considered as void or when it is declared by the
court that the term is a clog?

Held: Article 61(a) of the Limitation Act, 1963, which reads as - limitation time from
which period begins to run by a mortgagor to redeem or recover possession of
immovable property mortgaged is thirty years when the right to redeem or to recover
possession accrues.

The doctrine of the equity of redemption flows from the early development of case
law on the subject by the Courts in England to the effect that although a transaction of
a mortgage pertains to immovable properly, it is also a contract between the parties
relating to such property. Since, it is a transaction in the nature of a contract, it is not
beyond the scope and ambit of the law pertaining to contracts (in India this refers to
the Contract Act). Normally, Courts would bind each party and make each of them
responsible for the mutual rights and obligations created by such a contract
voluntarily entered into by the parties. However, the Courts have always refused to
recognize or enforce contracts which are unconscionable, opposed to public policy,
immoral contracts, etc.

A transaction of a mortgage has always been recognized by Courts under the principle
"once a mortgage always a mortgage". A mortgagor's right to redeem the property, the
subject of the mortgage, has been recognized as fundamental to the transaction of a
mortgage. If the right to redeem the property is denied to the mortgagor, the same
would amount to usurpation of the title by the mortgagee, which would result in the
transgression of the intention of the mortgagor and would therefore tend to frustrate
the transaction etc. The Courts have therefore taken a view that the denial of a right to
redeem the property, or delaying the exercise of this right to redeem by an
unconscionable period, or creating other contractual barriers against the exercise of
the right to redeem, is not acceptable to the Courts in equity. The Courts have
therefore struck down, have refused to recognize or have refused to enforce such
covenants.

It is well settled law that what precisely amounts to a clog is a mixed question of fact
and law. Whether a particular clause alleged to be offending against the doctrine
amounts to a clog or not, is not a question that can be answered without examining the
peculiar facts and circumstances attendant and appurtenant to the transaction itself.
This examination can only be accorded upon the facts and circumstances established
by appropriate and acceptable evidence on record. Merely because the mortgagor's
right to redeem is delayed or postponed by a long period of time would not ipso facto
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

amounts to a clog. The material aspect which requires emphasis at this stage is that
relief from the specific terms of the mortgage deed (although alleged to be oppressive
to the mortgagor and amounting to a clog) is not granted merely for the asking, or
merely by resorting to the overriding principles of equity, but only when the inequity
of the particular clause of the contract is actually brought home and established by
facts and evidence.

Reverting to the specific controversy placed before us for resolution, the contesting
parties in turn contend that the offending clog is "void ab initio" and "voidable".
The issue is – limitation act suggest 30 yrs – when does this begin? If a clog is void ab
initio, it means it never existed in the contract, thus, the time period begins rights
from the date of execution of the deed. However, clog is a question of facts and
circumstances and it is for a court to decide whether a condition amounts to a clog or
not. Parties cannot assume conditions as clog – if this is the position then the
limitation will begin from the date of declaration by the court.

On the plain reasoning it appears to be obvious that the offending clause postpones
the mortgagor's right to redeem for 99 years. It is only when the mortgagor desires to
redeem the property prior to 99 years that he approaches the Court. The mortgagor is
conscious of the fact that by contract he is a party to the postponement to the right to
redeem for 99 years. In order to escape from this clause on the ground that it is
oppressive and unconscionable, he satisfies the Court by leading appropriate and
credible evidence, and satisfies the Court that the oppressive clause amounts to a clog.
It is only when the Court finds on facts that this is a clog, that the Court strikes down
the offending clause and thereby lifts the clog. It is then and only then, can the
mortgagor seek redemption of the property. In other words, it is only when the
offending clause is struck down by the Court, that the right to redeem the property
accrues in favor of the mortgagor. Therefore, the period of limitation would
commence only from the date of such declaration. Thus, in a suit filed by the
mortgagor for the composite purpose of lifting the clog as also for redemption, it
could not possibly be said that the suit is beyond limitation.

If the contrary was correct then it would mean that if a mortgagor wanted to avoid the
deferred clause of 59 years on the plea of clog on redemption, he had to file a suit for
redemption within 30 years from the date of execution, which the contract does not
permit anyway.

Chaganlal v. Anantaraman, AIR 1961 Mad 415

Facts; 2 brothers (B1 and B2) executed a mortgage deed on 1930 for Rs. 2000. In
1952 B1 had sold the mortgaged property to B2 directing B2 to redeem the mortgage.
B1 subsequently died. B2 offered to redeem the mortgage on payment of Rs. 2000,
the principal amount, but the defendant refused the offer and insisted that besides the
principal, the other sums including interest due under the provisions of the mortgage
deed should also be paid before the mortgage could be redeemed.

Issue: Would interest always be included in the mortgage money and only on the
payment of principal amount + interest could a mortgagor redeem?
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Held: mortgage deed ran as:

"We have mortgaged with possession to you the house belonging to us and have
received from you in the presence of the Sub Registrar Rs. 2000 and for the interest
on this amount at Rs. 1-12-0 percent per mensem, you shall yourself let out the house
for rent and adjust the same in satisfaction o the interest. If the rent falls short or no
rent is at all yielded, such amount as represents the interest due we shall pay to you or
to your order before the 20th of the month and take receipt. We shall ourselves pay
the quit rent, Union taxes etc, for the property and also carry out necessary repairs
therefore at our own expense. If we fail to pay the taxes or carry out the repairs and
thereby you are obliged to pay the rents, taxes or the repairs charges, such amount
also shall be paid by us with interest at the above said rate. When we pay the principal
amount, you shall at that time cancel this document and deliver the house to our
possession. If we fail to pay you when you demand, the amount due according to this
document, you can recover the said amount from us and from the property. The deed
was styled a possessory mortgage.

S. 58(a) - "mortgage money" = principal + interest.

U/S 60 the mortgagor has a right on payment or tender at a proper time or place of the
mortgage money to obtain redemption. The 'question, therefore, is whether the
interest and other amounts payable by the mortgagor to the mortgagee are monies of
which payment is secured.
In Gangararn v. Natha Singh, ILR 5 Lab 425: (AIR 1924 PC 183), a mortgagee is
entitled to treat interest due under a mortgage as a charge upon the mortgaged
property in the absence of any contract to the contrary.

If there is a contract stipulating the payment of interest, then it would work as per the
terms of the deed. If the mortgagor had taken a personal liability to pay the interest
then it would not be a charge on the mortgage property. In the absence of the contract,
interest is a charge on the mortgage property and the mortgagor can only redeem after
paying the entire amount. As was Pointed out in ILR 7 Lah. 559 : (AIR 1926 Lah 624
(1)), the fact that there was a personal covenant to pay the interest would not by itself
be a contract to the contrary. It is true that in one part of the document it is provided
that when the mortgagors pay the principal amount, the document shall be cancelled
and the mortgaged property delivered to the mortgagors. Reading the entire document
as a whole, it is obvious that at the time of the execution of the mortgage, the parties
presumably contemplated that the interest would be recovered from the rent fetched
by the mortgaged property and, even if there was any deficiency, it would be
periodically made good by the mortgagors. If these provisions had been carried out by
the mortgagors, then obviously the only amount, which would be outstanding, would
be the principal amount, in which case it would be sufficient to pay the principal
amount only to enable the mortgagors to redeem the mortgage.

We hold that the construction placed on the material provisions of the mortgage deed
before us, we would be wrong in holding that there was a contract contrary to the
general rule that interest payable under a mortgage deed would also be charged to the
mortgaged property and would be included in the mortgage money on payment of
which alone the mortgagor would be entitled to obtain redemption of the mortgage.

Section 62- Right of ususfructory mortgagor to recover possession:

 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

“In the case of a usufructuary mortgage, the mortgagor has a right to recover
possession of the property together with the mortgage-deed and all documents relating
to the mortgaged property which are in the possession or power of the mortgagee, -

(a) where the mortgagee is authorized to pay himself the mortgage-money from the
rents and profits of the property, when such money is paid;

(b) where the mortgagee is authorized to pay himself from such rents and profits or
any part thereof a part only of the mortgage-money, when the term, (if any),
prescribed for the payment of the mortgage-money has expired and the mortgagor
pays or tenders to the mortgagee the mortgage-money or the balance thereof or
deposits it in Court as hereinafter provided.

Section 65- Implied Contracts by mortgagor: “In the absence of a contract to the
contrary, the mortgagor shall be deemed to contract with the mortgagee, -

(a) that the interest which the mortgagor professes to transfer to the mortgagee
subsists, and that the mortgagor has power to transfer the same;

(b) that the mortgagor will defend, or, if the mortgagee be in possession of the
mortgaged property, enable him to defend, the mortgagor's title thereto;

(c) that the mortgagor will, so long as the mortgagee is not in possession of the
mortgaged property, pay all public charges accruing due in respect of the property;

(d) and, where the mortgaged property is a lease, that the rent payable under the lease,
the conditions contained therein, and the contracts binding on the lessee have been
paid, performed and observed down to the commencement of the mortgage; and that
the mortgagor will, so long as the security exists and the mortgagee is not in
possession of the mortgaged property, pay the rent reserved by the lease, or, if the
lease be renewed, the renewed lease, perform the conditions contained therein and
observe the contracts binding on the lessee, and indemnify the mortgagee against all
claims sustained by reason of the non-payment of the said rent or the non-
performance or non-observance of the said conditions and contracts;

(e) and, where the mortgage is a second or subsequent encumbrance on the property,
that the mortgagor will pay the interest from time to time accruing due on each prior
encumbrance as and when it becomes due, and will at the proper time discharge the
principal money due on such prior encumbrance.

The benefit of the contracts mentioned in this section shall be annexed to and shall go
with the interest of the mortgagee as such, and may be enforced by every person in
whom that interest is for the whole or any part thereof from time to time vested.

Section 66: Waste by mortgagor in possession- “A mortgagor in possession of the

mortgaged property is not liable to the mortgagee for allowing the property to
deteriorate; but he must not commit any act which is destructive or permanently
injurious thereto, if the security is insufficient or will be rendered insufficient by such
act.

Explanation. —A security is insufficient within the meaning of this section unless the
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

value of the mortgaged property exceeds by one third, or, if consisting of buildings,
exceeds by one-half, the amount for the time being due on the mortgage.

Remedies of a mortgagee:

Ø Section 68(a)-A suit on the covenant

Ø Section 67- A suit for sale
Ø Section 67- a suit for foreclosure
Ø Section 69- sale without intervention of court and it also notes the very
limited circumstances in which it is permitted

Section 67- Right to foreclosure/ sale:

In the absence of a contract to the contrary, the mortgagee has, at any time after the
mortgage- money has become due to him, and before a decree has been made for the
redemption of the mortgaged property, or the mortgage-money has been paid or
deposited as hereinafter provided, a right to obtain from the court a decree that the
mortgagor shall be absolutely debarred of his right to redeem the property, or a decree
that the property be sold.

A suit to obtain a decree that a mortgagor shall be absolutely debarred of his right to
redeem the mortgaged property is called a suit for foreclosure.

Nothing in this section shall be deemed-

(a) to authorize any mortgagee other than a mortgagee by conditional sale or a

mortgagee under an anomalous mortgage by the terms of which he is entitled to
foreclose, to institute a suit for foreclosure, or an usufructory mortgagee as such or a
mortgagee by conditional sale as such to institute a suit for sale; or

When all is foreclosure/sale available?

Ø Simple mortgage- sale under Section 67

Ø Usufructuary mortgage- neither
Ø Mortgage by conditional sale: foreclosure
Ø English mortgage- sale under section 67
Ø Mortgage by deposit of title deeds- sale under section 67
Ø Anomalous mortgage- foreclosure, depending on the terms of contrct.

Section 68- Right to sue for mortgage money:

Ø Under Section 68(a) – enforcement of a personal covenant where under

clauses (b), (c) or (d), the suit is one for compensation
Ø Liability under personal covenant does not run with the land – refresh
discussion on negative, positive and personal covenants
Ø Under Section 68(1)(d), reference is to a usufructuary mortgage

Charge:

Where immoveable property of one person is by act of parties or operation of law

made security for the payment of money to another, and the transaction does not
amount to a mortgage, the latter person is said to have a charge on the property; and
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

all the provisions hereinbefore contained which apply to a simple mortgage shall, so
far as may be, apply to such charge.

Ø What is the basic ingredient? – intention to create a charge in prasaenti on

specific property – not the same as undertaking personal liability
Ø Charge by act of parties and operation of law
Ø Note that the provisions applicable to a simple mortgage would apply here
Ø Does it need registration?

Mortgage versus charge:

If a charge does not amount to a mortgage, then what is the difference between
the two?

• In a charge there is no transfer of an interest in property but creation of a right of

payment out of the property specified.

The broad distinction between a mortgage and a charge is this that whereas a charge
only gives a right to payment out of a particular fund or property without
transferring that fund or property, a mortgage is in essence a transfer of an interest in
specific immovable property.

Illustration: A inherited an estate from his maternal grandmother and executed an

agreement to pay his sister B a fixed annual sum out of the rents of the estate. B has a
charge on the estate.

ü Charge is one with respect to both movable and immovable properties.

ü Charge does not bind a subsequent transferee without notice while a mortgage
does.
ü Charge can be created, by both act of parties and law while mortgage can only
be created by act of parties.
ü A mortgage is for a fixed term whereas the charge may be in perpetuity.
ü A charge created by operation of law does not require the registration as
prescribed for mortgage under the Transfer of Property Act. But a charge
created by act of parties requires registration.
ü In case of a mortgage there is an outstanding debt but there may or may not be
a debt in case of a charge.

Section 91- Persons who may sue for redemption:

Besides the mortgagor, any of the following persons may redeem, or institute a suit
for redemption of, the mortgaged property, namely:-

(a) any person (other than the mortgagee of the interest sought to be redeemed) who
has any interest in, or charge upon, the property mortgaged or in or upon the right to
redeem the same;

(b) any surety for the payment of the mortgage-debt or any part thereof; or

(c) any creditor of the mortgagor who has in a suit for the administration of his estate
obtained a decree for sale of the mortgaged property.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Section 92- Subrogation

Any of the persons referred to in Sec 91 (other than the mortgagor) and any co-
mortgagor shall, on redeeming property subject to the mortgage, have, so far as
regards redemption, foreclosure or sale of such property, the same rights as the
mortgagee whose mortgage he redeems may have against the mortgagor or any other
mortgagee.

The right conferred by this section is called the right of subrogation, and a
person acquiring the same is said to be subrogated to the rights of the mortgagee
whose mortgage he redeems.

A person who has advanced to a mortgagor money with which the mortgage has been
redeemed shall be subrogated to the rights of the mortgagee whose mortgage has been
redeemed, if the mortgagor has by a registered instrument agreed that such persons
shall be so subrogated.

Nothing in this section shall be deemed to confer a right of subrogation on any person
unless the mortgage in respect of which the right is claimed has been redeemed in
full.

v A person ho is subrogated must file a separate suit to enforce his claims.

GIFTS(section 122-129)

What is a gift under TPA?

Definition is contained in Section 122- “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 donor, and accepted by or on behalf of
the donee.

Acceptance when to be made - Such acceptance must be made during the lifetime of
the donor and while he is still capable of giving.

If the donee dies before acceptance, the gift is void.

Ø The consent must be free and voluntary

Case brief of debi saran v. nandalal AIR 1929 PAT 591

Subhas Chandra v Ganga Prasad, AIR 1967 SC 878

Facts: The plaintiff's father, Prasanna Kumar, who died in 1948 at the age of 90
years, owned certain lands with high value. Prasanna had two sons, Ganga Prosad, the
plaintiff, and Balaram, the second defendant and Balaram’s son (Prasanna’s
grandson), Subhas Chandra, first defendant. Balaram always lived with his father and
looked after Prasanna’s properties. The father executed a will in favor of Subhas, the
grandson. The plaintiff contested the deed as fraudulent, collusive and invalid and
asked for cancellation of the document.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

High Court stated that on the basis that in the circumstances of the case and in view of
the relationship of the parties the trial court should have presumed that the donee had
influence over the donor and should have asked for proof from the respondents that
the gift was the spontaneous act of the donor exercising an independent will and
which would justify the court in holding that the gift was the result of a free exercise
of the donor's will. HC further presumed that with age of the donor his intelligence or
understanding must have deteriorated with advancing years and consequently it was
for the court to presume that he was under the influence of his younger son at the date
of the gift.
The suit was filed in 1952, more than eight years after the date of the transaction and
more than four years after the death of Prasanna. There is a considerable body of
evidence that in between 1944 and 1948 a number of settlements had been effected by
Balaram acting as the natural guardian of Subhas Chandra and in all of them the terms
had been recited and in each case Prasanna had signed as an attesting witness. These
settlements were made jointly with the other co-sharers of Prasanna. In 1947 the
Municipal Commissioners of Bankura filed a suit against Prasanna for recovery of
arrears of taxes. Prasanna filed his written statement in that suit stating that he had no
interest in the property. After Prasanna's death the Municipal Commissioners did not
serve the plaintiff with a writ of summons in the suit but obtained a decree only
against Balaram ex parte. It is the case of the plaintiff that Balaram exercised undue
influence on his father, as Plaintiff was unaware of this transaction.
Issue: Would this amount to undue influence on Prasanna?
Held: Under s. 16(1) of the Indian Contract Act, a contract is said to be induced by
undue influence where the relations subsisting between the parties are such that one of
the parties is in a position to dominate the will of the other and uses that position to
obtain an unfair advantage over the other. This shows that the court trying a case of
undue influence must consider two things to start with, namely, (1) are the relations
between the donor and the donee such that the donee is in a position to dominate the
will of the donor and (2) has the donee used that position to obtain an unfair
advantage over the donor ? Sub-section (2) of the section is illustrative as to when a
person is to considered to be in a position to dominate the will of another. These are
inter alia (a) where the donee holds a real or apparent authority over the donor or
where he stands in a fiduciary relation to the donor or (b) where he makes a contract
with a person whose mental capacity is temporarily or permanently affected by reason
of age, illness, or mental or bodily distress. Sub-section (3) of the section throws the
burden of proving that a contract was not induced by undue influence on the person
benefiting by it when two factors are found against him, namely that he is in a
position to dominate the will of another and the transaction appears on the face of it or
on the evidence adduced to be unconscionable.
The three stages for consideration of a case of undue influence were expounded in the
case of Ragunath Prasad v. Sarju Prasad in the following words :-
"In the first place the relations between the parties to each other must be such that one
is in a position to dominate the will of the other. Once that position is substantiated
the second stage has been reached - namely, the issue whether the contract has been
induced by undue influence. Upon the determination of this issue a third point
emerges, which is that of the onus probandi. If the transaction appears to be
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

unconscionable, then the burden of proving that the contract was not induced by
undue influence is to lie upon the person who was in a position to dominate the will of
the other. Error is almost sure to arise if the order of these propositions be changed.
The unconscionableness of the bargain is not the first thing to be considered. The first
thing to be considered is the relations of these parties. Were they such as to put one in
a position to dominate the will of the other ?”
It must also be noted that merely because the parties were nearly related to each other
no presumption of undue influence can arise. As was pointed out in Poosathurai v.
Kappanna Chettiar and others;
"It is a mistake (of which there are a good many traces in these proceedings) to treat
undue influence as having been established by a proof of the relations of the parties
having been such that the one naturally relied upon the other for advice, and the other
was in a position to dominate the will of the first in giving it. Up to that point
"influence" alone has been made out. Such influence may be used wisely, judiciously
and helpfully. But whether by the law of India or the law of England, more than mere
influence must be proved so as to render influence, in the language of the law,
"undue".
According to Halsbury's Laws of England, Third Edition, Vol. 17 p. 673, Art. 1298,
"where there is no relationship shown to exist from which undue influence is
presumed, that influence must be proved". Article 1299, P. 674 of the same volume
shows that "there is no presumption of imposition or fraud merely because a donor is
old or of weak character". The learned author notes at p. 679 that "there is no
presumption of undue influence in the case of a gift to a son, grandson, or son-in-law,
although made during the donor's illness and a few days before his death". Generally
speaking the relation of solicitor and client, trustee and trust, spiritual adviser and
devotee, medical attendant and patient, parent and child are those in which such a
presumption arises. Section 16(2) of the Contract Act shows that such a situation can
arise wherever the donee stands in a fiduciary relationship to the donor or holds a real
or apparent authority over him.
Several witnesses were examined to prove that Prasanna was a person of unsound
mind at the time when he executed the deed of gift. The plaintiff's only statement in
examination in chief was that his father was not of sound mind for 10 or 12 years
from before his death. Is it to be believed that he did not know about the deed until
four years after the death of his father? This statement of his can hardly be true
because the deed does not stand by itself, but was given effect to in several deeds of
settlement which came out in evidence at the trial.
A case very similar to the instant one - Ismail Mussaiee Mookerdum v. Hafiz Boo 33
I.A. 88. There one Khaja Boo, a Mahomedan woman, who died at the age of 90 years
entered into the impugned transactions when she was nearly 80. At that time she had
an only son, the plaintiff in the suit, and the defendant respondent, her daughter. It
came out in evidence that she was on terms of bitter hostility with her son and much
litigation had taken place between them. The daughter was a married woman whose
husband resided in Rangoon, but she herself was living with her mother at Rander.
The result of the impugned transactions was that the daughter Hafiz Boo became
possessed of nearly the whole of her mother's Rangoon properties or their proceeds.
The son alleged in the paint that at the time of the occurrence the mother was
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

suffering from dementia and was not in a fit state of mind to execute contracts or to
manage her affairs and was until July 1888 (she having died in the year 1900) residing
with the daughter and was completely under her domination and control. Before the
learned Trial Judge a large mass of evidence was given directed to the question of
Khaja Boo's mental capacity in 1889. The learned Judge found that the plaintiff had
failed to show that his mother was of unsound mind in 1889. The Court of Appeal
came to the same conclusion.
"The mere relation of daughter to mother, of course, in itself suggests nothing in the
way of special influence or control. The evidence seems to their Lordships quite
insufficient to establish any general case of domination on the part of the daughter,
and subjection of the mother, such as to lead to a presumption against any transaction
between the two. With regard to the actual transactions in question, there is no
evidence whatever of undue influence brought to bear upon them.“
The same remarks may justly be made of the pleading and the evidence adduced in
this case. There was practically no evidence about the domination of Balaram over
Prasanna at the time of the execution of the deed of gift or even thereafter. Prasanna,
according to the evidence, seems to have been a person who was taking an active
interest in the management of the property even shortly before his death. The plaintiff
had no son. For a good many years before 1944 he had been making a living
elsewhere. According to his own admission in cross-examination, he owned a jungle
in his own right (the area being given by the defendant as 80 bighas) and was
therefore possessed of separate property in which his brother or nephew had no
interest. There were other joint properties in the village of Parbatipur which were not
the subject-matter of the deed of gift. The circumstance that a grand-father made a gift
of a portion of his properties to his only grandson a few years before his death is not
on the face of it an unconscionable transaction. Moreover, we cannot lose sight of the
fact that if Balaram was exercising undue influence over his father he did not go to
the length of having the deed of gift in his own name.
Section 123- Transfer how effected- Different modes of effecting transfer for
movable and immovable property

Section 124- Gift of existing and future property

Section 125: Gift to several of whom one does not accept

Section 126: Conditional gifts: “The donor and donee may agree that on the
happening of any specified event which does not depend on the will of the donor a
gift shall be suspended or revoked; but a gift which the parties agree shall be
revocable wholly or in part, at the mere will of the donor, is void wholly or in part, as
the case may be.

A gift may also be revoked in any of the cases (save want or failure of consideration)
in which, if it were a contract, it might be rescinded

Save as aforesaid, a gift cannot be revoked.

Nothing contained in this section shall be deemed to affect the rights of transferees for
consideration without notice.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Illustrations:

(a) A gives a field to B, reserving to himself, with B's assent, the right to take back the
field in case B and his descendants die before A. B dies without descendants in A's
lifetime. A may take back the field.

(b) A gives a lakh of rupees to B, reserving to himself, with B's assent, the right to
take back at pleasure Rs.10,000 out of the lakh. The gift holds good as to Rs.90,000,
but is void as to Rs.10,000 which continue to belong to A.

Section 127: Onerous gifts

Section 128: Universal done- “Subject to the provisions of Section 127, where a gift
consists of the donor's whole property, the donee is personally liable for all the debts
due by and liabilities of the donor at the time of the gift to the extent of the property
comprised therein.”

Section 129: saving of donations Mortis Causa and muhammedan law- “Nothing
in this Chapter relates to gifts of moveable property made in contemplation of death,
or shall be deemed to affect any rule of Muhammadan law.”

Consultation Paper-cum-Questionnaire on Adverse Possession of

Land/Immovable Property

The claim to rights and interests in relation to property on the basis of possession has
been recognized in all legal systems. Uninterrupted and uncontested possession for a
specified period, hostile to the rights and interests of true owner, is considered to be
one of the legally recognized modes of acquisition of ownership. The prescription of
periods of limitations for recovering possession or for negation of the rights and
interests of true owner is the core and essence of the law of adverse possession. Right
to access to Courts is barred by law on effluxion of prescribed time. The conditions
necessary for the acceptance of a claim based on adverse possession have been laid
down basically by way of Judge-made law. Several exceptions to the concept of
adverse possession based on legal relationship between the title holder and the person
in actual possession as well as the character of land are also recognized by law.
Permissive possession or possession without a clear intention to exercise exclusive
rights over the property is not considered as adverse possession.

2. The legal position and principles governing adverse possession.

2.1 As observed by the Supreme Court of India in the case of Karnataka Board of
1
Wakf Vs. GOI , in the eye of law, an owner would be deemed to be in possession of a
property so long as there is no intrusion. Non-use of the property by the owner even
for a long time won’t affect his title. But the position will be altered when another
person takes possession of the property and asserts rights over it and the person
having title omits or neglects to take legal action against such person for years
together (emphasis supplied). “The process of acquisition of title by adverse
possession springs into action essentially by default or inaction of the owner”.

The essential requisites to establish adverse possession are that the possession of the
adverse possessor must be neither by force nor by stealth nor under the license of the
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

owner. It must be adequate in continuity, in publicity and in extent to show that the
possession is adverse to the paper owner.

2.2 The law on adverse possession is contained in the Indian Limitation Act. Article
65, Schedule I of The Limitation Act prescribes a limitation of 12 years for a suit for
possession of immovable property or any interest therein based on title. It is important
to note that the starting point of limitation of 12 years is counted from the point of
time “when the possession of the defendants becomes adverse to the plaintiff”. Article
65 is an independent Article applicable to all suits for possession of immovable
property based on title i.e., proprietary title as distinct from possessory title. Article 64
governs suits for possession based on possessory right. 12 years from the date of
dispossession is the starting point of limitation under Article 64. Article 65 as well as
Article 64 shall be read with Section 27 which bears the heading – “Extinguishment
of right to property”. It lays down:

“At the determination of the period hereby limited to any person for instituting the
suit for possession of any property, his right to such property shall be
extinguished.” That means, where a cause of action exists to file a suit for possession
and if the suit is not filed within the period of limitation prescribed, then, not only the
period of limitation comes to an end, but the right based on title or possession, as the
case may be, will be extinguished. The section assists the person in possession to
3
acquire prescriptive title by adverse possession . When the title to property of the
previous owner is extinguished, it passes on to the possessor and the possessory right
gets transformed into ownership. [Section 27] is an exception to the well accepted
rule that limitation bars only the remedy and does not extinguish the title. It lays down
a rule of substantive law by declaring that after the lapse of the period, the title ceases
4
to exist and not merely the remedy . It means that since the person who had a right to
possession has allowed his right to be extinguished by his inaction, he cannot recover
the property from the person in adverse possession and as a necessary corollary
thereto, the person in adverse possession is enabled to hold on to his possession as
against the owner not in possession.

2.3 As far as the Government (Central or State) property is concerned, the period of
limitation for any suit (except a suit before the Supreme Court) is 30 years and the
starting point of limitation is the same as in the case of a suit by a private person (vide
Article 112, Schedule I of Limitation Act). Acquisition of easements by prescription
is provided for by Section 25 of The Limitation Act.

2.4 The legal position as regards the acquisition of title to land by adverse possession
has been succinctly stated by the Judicial Committee of the Privy Council in Perry vs.
5
Clissold :

“It cannot be disputed that a person in possession of land in the assumed character of
owner and exercising peaceably the ordinary rights of ownership has a perfectly good
title against all the world but the rightful owner. And if the rightful owner does not
come forward and assert his title by the process of law within the period prescribed
by the provisions of the statute of Limitation applicable to the case, his right is for
ever extinguished and the possessory owner acquires an absolute title.”
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

2.5 This statement of law has been accepted by the Supreme Court of India in the case
6
of Nair Service Society Ltd. vs. K.C. Alexander . The Bench consisting of three
Judges observed thus:

“The cases of the Judicial Committee are not binding on us. But we approve of the
dictum in 1907 AC 73. No subsequent case has been brought to our notice departing
from that view. No doubt, a great controversy exists over the two cases of (1849) 13
QB 945 and (1865) 1 QB 1. But it must be taken to be finally resolved by 1907 AC 73.
A similar view has been consistently taken in India and the amendment of the Indian
Limitation Act has given approval to the proposition accepted in 1907 AC 73 and may
be taken to be declaratory of the law in India.”

2.6 It was clarified by a three-Judge Bench of the Supreme Court in Kshitish Chandra
7
Bose v. Commissioner of Ranchi, “All that the law requires is that the possession
must be open and without any attempt at concealment. It is not necessary that the
possession must be so effective so as to bring it to the specific knowledge of the
owner. Such a requirement may be insisted on where an ouster of title is pleaded, but
that is not the case here.” It was also clarified in a series of decisions that while
possession shall be open and exclusive and in assertion of one’s own right, the fact
that the possessor did not know who the real owner was, will not make his possession
any the less adverse. There are certain passing observations in some judgments of the
Supreme Court rendered by two learned Judges that the plea of adverse possession is
not available if the adverse possessor does not know who the true owner is; but, the
law declared by the larger Bench decisions of the Supreme Court obviously prevails.

2.7 The intention to exclude others from the control of property is an essential
element of factual possession. The intention to possess the property exclusively
implies the intention to exclude all others including the true owner whether known or
unknown to the adverse possessor. In an article written by Justice (retd.) S.A. Kader –
8
“Law of Adverse Possession in India – Recent Trends Unsettling the Law” the
learned author pointed out that the attempted distinction made in P.T. Munichikkanna
9
Reddy vs. Revamma between the ‘intention to possess’ and ‘intention to dispossess’
is not in conformity with the settled law and that both these concepts are correlative to
each other. The following statement of law by Slade, J on “intention to possess” has
10
been approved by House of Lords in JA Pye (Oxford) Ltd. Vs. Graham :

“What is really meant, in my judgment, is that the animus possidendi involves the
intention, in one’s own name and on one’s own behalf, to exclude the world at large,
including the owner with the paper title if he be not himself the possessor, so far as is
reasonably practicable and so far as the processes of the law will allow.”

11
2.8 In The Secretary of State vs. Vira Rayan , a Division Bench of Madras High
Court rightly pointed out that the ignorance of the owner will not prevent the accrual
of a title by prescription. The possession must be open and hostile enough to be
capable of being known by the parties interested in the property (vide T. Anjanappa
12
vs. Somalingappa). In other words, the possession to become adverse to the owner
must be so overt and open that the person against whom time runs, can, with exercise
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

of reasonable diligence, be aware of what is happening.

3. Justification for adverse possession.

3.1 The rationale for adverse possession rests broadly on the considerations that title
to land should not long be in doubt, the society will benefit from some one making
use of land the owner leaves idle and that that persons who come to regard the
13
occupant as owner may be protected. The maxim that law and equity does not help
those who sleep over their rights is invoked in support of prescription of title by
adverse possession. In other words, the original title holder who neglected to enforce
his rights over the land cannot be permitted to re-enter the land after a long passage of
time. A situation lasting for a long period creates certain expectations and it would be
unjust to disappoint those who trust on them.

3.2 The ‘great’ purpose of adverse possession as described by a jurist Henry W.

14
Ballantine in his article “Title by Adverse Possession,” “is automatically to quiet
all titles which are openly and consistently asserted, to provide proof of meritorious
titles and correct errors in conveyancing”. Another justification for the law of adverse
possession is captured in the quote that possession is “nine points of the law”. The
moral justification of the law of adverse possession was graphically stated by Justice
O.W. Holmes who said “man like a tree in the cleft of a rock, gradually shapes his
roots to the surroundings, and when the roots have grown to a certain size, can’t be
displaced without cutting at his life,”.

4. Criticism of adverse possession and the plea to have a fresh look.

4.1 Some legal scholars in foreign countries have pleaded for abolition of adverse
possession

describing it as legalized land theft and a means of unjust enrichment. It has also been
pointed out that there is no certainty in the law of adverse possession and the courts in
several cases have wrestled with the meaning of the expressions – actual, continuous,
open, hostile and exclusive possession.

4.2 The Supreme Court of India, has in two recent decisions, namely, Hemaji Waghaji
15 16
vs. Bhikhabhai Khengarbhai and State of Haryana Vs. Mukesh Kumar , has
pointed out the need to have a fresh look at the law of adverse possession. Borrowing
the language from the judgment of the High Court (Chancery Division) of England in
17
J.A. Pye (Oxford) Ltd. vs. Graham , the Supreme Court in the former case,
described the law of adverse possession as irrational, illogical and wholly
disproportionate and extremely harsh for the true owner “and a windfall for dishonest
person who had illegally taken possession of the property”. The Supreme Court, after
extensively quoting from P. T. Munichikkanna Reddy vs. Revamma (supra, 9)
reiterated the observation therein that “with the expanding jurisprudence of the
European Court of Human Rights, the Court has taken an unkind view to the concept
of adverse possession in the recent judgment of J.A. Pye (Oxford) Vs. United
Kingdom”. The Court was not aware that the said judgment of ECHR has not been
approved by the Grand Chamber consisting of a larger Bench, on a reference made to
it in the same case.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

4.3 In Hemaji Waghaji’s case, the Supreme Court held on the facts that the appellant
had miserably failed to prove adverse possession. However, the Court went further
and made the following observations at paragraphs 34 to 36 (of AIR).

“34. Before parting with this case, we deem it appropriate to observe

that the law of adverse possession which ousts an owner on the basis of inaction
within limitation is irrational, illogical and wholly disproportionate. The law as it
exists is extremely harsh for the true owner and a windfall for a dishonest person who
had illegally taken passion of the property of the true owner. The law ought not to
benefit a person who in clandestine manner takes possession of the property of the
owner in contravention of law. This in substance would mean that the law gives seal
of approval to the illegal action or activities of a rank trespasser or who had
wrongfully taken possession of the property of the true owner.

35. We fail to comprehend why the law should place premium on dishonesty by
legitimizing possession of a rank trespasser and compelling the owner to lose its
possession only because of his inaction in taking back the possession within
limitation. 36. In our considered view, there is an urgent need of fresh look regarding
the law on adverse possession. We recommend the Union of India to seriously
consider and make suitable changes in the law of adverse possession. A copy of this
judgment be sent to the Secretary, Ministry of Law and Justice, Department of Legal
Affairs, Government of India for taking appropriate steps in accordance with law.”

5. The two decisions of Supreme Court – critical analysis and closer look. 5.1 In
Hemaji Waghaji case, the court extensively referred to the earlier decision in P.T.
Munichikkanna Reddy vs. Revamma (supra, 9) and placed heavy reliance on ECHR
decision in J.A. Pye Oxford Vs. United Kingdom. Practically, the words employed by
18
the learned trial Judge Neuberger, J in J.A. Pye (Oxford) vs. Grahams and the
European Court of Human Rights (ECHR) in J.A. Pye (Oxford) Ltd. vs. United
19
Kingdom have been repeated in the concluding paragraph. The fact that by the time
Hemaji Waghaji’s case was decided, the Grand Chamber of ECHR delivered its
th
judgment on 30 August, 2007 disapproving the ratio of the 2005 decision of ECHR
in the case between the same parties was not brought to the notice of the learned
Judges of Supreme Court. The Grand Chamber of the ECHR examined the legislation
relating to adverse possession from the point of view of the objective of the law, the
principles of proportionality and fair balance and held that the existence of the
limitation period for actions for recovery of land as such pursues a legitimate aim and
that the fair balance required by Article 1, Protocol No. 1 to the Convention was not
upset by the law dealing with adverse possession.

5.2 Another aspect which needs to be mentioned in this context is that it is not clear
from the decision of the Supreme Court in Revamma and Hemaji as to what
difference would it make if the right to property is considered to be human right apart
from being a constitutional or statutory right. In Revamma, it was merely clarified that
property dispute issues including adverse possession is being examined by the
European Human Rights Courts on the premise that it is a human right. The ultimate
decision in both the cases decided by the Supreme Court turned on the facts of the
case i.e., whether there was enough evidence to substantiate the plea of adverse
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

possession and that was answered in the negative.

5.3 It is interesting to note that the Northern Ireland Law Commission in its Report on
Land Law [NILC8 (2010] had expressed the view that in the light of the decision of
the Grand Chamber of the European Court of Human Rights in the case of J.A. Pye
(Oxford) Ltd. Vs. U.K., the human rights issues relating to the doctrine of adverse
possession have been put to rest for the time being and should not be pursued further.
The consultees were unanimously in agreement with the Law Commission that the
doctrine of adverse possession should be reained to enable a squatter to acquire the
title of a dispossessed owner after the expiration of the specified period of limitation.

5.4 On a close and fair reading of the judgment in Hemaji’s case and even the latter
case in State of Haryana Vs. Mukesh Kumar (supra, 16), it is fairly clear that the
Court deprecated the law in so far as it benefits a rank trespasser who had wrongfully
taken possession of the property belonging to another. The observations in para 35
reinforces this view point quite clearly. A rank trespasser is thus frowned upon. So, it
needs to be seriously examined whether the protection should be extended to a naked
and dishonest trespasser and to those who may have purchased the property from such
trespasser. While claims based on adverse possession may deserve to be recognized, it
can still be ensured that the possession originating from dishonesty and foul means
does not receive the same recognition in law.

5.5 In the latest case of State of Haryana Vs. Mukesh Kumar (supra, 16), there is a
trenchant criticism of the doctrine of adverse possession. The same learned Judge who
authored the judgment in Hemaji’s case reiterated what was said earlier after referring
to the English cases and made certain important observations which need to be taken
note of. That was a case in which the State of Haryana (Police Department) set up the
plea of adverse possession which was not accepted by the trial court and appellate
court on a review of evidence. The learned Judge Dalveer Bhandari, J speaking for
the Bench, described the law of adverse possession as archaic and “needs a serious
relook” in the larger interest of the people. It was observed: “Adverse possession
allows a trespasser – a person guilty of a tort, or even a crime, in the eye of the law –
to gain legal title to land which he has illegally possessed for 12 years. How 12 years
of illegality can suddenly be converted to legal title is, logically and morally
speaking, baffling.

This outmoded law essentially asks the judiciary to place its stamp of approval upon
conduct that the ordinary Indian citizen would find reprehensible. The doctrine of
adverse possession has troubled a great many legal minds. We are clearly of the
opinion that time has come for change.” The learned Judge posed a question: “How
12 years of illegality can suddenly be converted to legal title is, logically and morally
speaking, baffling” and then observed “We are clearly of the opinion that time has
come for change”. The observations made earlier at paragraph 39 are also relevant.
“The Government instrumentalities – including Police – in the instant case have
attempted to possess land adversely. This, in our opinion, is a testament to the
absurdity of the law and a black mark upon the justice system’s legitimacy”. Then, it
was said “if this law is to be retained according to the wisdom of Parliament, then at
least the law must require those who adversely possess land to compensate the title
owners according to the prevalent market rate of the land or property.” Then at
paragraph 40, it was observed that Parliament must seriously consider at least to
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

abolish “bad faith” adverse possession i.e., adverse possession achieved through
intentional trespassing. At paragraph 41, it was also observed that if the Parliament
decides to retain the law of adverse possession, the duration of possession (i.e.,
limitation period) under the law of Limitation should be extended to 30 to 50 years,
“rather than a mere 12”. It was pointed out that “a longer statutory period would
decrease the frequency of adverse possession suits and ensure that only those
claimants most intimately connected with the land acquire it, while only the most
passive and unprotective owners lose title.” In the penultimate paragraph, the Court
said “we recommend the Union of India to immediately consider a seriously
deliberate either abolition of law of adverse possession and in the alternate, to make
suitable amendments in the law of adverse possession”.

6. Position in other countries

6.1 The acquisition of land under the doctrine of adverse possession is recognized in
all the civil and common law jurisdictions. The concept and elements of adverse
possession are almost the same. However, there is no clear pattern as regards the
length of limitation periods. The period after which the real owner may no longer
bring an action to repossess her land varies from 10 years to 30 years. In the case of
claims by the Crown (State) in most of the countries, it is 60 years. Proof of good
faith on the part of the possessor of the land will significantly reduce the limitation
period in some jurisdictions such as France, Spain, The Netherlands and Poland. For
instance, French law permits the acquisition of title to land by prescription over a 30-
year period if the possession is continuous, uninterrupted, peaceful, public and
unequivocal. A reduced prescription period of ten years is provided if the possessor
had acted in good faith and in genuine belief of the existence of a just title. However,
if the true owner does not live within the district of the Court of Appeal, then the
period is extended by twice the number of years i.e., 20 years. In some countries, e.g.,
Hungary, Germany, Massachusetts/US, the evidence of good faith is not a relevant
consideration. The application of the doctrine of adverse possession as well as the
duration of possession also depends on whether the land is registered or not.
Significant differences in the application of adverse possession arise where the States
have adopted the system of land registration. Where the title to land is registered,
some States have abolished the capacity to acquire land by prescription (e.g., Canada)
while retaining the right in respect of unregistered land. This difference reflects the
policy that the uncertainty of ascertaining ownership is eliminated by a system of
registration so that the rationale for the doctrine of adverse possession is thereby
20
weakened. Most countries do maintain the doctrine of adverse possession in respect
of registered land. (e.g., UK, Australia, US and Newzealand) and Courts continue to
recognize the public policy value of extinguishing title to registered property after a
certain period. (supra, 20)

6.2 In UK, the acquisition of land by adverse possession is governed by the

Limitation Act of 1980 and the Land Registration Act of 2002 which repealed the
earlier Act of 1925. The Limitation Act of 1980 provides that no action shall be
brought by any person to recover any land after the expiration of twelve (12) years
from the date on which the right of action accrued to him. The right of action shall be
treated as having accrued on the date of dispossession or discontinuance. It made no
distinction between registered and unregistered land. S.17 of the said Act provided
that on the expiry of limitation regulating the recovery of land, the title of the paper
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

owner was extinguished. Section 75(1) of Land Registration Act, 1925 however,
provided that on the expiry of the limitation period, the title was not extinguished, but
the registered proprietor was deemed to hold the land thereafter in trust for the
squatter. The Land Registration Act of 2002 (which repealed the 1925 Act) made a
number of changes to the law as it related to registered land. It provided that adverse
possession for however long would not of itself bar the owner’s title to a registered
land. However, a squatter is entitled to apply to be registered as proprietor after ten
(10) years and a procedure is prescribed for dealing with such application.

6.3 In US, all States within the Federation recognize title acquired by adverse
possession after limitation periods ranging from 5 to 40 years. In addition to varying
time limitations, there are differences among the States as to the role of good faith as
a necessary condition for adverse possession and as to certain categories of land type
and use. Most of the jurisdictions in US do not require an element of good faith in
cases of actual and uninterrupted possession. (supra, 20) 7. Abolition of adverse
possession – pros and cons

7.1 One view point which has considerable merit is that the wholesale abolition of
adverse possession would trigger practical problems affecting common people and
bona fide possessors of property who may have no title documents. Multitude of
people especially those in rural areas belonging to agriculturist families remain in
possession since long whether by virtue of inheritance, purchase or otherwise without
having valid and legally recognized title deeds. The lack of a legal regime under
which the titles are registered and the shoddy manner in which the land records are
maintained by the concerned Departments of Government has made it difficult to
those entering into land deals to know even through reasonable diligence the true
owner of land and the history of ownership. People in rural areas live in their
ancestral houses or enjoy possessory rights over parcels of land from times
immemorial, bona fide believing that they or their ancestors are the true owners of
land. There is no means of knowing whether the land in question is Government land
or the land over which the Government has a right of resumption or some one else has
superior title over land. At least the ordinary people do not know. Even legitimate
owners who may have only the element of possession as the foundation for assuming
or defending their rights may suffer if the concept of adverse possession is abolished
or allowed to remain under stringent conditions. That the possession is “nine points of
law” applies with great force to such category of persons.

7.2 On the other hand, the question may be legitimately asked as to why those who
grab the land overnight by force or otherwise without semblance of bona fides and
without color of title should be allowed to get title by adverse possession? Why
should land theft or grabbing be made the basis for deriving title by reason of open,
hostile enjoyment for a long period? Should not the conduct of occupier of land be
taken into account? Further, what about those owners of property who may not be
physically available to evince an intention towards disrupting hostile

possession. These questions do arise. In the ultimate analysis, there is perhaps a need
to strike a fair balance between competing considerations in the process of
considering the changes in law if any.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

8. A representation has been made to the Central Government by Pravasi Properties

Protection Council (PROP), Sion, Mumbai stating inter-alia that adverse possession
has become a handy tool to the relatives and neighbours to occupy the NRI’s
properties with the aid of village officers who are instrumental in effecting changes in
land records. They suggest the abolition of law of adverse possession and to check the
menace of trespassers. It is not specifically indicated as to how such problems of
NRIs could be adequately taken care of by abolishing adverse possession. However,
the need to devise some special measures for protection/restoration of properties
owned by NRIs deserve due consideration.

9. On the basis of informations received from the High Courts in U.P., Mahrashtra,
Delhi, Gujarat, Assam and other NE States, Kerala, Madhya Pradesh, Odisha, Bihar
and Rajasthan, there are about 52430 cases in which the plea of adverse possession
has been raised in the suits before the trial courts pending at the end of the year 2010.
Information has not been received from other High Courts. However, it can be
estimated that only in about 80,000 cases, the plea of adverse possession has been
raised in the pending matters. In the course of interaction with the judicial officers and
lawyers in some places, it has come to light that the plea of adverse possession though
raised is quite often not pursued and hardly any evidence is adduced thereon.

10. Having regard to the above legal and factual background and the views expressed
by the Supreme Court, it is considered necessary to get responses from the public,
especially, the Judges, lawyers, legal academia and bureaucracy on various issues
concerning adverse possession. A Questionnaire has been prepared and annexed
herewith for this purpose.

Questionnaire on Adverse Possession 1.

1. Do you think that the law of adverse possession under which the legal owner and
title

holder of immovable property is precluded from bringing an action to recover the

possession from a person in occupation of the property for a continuous period of
twelve years openly, peacefully and in a manner hostile to the interest of legal owner
should be retained in the statute book or the time has come to repeal it? Are there
good social reasons or considerations of public policy for retaining the legal
acquisition of title through adverse possession?

2. Do you think that having regard to the conditions in our country such as lack of
reliable record of rights, title registration, the problem of identity of property and the
difficulties of even genuine occupants to back up their possession with formal title
deeds, the law of adverse possession should remain or should it be scrapped?

3. (a) Do you think that certain exceptions and qualifications should be carved out by
law so as to ensure that the plea of adverse possession should not be made available to
those who dishonestly enter the land with full consciousness that they were
trespassing into another’s land? (b) In other words, whether it is just and proper to
make the plea of adverse possession available to a naked trespasser entering the land
without good faith?

(c) In any case, whether the bona fide purchasers from a trespasser should be allowed
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

to plead adverse possession. ?

4. If the benefit of acquisition of title by adverse possession is to be denied to a rank

trespasser, should he be paid compensation for the improvements made or other
expenditure incurred for preservation of land?

5. Do you think that the real owner who did not evince any interest in the land should
at any distance of time be permitted to claim back the land irrespective of a string of
changes in land occupation and improvements made thereto ?

6. If adverse possession is allowed to remain, do you think that the real owner should
be compensated in terms of market value as per the rate prevailing on the date when
the person claiming adverse possession started possessing the land? Or, could there be
any other principle of working out compensation or indemnification without hassles?

7. If adverse possession is retained, is there a case for enlarging the present period of
limitation of 12 years and 30 years (in the case of Govt. land) ? If so, to what
extent? 8. As far as the property of the State is concerned, the Limitation Act
prescribes thirty year period for filing a suit against a person in adverse possession. Is
there a case for abolition of adverse possession in relation to Government property?
Should it be left to the Government to claim possession of its land at any time
irrespective of the long chain of events that might have occurred and inaction on the
part of Govt.?

9. Whether the law which extinguishes the right to property vested with the true
owner by reason of the lapse of prescribed period of adverse possession of another
st 21
can be tested by the standards laid down in Article of the 1 Protocol to the
(European) Convention for the Protection of Human Rights and Fundamental
Freedoms and be faulted on the ground of being ‘irrational’ and ‘disproportionate’?

10. (a) In what way the NRIs would be more handicapped than resident Indians by
reason of application of the law of adverse possession?

(b) What safeguards and remedies if any should be provided to the N.R.Is to check
illegal encroachment of their immovable properties? Should there be longer period of
limitation in respect of the property owned by N.R.Is. ?

11. Do you think that the principles governing adverse possession and its proof should
be provided explicitly in a Statute?

Easements:(Introduction to easements and distinguishing between easements

and license)

Reference to easements under TPA:

Ø Section 6(c) of the Transfer of Property Act, 1882 states that “an easement
cannot be transferred apart from the dominant heritage”.
Ø Section 2(6) of the Registration Act, 1908 includes within immovable property
inter alia “right of way”.
Ø Thus any transfer of easement requires registration. But easement rights can
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

also be acquired by prescriptive user of at least twenty years.

What is an easement?

Sec. 4, Indian Easements Act, 1882:

An easement is a right which the owner or occupier of certain land possesses, as such,
for the beneficial enjoyment of that land, to do and continue to do something, or to
prevent and continue to prevent something being done, in or upon, or in respect of
certain other land not his own.

Dominant and servient heritages and owners - The land for the beneficial
enjoyment of which the right exists is called the dominant heritage, and the owner or
occupier thereof the dominant owner; the land on which the liability is imposed is
called the servient heritage, and the owner or occupier thereof the servient owner.

Illustrations:

(a) A, as the owner of a certain house, has a right of way over his neighbour B’s land
for purposes connected with the beneficial enjoyment of the house. This is an
easement.

(b) A, as the owner of a certain house, has the right to go on his neighbor, B’s land,
and to take water for the purposes of his household out of a spring therein. This is an
easement.

(c) A, as the owner of a certain house, has the right to conduct water from B’s stream
to supply the fountains in the garden attached to the house. This is an easement.

(d) A dedicates to the public the right to occupy the surface of certain land for the
purpose of passing and re-passing. This right is not an easement.

Easement versus License:

Section-7: Easement restrictive of certain rights: Easement are restrictions of one

or other of the following rights, namely:--

(a) Exclusive right to enjoy. - The exclusive right of every owner of immovable
property (subject to any law for the time being in force) to enjoy and dispose of the
same and all products thereof and accessions thereto.

(b) Rights to advantages arising from situation. - The right of every owner of
immovable property (subject to any law for the time being in force) to enjoy without
disturbance by another the natural advantages arising from its situation.

Illustrations of the Rights above referred to:

(a) The exclusive right of every owner of land in a town to build on such land, subject
to any municipal law for the time being in force.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

(j) The right of every owner of land abutting on a natural stream, lake or pond to use
and consume its water for drinking, household purposes and watering his cattle and
sheep and the right of every such owner to use and consume the water for irrigating
such land, and for the purposes of any manufactory situate thereon, provided that he
does not thereby cause material injury to other like owner.

Section 6- Easement for limited time/on condition: “An easement may be

permanent, or for a term of years or other limited period, or subject to periodical
interruption, or exercisable only at a certain place, or at certain times, or between
certain hours, or for a particular purpose, or on condition that it shall commence or
become void or voidable on the happening of a specified event or the performance or
non-performance of a specified act.”

Section 8- Who may impose easements: An easement may be imposed by any one
in the circumstances, and to the extent, in and to which he may transfer his interest in
the heritage on which the liability is to be imposed.

(a) A is a tenant of B’s land under a lease for an unexpired term of twenty years, and
has power to transfer his interest under the lease. A may impose an easement on the
land to continue during the time that the lease exists or for any shorter period.

(b) A is tenant for his life of certain land with remainder to B absolutely. A cannot,
unless with B’ consent, impose an easement thereon which will continue after the
determination of his life interest.

(c) A, B and C are co-owners of certain land. A cannot, without the consent of B and
C, impose an easement on the land or on any part thereof.

How are easements created?

Ø By virtue of a contract
Ø Necessity
Ø Prescription and
Ø Custom

Section-13: Creation of an easement by necessity

Illustrations:

(a) A sells B a field then used for agricultural purposes only. It is inaccessible except
by passing over A’s adjoining land or by trespassing on the land of a stranger. B is
entitled to a right of way, for agricultural purposes only, over A’s adjoining land to
the field sold.

(b) A the owner of two fields, sells one to B, and retains the other. The field retained
was, at the date of the sale, used for agricultural purposes only, and is inaccessible
except by passing over the field sold to B. A is entitled to a right of way for
agricultural purposes only, over B's field to the field retained.

(c) A sells B a house with windows overlooking A’s land, which A retains The light
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

which passes over A’s land to the windows is necessary for enjoying the house as it
was enjoyed when the sale took effect. B is entitled to the light, and A cannot
afterwards obstruct it by building on his land.

Section-15: Acquisition by prescription

Where the access and use of light or air to and for any building have been peaceably
enjoyed therewith, as an easement, without interruption, and for twenty years, and
where support from one person’s land or things affixed thereto, has been peaceably
received by another person's land subjected to artificial pressure is or by things
affixed thereto, as an easement, without interruption, and for twenty years, and where
a right of way or any other easement has been peaceably and openly enjoyed by any
person claiming title thereto, as an easement and as of right, without interruption, and
for twenty years, the right, to such access and use of light or air, support, or other
easement, shall be absolute.

• Look at Illustration (a) and note the limitations within Sec.17

Section 18: Customary Easements: “An easement may be acquired in virtue of a

local custom. Such easements are called customary easements.

Illustration:

By the custom of a certain town no owner or occupier of a house can open a new
window therein so as substantially to invade his neighbor's privacy. A builds a house
in the town near B’s house. A thereupon acquires an easement that B shall not open
new windows in his house so as to command a view of the portions of A’s house
which are ordinarily excluded from observation, and B acquires a like easement with
respect to A’s house.

Section 19- Transfer of dominant heritage passes easement: “Where the dominant
heritage is transferred or devolves, by act of parties or by operation of law, the
transfer or devolution shall, unless a contrary intention appears, be deemed to pass the
easement to the person in whose favor the transfer or devolution takes place.

Illustration:

A has certain land to which a right of way is annexed. A lets the land to B for twenty
years. The right of way vests in B and his legal representatives so long as the lease
continues.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

9) The Stock Exchange, Ahmedabad vs Asstt. Commissioner Of Income AIR 2001

SC 1071:
Facts: The Stock Exchange, Ahmedabad, the appellant, admitted Rajesh Shah as its
member on 19th February, 1988. He died on 7th February, 1994. On 12th February,
1994, heirs and legal representatives of Rajesh Shah wrote to the Stock Exchange that
they were unable to meet the liabilities of the deceased.

The Governing Board of the Stock Exchange is said to have passed a resolution dated
12th February, 1994 declaring Rajesh Shah, the deceased member, as a deemed
defaulter and further resolving that his membership rights vested in Stock Exchange
be disposed of by inviting offers within a minimum floor price of Rs.25 lakhs. In
respect of the order of provisional attachment, the stand of Stock Exchange is that
under its Rules, Bye-laws and Regulations on the death or default of a member,
member's right of nomination ceases and it vests in the exchange and belongs
absolutely to the exchange free of all rights, claims or interests of such member or any
person claiming through such member and the Governing Board is entitled to deal
with or dispose of such right of membership as it may think fit.

Issue: Whether right of membership confers upon the member any right of property
and after his demise devolved upon his legal representatives and heirs or it was a
personal permission in favor of the deceased and right of nomination of the legal
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

representative and heirs after his death has ceased and the said right has vested in the
Exchange?

Holding: The membership right in question was not the property of the assessee. The
right of membership is merely a personal privilege granted to a member, it is non-
transferable and incapable of alienation by the member or his legal representatives
and heirs except to the limited extent as provided in the rules on fulfillment of
conditions provided therein. In case of death or default of a member his right of
nomination shall cease and vest in the Exchange. In the case in hand, on the death of
Rajesh Shah his right of nomination ceased and vested in the Exchange and his legal
representatives and heirs did not exercise the right of nomination by expressing their
inability to meet the liabilities of the deceased.

Ratio: The right of membership is merely a personal privilege granted to a member

and not a right of property.

10) Suresh Chand v. Kundan (2001) 10 SCC 221:

Facts: A plot was owned by 2 co-sharers. They executed an Agreement to Lease

(ATL) in favor of the appellant. They however, did not execute a sale deed. The
appellant brought a suit for specific performance and while that was being decided
one of the 2 owners transferred his ½ share to the appellant. The second owner
however, contested that the agreement was to transfer land only and not the trees
standing thereon.
HC decided that parties should compromise and of cannot then the 2nd co-
sharer be allowed to reap the fruits and the purchaser enjoys the property.
Held: Section 8 of TPA provides that: Unless a different intention is expressed or
necessarily implied, a transfer of property passes forthwith to the transferee all the
interest which the transferor is then capable of passing in the property and in the legal
incidents thereof.
Such incidents include, where the property is land, the easements annexed thereto, the
rents and profits thereof accruing after the transfer. The Section provides that if there is
any transfer of a property and unless there is any expressed or implied different
intention appearing in the agreement, the interest in the property would also include
anything attached with the land which is agreed to be sold. Thus when a vendor sells a
property, he sells all his rights imbedded in the property unless it specifically or
impliedly excluded. It is clear that interest in the property also includes anything
attached to the land including trees standing on the land. Where a vendor sells his
right, title and interest in the land unless expressly or impliedly provided in the
agreement, sale of the land would also include trees standing thereon. But not vice
versa. It is open to the vendor while transferring the land to exclude the trees from sale
if he wants to
In the present case, there was no mention in the agreement that the saplings were not
being sold along with the land. In the absence of any expressed or implied intention in
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

the agreement, it would be taken that the land along with the saplings standing on the
land which subsequently grown into trees were sold.

6) State of Orissa v. Titaghur Paper Mills Company Limited, AIR 1985 SC

1293:

Facts: The respondent company entered into agreements with the State of Orissa for
felling, cutting, obtaining and removing bamboos from the forest areas.This was for
the purpose of converting bamboo into paper pulp or for purposes connected with the
manufacturing of paper.
Later the Government issued notifications, declaring that the bamboos agreed to be
severed are liable to be taxed on the turnover of the Purchaser. Respondent filed
various writ petitions in HC challenging the validity of the notifications. HC quashed
the notification and the judgment of the HC is appealed in the SC.
The State contended that the subject matter are “goods” and that is what is made
taxable, Respondents claimed that by such notification the state was attempting to
make a new class of goods not known to law and thus unconstitutional.
Issue: Whether the contract was for movable or immovable property?
Held: SC observed that the contract was not an agreement to sell bamboos standing
in the contract areas with an accessory license to enter upon such areas as for the
purpose of felling and removing the bamboos nor is it for a particular felling season
only. It is an agreement for a period ranging from fourteen, thirteen and eleven years
with the option to renew the contract for further terms of twelve years.
• It is an agreement for a long period extending to fourteen years, thirteen years
and eleven years with respect to different contract areas with an option to the
Respondent to renew the contract for a further term of twelve years and it
embraces not only bamboos which are in existence at the date of the contract
but also bamboos which are to grow and come into existence thereafter
• Under the Contract, the Respondent has the right to use all lands, roads and
streams within as also outside the contract areas for the purpose of free ingress
to and egress from the contract areas.
• It is also given the right to make dams across streams, cut canals, make water
courses, irrigation works, roads, bridges, buildings, tramways and other work
useful or necessary for the purpose of its business of felling, cutting, and
removing bamboos for the purpose of converting the same into paper pulp or
for purposes connected with the manufacture of paper
• Thus, the terms and conditions of the contract show that it is not a contract of
sale of goods. It confers upon the Respondent a benefit to arise out of land and
thus grants a profit a prendre and thus an immovable property.

7) Ananda Behra v. State of Orissa (1955) 2 SCR 919

Facts: Chilka lake which was once the estate of the Raja vested in the State of Orissa
under the Orissa Estates Abolition Act, 1951 and ceased to exist in its original form.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

The petitioners carry on the business of catching and selling fish from fisheries within
the lake. That before the vesting of the estate the petitioners had entered into contracts
with the Raja, licensing them for catching and appropriating all the fish from the
fisheries. The State refused to recognize these licenses and the petitioners filed writ
petition on the ground that their fundamental rights under articles 19(1)(f) and
31(1) were infringed.

Issue: Right to fishery - Movable or Immovable property ?

Decision: If the petitioners' rights are no more than the right to obtain future goods
under the Sale of Goods Act, then that is a purely personal right arising out of a
contract to which the State is not a party and in any event a refusal to perform the
contract that gives rise to that right may amount to a breach of contract but cannot be
regarded as a breach of any fundamental right.

It is clear that what was sold was the right to catch and carry away fish in specific
sections of the lake over a specified future period. That amounts to a license to enter
on the land coupled with a grant to catch and carry away the fish, that is to say, it is a
profit a prendre. In England this is regarded as an interest in land because it is a right
to take some profit of the soil for the use of the owner of the right. In India it is
regarded as a benefit that arises out of the land and as such is Immovable property.

For this there needs to be a registered deed and if not so, the petitioners have no right
to enforce their fundamental right.

MORTGAGE AND CHARGE

1.

Vidhyadhar vs Manikrao & Anr., AIR 1999 SC 1441

Shantabai v State of Bombay, AIR 1958 SC 532

 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Facts -

A lease deed (unregistered) in the favor of the wife (Petitioner) for a period of 12 years Right
to enter upon certain areas in the land to cut certain trees. Certain restrictions were placed by
the lessor on the cutting and felling of the trees. The petitioner enjoyed her rights until the
Madhya Pradesh Addition of Proprietary Rights Act was passed and she was stopped
from cutting of trees. Filed a writ petition.

Supreme Court held:

Lease vs License there are no words of transfer or conveyance – it does not confer rights of
management – amounts to a license to enter on the land coupled with a grant to cut certain
trees and carry away the wood. In a lease, one enjoys the property but has no right to take it
away. In a profit a prendre one has a license to enter on the land, not for the purpose of
enjoying it, but for removing something from it, namely, a part of the produce of the soil.

Standing timber v Timber – standing timber must be a tree that is in a state fit for these
purposes (building houses, bridges) and, further, a tree that is meant to be converted into
timber so shortly that it can already be looked upon as timber for all practical purposes even
though it is still standing. If not, it is still a tree because, unlike timber, it will continue to
draw sustenance from the soil.

Cardinal rule – is the tree drawing sustenance from the soil so long as it continues to stand
and live; and that physical fact of life cannot be altered by giving it another name and calling
it " standing timber ". But the amount of nourishment it takes, if it is felled at a reasonably
early date, is so negligible that it can be ignored for all practical purposes and though,
theoretically, there is no distinction between one class of tree and another, if the drawing of
nourishment from the soil is the basis of the rule, the law is grounded…..

Decision

profit a prendre - is a grant of the produce of the soil "like grass, or turves or trees ". It is not
a "transfer of a right to enjoy the immoveable property" itself, but a grant of a right to enter
upon the land and take away a part of the produce of the soil from it. In a lease, one enjoys
the property but has no right to take it away. In a profit a prendre one has a licence to enter on
the land, not for the purpose of enjoying it, but for removing something from it.

Now, how does the document in question regard this. In the first place, the duration of the
grant is twelve years. It is evident that trees that will be fit for cutting twelve years hence, will
not be fit for felling now. Therefore, it is not a mere sale of the trees as wood. Such trees
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

cannot be regarded as timber that happens to be standing because timber, as such, does not
draw nourishment from the soil. If, therefore, they can be left for an appreciable length of
time, they must be regarded as trees and not as timber. The difference lies there. The result is
that, though such trees as can be regarded as standing timber at the date of the document, both
because of their size and girth and also because of the intention to fell at an early date, would
be moveable, property for the purposes of the Transfer of Property and Registration Acts, the
remaining trees that are also covered by the grant will be immoveable property, and as the
total value is Rs. 26,000, the deed requires registration. Being unregistered, it passes no title
or interest. If the document is construed as conveying to her any part or share not being
registered under the Indian Registration Act, the document does not affect the immoveable
property or give her any right to any share or interest in the immoveable property. If the
document is construed as purely a license granted to her to enter upon the land, then that
license must be taken to have become extinguished as soon as the grantor's proprietary rights
in the land vested in the State. If the document is construed-as having given her a profits-a-
prendre which is an interest in land, then also the document will not affect the immoveable
property and will not operate to transmit to the petitioner any such profits-a-prendre, as the
document has not been registered.

Duncan Industries Ltd. v State of Uttar Pradesh, (2000) 1 SCC 633

Facts:

A co. ICI India Ltd. Executed a deed of conveyance in favor of Chand Chhap Fertilizer &
Chemicals Ltd. (Appellants) for the sale of its fertilizer business for a sale consideration of
Rs. 70 cores. It was to be sold as a going concern. Dispute with regard to payment of stamp
duty. Registrar concerned complained that the relevant Stamp Act was not complied with as
the machinery was immovable property. The HC held machinery was immovable property so
the appellants challenged it on the ground that the intention of the parties was to treat the
machinery and plant as movables and their value could not have been considered for stamp
duty

Issue
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Whether the plant and machinery sold to the Appellant co. were immovable property
attracting stamp duty?

Decision:

The SC held that whether a machinery imbedded in the earth is movable property or
immobvable property, depends upon the facts and circumstances of each case. Primarily the
court will take into consideration the intention of the parties whether such embedment was
intended to be temporary or permanent.

Like, the definition of “fertilizer business” clearly shows that the intention of the vendor was
to transfer all properties that comprised the fertilizer business.

• A careful perusal of the agreement of sale and the conveyance deed along with the
attendant circumstances and taking into consideration the nature of machineries
involved clearly shows that the machineries which have been embedded in the earth
to constitute a fertilizer plant in the instant case, are definitely embedded permanently
with a view to utilize the same as a fertilizer plant.
• The description of the machines as seen in the Schedule attached to the deed of
conveyance also shows without any doubt that they were set up permanently in the
land in question with a view to operate a fertilizer plant and the same was not
embedded to dismantle and remove the same for the purpose of sale as machinery at
any point of time.
• The facts as could be found also show that the purpose for which these machines
were embedded was to use the plant as a factory for the manufacture of fertilizer at
various stages of its production. Hence, the contention that these machines should be
treated as movables cannot be accepted.

Ananda Behra v. State of Orissa (1955) 2 SCR 919

Facts:

Chilka lake which was once the estate of the Raja vested in the State of Orissa under the
Orissa Estates Abolition Act, 1951 and ceased to exist in its original form. The petitioners
carry on the business of catching and selling fish from fisheries within the lake. That before
the vesting of the estate the petitioners had entered into contracts with the Raja, licensing
them for catching and appropriating all the fish from the fisheries. The State refused
to recognize these licenses and the petitioners filed writ petition on the ground that
their fundamental rights under articles 19(1)(f) and 31(1) were infringed.

Issue:

Right to fishery - Movable or Immovable property ?

 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

Decision:

If the petitioners' rights are no more than the right to obtain future goods under the Sale of
Goods Act, then that is a purely personal right arising out of a contract to which the State is
not a party and in any event a refusal to perform the contract that gives rise to that right may
amount to a breach of contract but cannot be regarded as a breach of any fundamental right.

It is clear that what was sold was the right to catch and carry away fish in specific sections of
the lake over a specified future period. That amounts to a license to enter on the land coupled
with a grant to catch and carry away the fish, that is to say, it is a profit a prendre. In England
this is regarded as an interest in land because it is a right to take some profit of the soil for the
use of the owner of the right. In India it is regarded as a benefit that arises out of the land and
as such is Immovable property.

For this there needs to be a registered deed and if not so, the petitioners have no right to
enforce their fundamental right.

State of Orissa v. Titaghur Paper Mills Company Limited, AIR 1985 SC 1293

Facts:

The respondent company entered into agreements with the State of Orissa for felling, cutting,
obtaining and removing bamboos from the forest areas. This was for the purpose of
converting bamboo into paper pulp or for purposes connected with the manufacturing of
paper. Later the Government issued notifications, declaring that the bamboos agreed to be
severed are liable to be taxed on the turnover of the Purchaser. Respondent filed various writ
petitions in HC challenging the validity of the notifications. HC quashed the notification and
the judgment of the HC is appealed in the SC. The State contended that the subject matter are
“goods” and that is what is made taxable, Respondents claimed that by such notification the
state was attempting to make a new class of goods not known to law and thus
unconstitutional.

Issue: Whether the contract was for movable or immovable property?

Held: SC observed that the contract was not an agreement to sell bamboos standing in the
contract areas with an accessory license to enter upon such areas as for the purpose of
felling and removing the bamboos nor is it for a particular felling season only. It is an
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

agreement for a period ranging from fourteen, thirteen and eleven years with the option to
renew the contract for further terms of twelve years.

• It is an agreement for a long period extending to fourteen years, thirteen years and
eleven years with respect to different contract areas with an option to the Respondent
to renew the contract for a further term of twelve years and it embraces not only
bamboos which are in existence at the date of the contract but also bamboos which
are to grow and come into existence thereafter
• Under the Contract, the Respondent has the right to use all lands, roads and streams
within as also outside the contract areas for the purpose of free ingress to and egress
from the contract areas.
• It is also given the right to make dams across streams, cut canals, make water courses,
irrigation works, roads, bridges, buildings, tramways and other work useful or
necessary for the purpose of its business of felling, cutting, and removing bamboos
for the purpose of converting the same into paper pulp or for purposes connected with
the manufacture of paper
• Thus, the terms and conditions of the contract show that it is not a contract of sale of
goods. It confers upon the Respondent a benefit to arise out of land and thus grants a
profit a prendre and thus an immovable property.

Triveni Engineering & Industries Limited v. Comm. of Central Excise (2000) 7 SCC 29

Facts: The appellants deal in turbo alternators which has two components - steam turbine
and Generator The appellants manufacture steam turbine in their factories where excise duty
is paid on them under the Act. They purchase duty paid generators which are delivered at the
site of the customer. show cause notices issued to them by the Collectors of Central Excise
stating that turbo alternators are liable to excise. The appellants claimed that turbo alternator
generator comes into existence on its being fixed permanently on the land as such it is not an
excisable good but an immovable property. The assessee filed two appeals against the orders
of the said Collectors on the question of levy of excise duty on turbo alternator

Held: There can be no doubt that if an article is an immovable property, it cannot be termed
as 'excisable goods' for purposes of the Act. From a combined reading of the definition of
immovable property' in Section 3 of the Transfer of Property Act, Section 3(26) of the
General Clauses Act, it is evident that in an immovable property there neither mobility nor
marketability as understood in the Excise Law. Whether an article is permanently fastened to
anything attached to the earth require determination of both the intention as well as the
factum of fastening to anything attached to the earth and this has to be ascertained from the
facts and circumstances of each case.
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

The marketability test requires that the goods as such should be in a position to be taken to
the market and sold, it follows that to take turbo alternator to the market it has to be separated
into its components--turbine and generator—but then it would not remain turbo alternator +
wont function if not fixed to the ground - Immoveable

Suresh Chand v. Kundan (2001) 10 SCC 221

Facts: 2 co-sharers owned a plot. They executed an Agreement to Lease (ATL) in favor of the
appellant. They however, did not execute a sale deed. The appellant brought a suit for specific
performance and while that was being decided one of the 2 owners transferred his ½ share to
the appellant. The second owner however, contested that the agreement was to transfer land
only and not the trees standing thereon. HC decided that parties should compromise and of
cannot then the 2nd co-sharer be allowed to reap the fruits and the purchaser enjoys the
property.

Held: Section 8 of TPA provides that: Unless a different intention is expressed or

necessarily implied, a transfer of property passes forthwith to the transferee all the interest
which the transferor is then capable of passing in the property and in the legal incidents
thereof.

Such incidents include, where the property is land, the easements annexed thereto, the rents
and profits thereof accruing after the transfer. The Section provides that if there is any transfer
of a property and unless there is any expressed or implied different intention appearing in the
agreement, the interest in the property would also include anything attached with the land,
which is agreed to be sold. Thus when a vendor sells a property, he sells all his rights
imbedded in the property unless it specifically or impliedly excluded. It is clear that interest in
the property also includes anything attached to the land including trees standing on the land.
Where a vendor sells his right, title and interest in the land unless expressly or impliedly
provided in the agreement, sale of the land would also include trees standing thereon. But not
vice versa. It is open to the vendor while transferring the land to exclude the trees from sale if
he wants to

In the present case, there was no mention in the agreement that the saplings were not being
sold along with the land. In the absence of any expressed or implied intention in the
 FINAL NOTES PROPERTY LAW- E. ANISHA REDDY

agreement, it would be taken that the land along with the saplings standing on the land which
subsequently grown into trees were sold.