MODULE 1

CONTENTS
MEANING OF PROPERTY ............................................................................................................... 2
DEFINITIONS ...................................................................................................................................... 3
1. IMMOVABLE PROPERTY. ................................................................................................... 3
2. ATTESTATION ........................................................................................................................ 5
3. REGISTRATION: ........................................................................................................................ 6
4. ACTIONABLE CLAIMS. ............................................................................................................ 7
DISTINCTION BETWEEN MOVABLE AND IMMOVABLE PROPERTY Error! Bookmark not
defined.
DEFINITION OF TRANSFER OF PROPERTY ............................................................................ 12
TRANSFERABLE AND NON-TRANSFERABLE PROPERTY .................................................. 13
WHAT CANNOT BE TRANSFERRED? ....................................................................................... 13
CASE LAWS FOR TRANSFERABLE PROPERTY AND NON-TRANSFERABLE
PROPERTY:..................................................................................................................................... 15
CONDITIONS RESTRICTING TRANSFER ................................................................................. 16
TYPES OF RESTRAINTS: ............................................................................................................. 16
TRANSFER TO AN UNBORN PERSON AND RULE AGAINST PERPETUITY .................... 18
VESTED AND CONTINGENT INTEREST ................................................................................... 22
VESTED INTEREST: .................................................................................................................... 22
CHARACTERISTICS OF VESTED INTEREST .......................................................................... 22
CASE LAW- ................................................................................................................................ 23
CONDITIONS APPLICABLE FOR VESTED INTEREST .......................................................... 23
CONTINGENT INTEREST: ......................................................................................................... 24
CHARACTERISTICS OF CONTINGENT INTEREST................................................................ 25
CONDITIONS APPLICABLE FOR CONTINGENT INTEREST ............................................... 25
CONDITIONAL TRANSFER ........................................................................................................... 26
RULE OF ELECTION ....................................................................................................................... 28
THE NECESSARY INGREDIENTS FOR THE DOCTRINE OF ELECTION: ......................... 29
CASE LAWS ON DOCTRINE OF ELECTION ............................................................................ 30
THE EXCEPTIONS TO THE DOCTRINE OF ELECTION: ...................................................... 30
 MEANING OF PROPERTY
The word “property” is derived from the Latin word proprietary and the French equivalent
properties, which means a thing owned.

The concept of property and ownership are very similar to each other. Eminent
jurist Salmond while defining the term property, observed that the term might be understood
in one of the three senses mentioned below:

(i) The term property includes all the legal rights of a person. That is to say that it includes
complete ownership of a man on material as well as incorporeal things.

(ii) The term includes not a man’s personal rights, but only his proprietary rights.

(iii) The term includes the rights of ownership in material things such as building etc.
According to another jurist, Bentham, the term property includes ownership of material objects
alone. He has, in a way, interpreted the term in a narrow sense.

The honorable Supreme Court of India in the case of R.C. Cooper vs. Union of India AIR 1970
SC 564, interpreted the concept of Property in the legal regime. The court, in this case, observed
that the term property includes both corporeal things such as land, furniture and incorporeal
things such as copyrights and patents. The recent trend of the Apex court, however, has
changed. Court has started viewing Property in the light of Article 21 of the Indian constitution
as liberties exist even reference to the Property owned and possessed.
 DEFINITIONS
1. IMMOVABLE PROPERTY: Definition in Section 3 is not exhaustive. It says only
that ‘immovable property’ does not include standing timber growing crops or grass.
Definition of immovable property in Section 3(26) of General Clauses Act, 1897, is
also not exhaustive. It defines immovable property as it shall include land, benefits to
arise out of land, and things attached to earth.
According to Indian Registration Act, Immovable Property includes land, building, hereditary
allowances, right to ways, lights, ferries, fisheries, or any other benefits to arise out of land and
things attached to earth, but not standing timber, growing crops or grass.
Immovable Property means lands, benefits arising of the lands and the things attached to the
earth or permanently fastened to anything attached to the earth. Other than the physical
aspect, every benefit arising from and every interest in the property is also included in the
definition. It excludes three things, namely, standing timber, growing crops and grass.
It may be concluded from above definitions that Immovable Property means lands, benefits
arising of the lands and the things attached to the earth or permanently fastened to anything
attached to the earth. Other than the physical aspect, every benefit arising from and every
interest in the property is also included in the definition. It excludes three things, namely,
standing timber, growing crops and grass.
After analysis the above definitions it may be concluded that the following objects and things
are included in ‘Immovable property’:
A. Land – Land includes earth’s surface, column of space above the surface, the ground
beneath the surface, all objects which are on or under the surface in its natural state e.g.
minerals, land covered by water e.g. lakes, river and ponds, object placed by human agency
with the intention of permanent annexation e.g. buildings, walls and fences.
B. Benefits arising out of land – The benefits arising out of land are also known as ‘profit a
prendre’. All benefits arising out of immovable property and every interest in such property
are also regarded as immovable property as such benefits cannot be severed from the land
e.g. hereditary allowances, rights of ways, right to collect fish from ponds etc. If Ram sells a
forest to Shyam, the trees, rivers, minerals etc. all forming part of land or ‘profit a prendre’ or
benefits arising out of land will go with it.
Case Laws: In case of Shanta Bai v State of Bombay - right to entre in land, cut and carry
away wood over a period of 12 years was held to be immovable property.
C. Things attached to earth – Section 3 of Transfer of property Act defines the expression
“attached to earth” as including – (a) things rooted in the earth as in the case of trees and
shrubs
(b) things imbedded in the earth, as in the case of wall or buildings
(c) things attached to what is so imbedded for the permanent beneficial enjoyment of that to
which it is attached.
The following have been judicially interpreted as included in immovable property:-
 (i) A right of way (ii) A right of ferry (iii) Right to collect rent of immovable
property (iv) A right to catch and carry away fish (v) Hereditary rights (vi) Rights
of collect lac from trees etc.
But the following are not included in immovable property:- (i) A right to worship; (ii) A
copyright; (iii) The interest of a partner in a partnership firm; (iv) A right to get
maintenance; (v) A right to obtain the specific performance of an agreement to sell; (vi)
Government promissory notes; and (vii) A machinery that is not permanently attached to
the earth and can be shifted from one place to another.
The real test if whether a property is immovable or immovable is the intention behind the
transfer and the transferability of the property. For example, generally a mango tree will
be treated as an immovable property but it will be treated as movable property if it is to be
cut and used to build a house.
2. MOVABLE PROPERTY – The definition of movable property is not given in transfer of
property act 1882. According to general clause act, “movable property means property of
every description except immovable property”.
The following are held to be not immovable property so these properties may be considered
as movable property:
(i) Right of worship (ii) A decree for sale of immovable property (iii) A decree for
arrears of rent (iv) Royalty (v) A right to recover maintenance allowance (vi)
Standing timber, growing crops and grass (vii) Machinery which is not
permanently attached to earth etc.
Case laws: Bamdev Panigrahi v Manorama Raj – it was held in this case that Cinema
equipments like projector, diesel engine etc. installed on the tenanted land temporarily
and not only not attached to the earth, but also not permanently fastened to anything
attached to the earth, are movable properties.

DISTINGUISH BETWEEN MOVABLE AND IMMOVABLE

PROPERTY
In a leading case Justice Holloway explained the difference between movable and
immovable property: Movability may be defined a capacity in a thing of suffering
alteration of the relation of place. Immovability is incapability for such alteration. If
however, a thing cannot change its place without injury to the quality by virtue of which
it is, what it is, it is immovable.

S.No Immovable Property Movable Property

1. It includes land, benefits to arise out It includes stocks and shares, growing
of land, and things attached to the crops, grass, and things attached to or
earth (sec. 3 of General Clauses Act). forming part of the land, and which are
agreed to be severed before sale, or
under the contract of sale (sec.2 of
Sale of Good Act).
 2. If the thing is fixed to the land even If the thing is resting on the land
slightly of it is caused to go deeper in merely on its won weight, the
the earth by external agency, then it is presumption is that it is movable
deemed to be immovable property. property, unless contrary is proved.

3. If the propose of annexation of a thing If the purpose was only to enjoy the
is to confer a permanent benefit to the thing itself, then it is movable property
land to which it is attached, then it is even though it is fixed in the land.
immovable property.

4. Examples Benefits to arise out of land Examples Right of worship; royalty; a

such as hereditary allowances, right of decree of sale of immovable property;
way, ferries and fisheries, right to a decree for arrears of rent;
collect rent and profits of immovable Government promissory notes;
property; a mortgage-debt; right to cut standing timber, growing corps and
grass of one year, a factory; etc. grass.

5. Transfer of immovable property No registration is required to transfer a

requires registration of the document movable property.

3. ATTESTATION: Section 3 of the Transfer of Property Act defines ‘Attestation’ in

relation to a legal instrument. It states that a valid attestation constitutes an execution
of a legal instrument by the executant or by any other person who has been directed by
the executant to personally acknowledge the attestator of the execution, with the
attestator signing or affixing his mark on the instrument in the presence of the executant
as a proof of his acknowledgement of the attestation.Thus, by this the attestator
becomes the ‘attesting witness’ to the act of execution of a legal document or
instrument.

Essentials of a Valid Attestation

1. The attesting witnesses must always be two or more for it be an authentic attestation.

2. The attestator though need not see the execution of the legal instrument, he must either see
the executant sign or affix his mark or see anyone else do so on the direction of the executant
or receive personal acknowledgement from the executant of the same.
3. But, it is mandatory for the attestator to sign or affix his mark in the presence of the executant
for it to validate as an ‘attesting witness’.

4. The attestator can only sign after the execution of the legal instrument/document is complete
for it to be a valid attestation.

5. The attestators (two or more) need not sign or affix their mark at the same time.

6. There is no particular form of attestation that the parties need to adhere to. Even a signature
by an attesting witness at the legal document with all form and formality may constitute
attestation.

7. The personal acknowledgement to the attestator must be given by the executant himself and
not through any other source.

8. ‘Attestator should be sui generis’ i.e. the attestator should be competent to contract. Thus, a
minor cannot be an attestator.

9. ‘Attestator must be AnimoAttestandi’ i.e. an attestation will only be valid if the attestator
has signed the legal instrument with an ‘intention to attest’ to authenticate the execution of the
document.

10. Attestation under the Transfer of Property Act does not validate an attestation if the
attesting witness is a party to the transfer’.

11. The attestator is not ‘estop’ by the attestation of a deed except that he witnessed the
execution of the deed. The mere attesting of a document by the attestator is no proof that he is
aware of the contents of the document.

12. The attesting witnesses need not identify each other for it to constitute a valid attestation.

4. REGISTRATION: Registration is a term used in legal and official language and

Registration is taking care by Section 17 of the Registration Act, 1908 and with
Registration the condition precedent is payment of Stamp Duty. Registration of any
 documents shall be done within 4 months from the date of execution of the
agreements. Registration of the documents of sale and purchase of immovable property
is mandatory and ensures conservation of evidence, prevention of fraud and assurance
of title. The provision of the Registration Act, 1908 provides for the registration of
various documents, to ensure conservation of evidence, prevention of fraud and
assurance of title.

What can be registered?

Section 17 of the Indian Registration Act, 1908 provides for mandatory registration of certain
documents. They are:

1. Instruments of gift of immovable property;

2. Non-testamentary instruments which purport or operate to create, declare, assign, limit or

extinguish, whether in present or in future, any right, title or interest, whether vested or
contingent, of the value of one hundred rupees and upwards, to or in immovable property. This
means that all transactions that involve the sale of an immovable property for a value exceeding
Rs 100, must be registered;

3. Leases of immovable property from year to year, or for any term exceeding one year, or
reserving a yearly rent;

4. The documents containing contracts to transfer for consideration, any immovable property
for the purpose of section 53A of the Transfer of Property Act, 1882.

5. ACTIONABLE CLAIMS: Actionable claim means a debt or a claim on which action

can be started in a Court of law for comfort or relief. The civil Courts recognized as
giving the grounds for relief whether such claims are conditional, accruing and other.
The actionable claim is defined under section 3 of the Transfer of Property Act, 1882.
In general terms, an actionable claim is a debt or claim for which the person can take
an action and also approach the Court for recovery his debt or claim. According to
section 3 of the Transfer of Property Act, the actionable claim is a claim to any debt
which is not secured by a mortgage, pledge, and hypothecation.
Under Section 130 of the Transfer of Property Act, the mode of transfer of actionable claim
is described. According to Section 130, the transfer can be done by only a written instrument;
and signed by the transferor or his legal agent; and the transfer will be complete.
Exceptions of the Sec 130-Sec 130 does not apply on the transfer of marine and insurance of
fire policy. In the case of Simon Thomas vs. State Bank of Travancore, in this case, there
should be an intention to transfer the debt represented by the written receipts.

Under Section 132 of the Transfer of Property Act, defines the liability of the transferee of
actionable claim. The liabilities and equities of the transferor are transferred to the transferee.

Some examples of actionable claim, these following claims are the actionable claim-:
Claim for arrear rent, Claim for rent to fall due in future, A choice offered to repurchase the
property once again, Book debts or claims, The right to claims maintenance, Claim the benefit
of the contract, Deposit receipt.

The following claims are not the actionable claim-: A claim which is decreed, “Right to
sue”, it is a right but it is not an actionable claim, the claim for the main profits.

In the case of the Jugalkishore Saraf Vs Raw Cotton Co. Ltd., the Supreme Court held that a
judgment debt or decree is not an actionable claim for action is necessary.

In the leading case Lachmi Koeri Vs the State of Bihar, the Court has been pointed out the
transfer of arrears of rent is a type of a transfer of actionable claim. And the transfer of arrears
of rent could be transferred in accordance with the provisions of the Transfer of Property Act.

6. NOTICE: The word notice means to get knowledge. It means in law the knowledge of
a fact. A person is said to have a notice of a fact when he actually knows that fact, or
when, but for wilful abstention from an inquiry or search which he sought to have made,
or gross negligence, he would have known it.
There are two kinds of notice viz express and constructive. Express notice is the actual notice.
Here a person acquires actual knowledge or information of a fact. Constructive notice is
implied notice.

Actual Notice
Direct or express knowledge or intimation of a fact to a person is said to be an actual
notice of the fact to that person. Actual notice is express or formal communication of a
definite fact relevant to the transaction to one party by another party interested in the
transaction. An actual notice is said to be binding upon a person only when the following
procedural requirements are fulfilled:
1. Definite knowledge, it should not be hearsay or rumours. The notice must be of such a
nature that it is expected out of a reasonable to take the notice seriously. It must be the
result of a formal communication and not a casual conversation between individuals.

2. Given by a party interested in the transaction, it is a settled rule that a person is not
bound to attend to vague rumours or statements by mere strangers, and for a notice to
be binding, it must proceed from some persons interested in the transaction.

3. Relevant to the transaction, knowledge must be in relation to the transfer in question,

not general or irrelevant to the transaction. Also, the notice must relate to the same
transaction, as any information imparted as part of any other transaction may be
forgotten and doctrine of notice being based on equity does not allow such.

Constructive Notice
When there is no express information, but knowledge of a fact is presumed owing to the
existence of certain circumstances, it is constructive notice. A person under constructive
notice is not in actual possession of the knowledge about a fact. In case of a constructive
notice, the court presumes that under the given circumstances, the person ought to have
had knowledge of the fact, and so the person is deemed to have knowledge of the fact,
and a notice of the fact is imputed on him.

Constructive notice is a legal presumption. In accordance with the provisions of the

Transfer of Property Act, 1882 a constructive notice is said to be imposed upon a person
under the following circumstances:
1. Wilful abstention from inquiry or search:
This presents a situation where a person deliberately avoids taking notice of a fact which
a reasonable man would have taken in the ordinary affairs of life. The principle
underlying a presumption of notice in this situation is that the existence of means of
acquiring knowledge is equivalent to actual knowledge. This suggests that there existed
circumstances which ought to have put a person upon enquiry and if such enquiry had
been reasonably prosecuted, it would have led to the discovery of that knowledge. Wilful
abstention is thus construed to mean lack of a bona fide intention. A constructive notice
will not be inferred, unless it is brought to the court’s view that the situation offered a
starting point of an inquiry, which if prosecuted would have led to the discovery of the
fact.

2. Gross Negligence:
Negligence simply means want of care. Negligence involves either the doing of an act
which a reasonable man guided by prudence which regulate the general conduct of
human affairs would not do, or the omission of such an act. However, mere negligence to
take cognizance of a fact does not result in a presumption of notice. It is when the
negligent act is so grave that a man of ordinary prudence can never be expected to act in
that way, it amounts to gross negligence. A presumption of notice on account of gross
negligence is taken when the negligence is of such an aggravated nature that it is
indicative of a mental indifference to obvious risks. It is to be noted here that in wilful
abstention, opportunity of knowledge might be an important factor, but under gross
negligence, it is not relevant.

3. Registration as Notice:
Explanation I to section 3 of the Transfer of Property Act, 1882 provides for drawing a
presumption of notice of all the facts stated in a document or which can be reasonably
inferred from the contents of the document, when that document is registered. The
legislative intent behind this explanation was to make it clear that only for those
documents in which registration is a compulsory requirement, constructive notice of the
document is to be inferred on registration, as a general rule. On registration, the facts in
the registered document come in the public domain, so a reasonable notice to parties
interested in the transaction concerning that document is construed.

For registration of a document to serve as constructive notice, following requisites must

be fulfilled:
o The documents must be of a nature that they are compulsorily registrable, for
example, gift of immovable property is always done through a registered deed
under the Registration Act. Registration of documents concerned with
transfers where registration is optional, a mere registration will not serve as
constructive notice to the interested parties.

o A registration serves as constructive notice only when it has been completed in

accordance with the procedural requirements of registration under the
Registration Act.

o Registration serves as constructive notice only in a transfer done after the

registration has been completed, i.e., only to a subsequent transferee. Any
transfers made prior to the registration are not presumed to be guided by
constructive notice of the documents registered.

4. Actual Possession as Notice of Title:

Under Explanation II to section 3 of the Transfer of Property Act, 1882, actual
possession of an immovable property is considered to be constructive notice of such title
or that much interest which the person in possession may have. It is to be noted that title
(here) is not indicative of an ownership, instead it merely suggests a right to possess. In
order to operate as constructive notice, possession must be actual possession.
Constructive possession does not give rise to a presumption of notice.[9] When an actual
or physical possession is proved, the transferee cannot take the plea that he had no
knowledge of the title held by the possessor.

5. Notice to agent an Imputed notice to Principal:

Explanation III to section 3 of the Transfer of Property Act, 1882 deals with the situation
where a notice to an agent is treated as an imputed notice to the principal. The underlying
principle governing such inference of notice is that he who acts through another, is
deemed to act in person (qui facit per alium facit per se).

The doctrine of notice is based on the principle of equity. And thus, the presumption of
notice to agent being constructive notice to the principal is to ensure that no principal
avoids an unfavourable notice by simply appointing an agent.

The applicability of notice to an agent being an imputed notice to the principal rests
on the following conditions:
o Notice should be obtained by the agent in his capacity as an agent. Existence
of a principal-agent relationship is an essential condition for a presumption of
notice in this case.

o The agent should have been appointed for that specific transaction to which
the notice relates to. If the agent is appointed for transaction A and the notice
is pertaining to transaction B, for which he is not appointed, any notice to the
agent pertaining to transaction B will not be imputed notice to principal.

o The agent must have acquired the notice in the course of his employment as an
agent to the principal. Knowledge of any fact prior to appointment as an agent
and after the termination of appointment is not imputed notice to the principal.

o Notice acquired by the agent must be material to the transaction or relevant to

that particular transaction for which the agent is appointed. Knowledge of
facts not related to the particular business for which the agency exists does not
result in an imputed notice to the principal.

o There must not have been any fraudulent concealment of facts from the
principal by the agent. When the agent, with a dishonest intention deliberately
conceals information from the principal, a notice of that fact is imputed on the
principal so long as the third party to whom the principal is accountable, is not
a party to the fraudulent concealment by the agent.
 DEFINITION OF TRANSFER OF PROPERTY
Transfer of Property means an act by which a living person can conveys property, in present
or in future, to one or more other living persons, or to himself, or to himself and one or more
or other living persons, and to transfer property is to perform such act.
The object of the Transfer of Property Act is to define and amend law relating to Transfer of
Property by act of parties and not to transfer by operation of law. A Transfer of Property is a
contract hence all necessary requirements to constitute valid contract are to be fulfilled.
Essentials of valid transfer
There are 8 essentials of Transfer of Property, which are as follows -

A) Transfer must be between two or more living Persons (Section.5) -

The Transfer must be inter vivos. Therefore there cannot be a transfer to person not in existence
at the time of transfer. The living person including company or Association or body of
individuals whether incorporated or not.

B) The property must be transferable (Section. 6) -

Property of any kind of may be transferred, excepts as otherwise mentioned in S.6(a) to (I)
cannot be transferred. Therefore those properties described in the clauses (a) to(I) of Section.6
cannot be transferred. These are restrictions on the Transfer of Property and any transfer in
contravention of any of the clauses given in Section 6(a) to (I) is null and void.

C. The Transfer must not be -

1. opposed to the nature of interest affected thereby Section.6 (h) ;
2. for unlawful object and consideration as per provision of Section 23 of the Indian
Contract Act 1872, which provides a consideration or object is unlawful if -
a) It is Forbidden by law, or
b) It is of such a nature that it defeats the provision of any law, or
c) is fraudulent, or
d) it involves or implies injury to the person or property of another or
e) the court regards it as immoral or opposed to public policy.
3. To a person legally disqualified to be a transferee. As per Section 136. of Transfer of
Property Act, a Judge, a legal practitioner are an office are connected with Court of
Justice are disqualified from purchasing in actionable claim. This prohibition is only
with respect to actionable claim. It does not apply to any other kind of property.
D) Persons competent to transfer (Section.7) -
Every person is competent to contract and entitle to transferable property, or authorized to
dispose off Transferable property not his own, is competent to transfer such a property either
wholly or in part, and either absolutely or conditionally, in the circumstances to the extent and
in the manner, allowed and prescribed by any law for the time being in force.

TRANSFERABLE AND NON-TRANSFERABLE PROPERTY

Section 6 of the Act reads as, Property of any kind may be transferred, except as otherwise
provided by this Act or by any other law for the time being in force-

Therefore, this provision of the Act deals with the demarcation between transferable and non-
transferable property. The section has 9 sub clauses, each of which explains the different kinds
of transfer of property that. Everything else according to the Act can be legally transferred in
various means and forms.

WHAT CANNOT BE TRANSFERRED?

Exceptions to the transfer of property come under Section 6(a)-6(h) of the act: –
1. Spes succession [Section 6(a)]: –
o The chance of an heir-apparent in succeeding of getting the property, the chance of
inherited relationship upon the death of any relative, or any other mere possibility of
this nature cannot be transferred.
o For example: – ‘A’ dies leaving his widow ‘B’, and his nephew ‘C’, here ‘C’ only have
spes succession as his succession to the estate depends upon the factor, i.e., ‘B’ leaving
the property intact.
2. Right of re-entry [Section 6(b)]: –
o A mere right to re-entry cannot be transferred to anyone except the owner of the property
affected thereby.
o For example: – ‘A’ grants his plot to ‘B’ on a lease, for 5 years; with a condition that
‘B’ cannot dig a tank on the land, if ‘B’ does any such act then ‘A’ has the right to re-
enter. So, here ‘A’ cannot transfer his right to re-entry to ‘C’ for the breach of the
condition. If ‘A’ does any such act of transfer of his right to ‘C’ then this transfer will
be regarded as invalid.
3. Easement [Section 6(c)]: –
o An Easement cannot be transferred except the dominant heritage.
 o For example: – Right to way, right to light, right to water, etc. These rights cannot be
transferred without property which has its benefits.
4. Restricted interest [Section 6(d)]: –
o An interest in a property which is restricted in its enjoyment by the owner to the lender
then lender does not have the right to transfer the property.
o For example: – If a house is lent to a person for his personal use, he cannot transfer his
right of enjoyment to another.
# The following types of interest are non-transferable: –
• Tenure of services
• Religious office
• Pre-emption right
• Emoluments that are attached to the priestly office. However, it should be noted that the
right to receive offerings in a temple is independent of the obligation to perform services
which would include qualifications of a personal nature, and such rights are transferable.
5. Right to future maintenance [Section 6(d)]: –
o The right to future maintenance is only for the personal benefit of the person to whom
it has been granted, thus it cannot be transferred.
6. Mere right to sue [Section 6(e)]: –
o A mere right to sue cannot be transferred.
o The right to sue is personal to the party aggrieved.
o For example: – Damages for the breach of contract or tort, as it claims for past means
profits for suing an agent for his accounts, for pre-emption, etc.
o These rights cannot be transferred.
7. Public office [Section 6(f)]: –
o A public office is non-transferable property therefore cannot be transferred, nor can the
salary of the public officer be transferred.
o Thus, prohibition is based on public policy as a public office is held for personal
qualities.
o If the office is not public, it will be transferable, even if the discharge of its duties is
indirectly beneficial to the public.
8. Pensions [Section 6(g)]: –
o The stipends which are paid to military, naval and air forces and civil pensions of
government and political pensions cannot be transferred.
 o Pensions mean personal allowance or stipend not concerning any right of office but of
special merit.
9. Nature of interests [Section 6(h)]: – In this, no transfer can be made in three conditions: –
o If it is opposed to the nature of interest affected. These things are non-transferable by
inherent nature. For example: – light and air
o Anything with an unlawful object or consideration within the meaning of Section 23 of
the Indian contract act, 1872 cannot be transferred.
▪ Is fraudulent
▪ It is against public policy
▪ It is prohibited by law.
▪ Is of such a nature to defeat the provisions of any law.
o A person legally disqualified to be a transferee. For example: – Judge or Legal
practitioner. The judge or a legal practitioner or any officer connected with the court of
law is disqualified to purchase any actionable claim.
10. Statutory prohibitions on the transfer of interest [Section 6(h)]: –
o This section makes it clear that a tenant cannot have an occupancy of a non-transferable
right in any way to transfer his interest.
o But at the same time, this section also contains an exception to the general rule that
states that all tenancies or leasehold are transferable. This gives effect to various
enactments, according to which it states that certain categories of leasehold interests or
tenancies are non-transferable. Similarly, where a farmer of an estate, in respect of
which default has been made in paying revenue cannot show his interest in the holding.
CASE LAWS FOR TRANSFERABLE PROPERTY AND NON-TRANSFERABLE
PROPERTY:
1. Official Assignee, Madras vs. Sampath Naidu, AIR 1933 Mad. 795
It was observed by the court that a mortgage executed by an heir is void even if he has
subsequently acquired the property as heir. Therefore, it can be concluded from above that the
transfer of spes- succession is void ab initio.

2. Shoilojanund vs. Peary Charon, (1902) ILR29 Cal 470

In this case, the court held that the right to receive voluntary and uncertain offerings in worship
is restricted for personal enjoyment and, therefore, cannot be transferred.

3. Ananthayya vs. Subba Rao, AIR 1960 Mad 188

In this case, the court held that where there is an agreement between two people and according
to which a person agrees to give a certain proportion of his income to his brother in
consideration of having being maintained by the later. Now in such cases, this provision will
not apply.

4. Saundariya Bai vs. Union of India, AIR 2008 MP 227

It was believed that the pension is non-transferable property, as long as it is unpaid and in the
hands of the government. Another important aspect that needs to be noted is that pensions are
separate from bonuses and rewards, and on the contrary, these are transferable.

CONDITIONS RESTRICTING TRANSFER

Section 10 to 18 of the Transfer of Property Act, 1882 state the rules for alienation of property.
Section 10 lays down that where the transferee is absolutely restrained from transferring his
interest in his property to another person because of a condition which came along when the
property was transferred to the transferee, then this condition will be made void. The transfer,
from the transferor to the transferee would remain valid.

For example, A transfers some property to B as a gift but with the condition that while A is
alive, B must not transfer the property to any other person. This condition will be held void as
it absolutely restrains B from transferring his interest in the property to another person.

TYPES OF RESTRAINTS:

1. Absolute Restraints

An absolute restraint is such a restraint which completely takes away the right of the transferee
to alienate or dispose of the property. The transferee can now no longer transfer his interest in
the property to another person and he has no freedom to do what he wants with the property in
his capacity as the owner of the property.

• In Rosher v. Rosher (1884) 26 Ch D 801, A made a gift of a house to B, and gave a

condition that if B decides to sell the house during the lifetime of A’s wife, she should
have the option of purchasing it for Rs 10000, while the market value of the house was
set at Rs 10,00,000. This condition was held to be an absolute restraint and was declared
void.
 • In Kannamal v. Rajeshwari, AIR 2004 NOC 8 (Mad), a life estate was to be created in
favour of ‘M’, but the transferor gave an absolute restriction along with the property
transfer to M, whilst divesting himself of all his interests in the property. This restraint
was held to be void as there was an absolute transfer.

2. Partial Restraints

A partial restraint is a condition which partially takes away the right of the transferee to dispose
of his interest in the property. Here, the right is not taken away substantially. Section 10 does
not explicitly talk about partial restraints. A condition imposing partial restriction is valid.

In Mata Prasad v. Nageshwar Sahai (1927) 47 All 484, there was a dispute regarding succession
between nephew and widow. A compromise was formed that the widow had possession of the
property while the title for the same was given to the nephew with the condition that he was
restricted from alienating the property during the widow’s lifetime. It was held that the
compromise and the condition were valid and prudent in the present case.

A. Repugnant conditions

Section 11 of the Transfer of Property Act contains conditions which are inconsistent with the
nature of the interest transferred are repugnant conditions. These conditions come with the
transfer when the transfer confers to the transferee, absolute interests in the property. Any
condition with a transfer of absolute interests in the property will be void.

When a property is transferred absolutely, it must be transferred along with all its legal
incidents. In Manjusha Devi v. Sunil Chandra, AIR 1972 Cal 310, the parties entered into a
sale for a piece of land. In the sale deed, it was mentioned that the buyer could only use the
land for setting up a factory for jute textile manufacturing. It was held that this condition was
invalid as the absolute interests in the land had been transferred to the buyer and he could use
it as he pleased.

B. Positive and negative conditions

Positive conditions: These are those conditions imposed on the transfer where the transferor
imposes a condition on the transferee to do some act. For example, A transfers land to B, on
the condition that he shall maintain and keep filling up the well on that plot of land. This
condition is positive.

Negative conditions: These are those conditions imposed on the transfer when the transferor
imposes a condition on the transferee to not do some act. For example, A transfers land to B,
on the condition that he shall leave open a four feet wide space on the land, and would not build
anything on it.

C. Condition of insolvency

Section 12 provides that when the transferee becomes insolvent, and if he has some interest in
the property that was transferred to him by the transferor, the transferee still would not lose his
interest in the property. Hence, any condition stating that transferee shall lose the interest in
the transferred property on insolvency and this interest shall be reverted back to the transferor
shall be void.

However, this section does not apply to a condition on a lease for the benefit of the lessor or
those claiming benefit under him. However, in Smith v. Gronow (1891) 2 QB 394, if lessee
assigns the lease and then is rendered insolvent, then this condition will not apply.

TRANSFER TO AN UNBORN PERSON AND RULE AGAINST

PERPETUITY
The rule as regards the transfer of property for the benefit of unborn person and the rule against
perpetuity (collectively, the "Rules"), which are mainly governed by sections 13 and 14,
respectively, of the Transfer of Property Act, 1882 ("TPA"), have, since decades, troubled
lawyers of all ages across the country. These Rules are often described as one of the most
complicated legal rules ever.

Rule For Transfer Of Property For The Benefit Of Unborn Person

• Section 13 of TPA provides that:

"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."
 Principle underlying section 13

The underlying principle in section 13 is that a person disposing of property to another

shall not fetter the free disposition of that property in the hands of more than one
generation.

Rules underlying section 13

No direct transfer

Property cannot be transferred directly to an unborn person but property can be

transferred for the benefit of an unborn person. Sec 13 provides that property can be
transferred for the benefit of an unborn person subject to following conditions:

Transfer for the unborn must be preceded by a life interest in favor of a person existing
at the date of transfer.

Only absolute interest may be transferred in favor of an unborn person.

Prior life interest

The transfer for the benefit of an unborn person must be preceded by a life interest in
favour of person living person in existence at the date of the transfer. So that such living
person holds the property during his life and till the time the unborn would come in the
existence. After the termination of this life interest the property would pass on
ultimately to the unborn person who, by that time comes into the existence.

Absolute interest

Only absolute interest may be transferred in favor of an unborn person. Limited interest
cannot be given to unborn person. sec 13 says that interest given to an unborn must be
the whole of the remaining interest of the transferor in the property .When a property
is transferred in favor of an unborn person The transferor first creates the life interest
and after transferring the property, he retains with him the remaining interest of the
property. After termination of the life interest the unborn gets the absolute interest in
that property.
 This has following legal consequences:

The intermediary person living at the date of transfer is to be given only life interest. Giving
the life interest means giving him a right to enjoyment or possession. He has to preserve the
property like a trustee. After the termination of life interest the whole property or interest would
be given to unborn person who came in existence.

The unborn must come in existence before the death of the person holding the property for life.
If the unborn person come in the existence after one month he property would be revert back
to transferor or his legal heirs.

This is obvious because after the termination of life interest, it cannot remain in abeyance.

Rule Against Perpetuity

• Section 14 of TOPA provides that:

"No transfer of property can operate to create an interest which is to take effect after
the life time of one or 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."

Analysis Of Provisions

• Section 13 and 14 of the TOPA go hand in hand, in as much as, section 13 and 14 are
to be read together in order to understand the provisions governing the Rules.
• The TOPA does not permit transfer of property directly in favour of an unborn person.
Thus, in order to transfer a property for the benefit of a person unborn on the date of
the transfer, it is imperative that the property must first be transferred in favour of
some other person living on the date of transfer. In other words, the property must
vest in some person between the date of the transfer and the coming into existence of
the unborn person since property cannot be transferred directly in favour of an unborn
person. In other words, the interest of the unborn person must, in every case, be
preceded by a prior interest.
• Further, where an interest is created in favour of an unborn person on a transfer of
property, such interest in favour of the unborn person shall take effect only if it extends
 to the whole of the remaining interest of the transferor in the property, thereby making
it impossible to confer an estate for life on an unborn person. In other words, the interest
in favour of the unborn person shall constitute the entire remaining interest. The
underlying principle in section 13 is that a person disposing of property to another shall
not fetter the free disposition of that property in the hands of more than one generation.
• Section 13 does not prohibit successive interests (limited by time or otherwise) being
created in favour of several persons living at the time of the transfer. What is prohibited
under section 13 is the grant of interest, limited by time or otherwise, to an unborn
person.
• Further, Section 14 of TOPA provides that where an interest is created for the benefit
of an unborn person (in accordance with the provisions of section 13), such interest
shall not take effect if the interest is to vest in such unborn person after the life time of
one or more persons living on the date of the transfer (i.e. the person in whose favour
the prior interest is created as required under section 13) and the minority of such
unborn person. In other words, the interest created for the benefit of an unborn person
shall take effect only if the interest is to vest in such unborn person before he attains
the age of eighteen years.
• Section 14 further provides that the unborn person, in whose favour the interest is
created, must have come into existence on or before the expiry of the life or lives of
the person(s) in whose favour the prior interest is created as required under section 13.

Illustrations

a. A gives property to B for life, and afterwards to his son (unborn), subject to the condition
that if the son changes his religion, the property should be forfeited. Here the condition
regarding change of religion fetters the estate, and does not therefore comply with Section 13,
which speaks of the whole of the estate.

b. A transfers his properties to X for life and then to Y for life and then to Z for life and
thereafter to the unborn child of Z. Here, X, Y and Z are all living persons in existence at the
date of the transfer. This disposition of property is valid. The property may be given to more
than one living persons successively ‘for life’ before it ultimately vests in the unborn (Z’s
unborn child).
c. A transfers his properties to X for life who is unmarried and then to the eldest child of X
absolutely. The transfer in favor of eldest child of X is valid.

VESTED AND CONTINGENT INTEREST

For the transfer of a property two major interests are taken into consideration, namely, Vested
Interest and Contingent Interest. Vested Interest is mentioned in Section 19 and Contingent
Interest is mentioned in Section 21 of the Transfer of Property Act, 1888.

VESTED INTEREST:

Vested Interest is an interest which is created for the favour of a person when the condition
specified for the contract of transfer of property is certain and the event will happen surely in
the future. The transferer and the transferee enter into a contract of transfer of property and the
transferer makes a certain condition for the fulfillment of transfer of property and upon the
completion of the condition, the transferee gets the possession of the property. The transferee
may not get the possession of the property immediately after making a contract but he can
expect it after the fulfillment of the specific certain condition.

For instance, A person X promises person Y to transfer the property and come into a contract.
Here X is the transferer and Y is the transferee of the property. For transferring the property X
puts a condition that Y can get the possession of his property only after X’s death. X’s death,
here, is a certain event which will surely occur in future and so Y can claim X’s property after
X’s death. If Y dies before X, then the property will be transferred to the legal heirs of Y after
X’s death. Here, Y has Vested Interest over X’s property.

CHARACTERISTICS OF VESTED INTEREST

• Vested Interest Depends on Certain Events.

For the fulfillment of a contract related to transfer of property by vested interest, the condition
of the contract must be certain. Impossible event or uncertain event is not considered to be a
vested interest.
Conditions which are meant to happen in future, for example, death, aging, etc are considered
as certain events. The fulfillment of the contract is solely based on the happening of certain
events.

• Vested Interest is applicable irrespective of the death of the parties.

If the transferee dies before the enjoyment of property, the interest is not defeated by the death
and the right to enjoy the property is vested in the legal tiers of the transferee.

CASE LAW-

In the cases of Pearey Lal Vs Rameshwar Das, AIR 1918 Mad 294[2] and Sri Ram Vs Abdul
Rahim Khan, AIR 1946 1 M.L.J.275 it was held that vested interest is not even defeated by
the death of the devisee before he obtains possession and his representatives will be entitled to
its benefit.

In the case of K. Subramaniam Chetti Vs T. Subramaniam Chelti[3], AIR 1971 (Madras)

202. , the executor died before the junior wife. It was held that the executor has vested interest
in the property and thus their heirs were entitled to the property.

• Vested Interest is a transferable as well as a heritable right.

The transferee in the contract of transfer of property through vested interest has both
transferable and heritable rights. It means that the person has the rights of the property while
claiming the property from the transferor and also has the rights of the property upon his death.
The property will be in possession of the legal heirs of the transferee after his death.

CONDITIONS APPLICABLE FOR VESTED INTEREST

There can be various conditions for vested interest when the parties are minor, insolvent,
unborn, etc. The rights and possession of property in such conditions are mentioned in
accordance with the Transfer of Property Act, 1888, The Indian Partnership Act, 1932 and the
Indian Contract Act, 1872.

• Minor
If a person is a minor in the contract of transfer of property, he cannot have any right on the
vested interest till he attains the age of majority and is guided by the legal guardian who holds
the possession of the property till the minor attains the majority age.

• Insolvent
If a person is held insolvent, he cannot possess the vested interest and has no rights on the
property until he restores his financial crisis.

CASES – Subbaraya Chettiar Vs Papathi Ammal ,A.I.R. 1918 Mad. 294, Vijiaranga Naidu
Vs N drayanappa,A.I.R. 1946 Mad. 371.

• Unborn Child
According to Section 13 of the Transfer of Property Act, 1888, an unborn child is not
considered as a living person and he cannot hold the vested interest individually. For the
transfer of property, the unborn child will enjoy his rights after the birth and the interest is
transferred immediately to the legal heirs of the unborn child.

CONTINGENT INTEREST:

Contingent Interest is an interest which is created in a property in favour of a person to whom

such property is transferred based on the occurrence or happening of an uncertain event which
may or may not happen in future. It is defined under Section 21 of the Transfer of Property
Act, 1888. The contract of transfer of property completes after the completion of a condition
which is uncertain in nature. This interest in the property can become vested interest in favour
of the person to whom it is transferred on the happening of the event or when the happening of
the specified event fails or becomes impossible.

For instance, A and B come into a contract of transfer of property where, A is the transferor
and B is the transferee of the property and A puts a condition that the property will be
transferred to B only if he sells his house to C. here, B may or may not sell his house to C and
therefore it is an uncertain event. If B sells the property to C then the interest becomes vested
interest.
CHARACTERISTICS OF CONTINGENT INTEREST

• Happens only if an uncertain event is fulfilled.

As the name suggests, a Contingent event happens only if there is a fulfillment of an uncertain
event. The contract will not be called as complete if the event is not fulfilled.

• Death of the transferee will result in the failure of contingent interest.

If the transferee dies before the completion of an uncertain event then the property will not be
passed on to the legal heirs of the transferee as it is done in the condition of vested interest.

• Contingent interest is transferable but it may or may not be hereditary.

In the condition of Contingent Interest, the transferee has the right of transfer of property and
he owns the property after fulfilling the uncertain condition but it cannot be given to the legal
heirs of the transferee.

CONDITIONS APPLICABLE FOR CONTINGENT INTEREST

Conditions for contingent interest are given under Section 22[9], Section 23[10] and Section
24[11] of the Transfer of Property Act, 1888.

Section 22 : Transfer to members of a class who attain a particular age.

Section 22 explains that the contingent interest is fulfilled after attaining a certain age, or time
or by fulfilling a certain condition. For instance, A keeps a condition that the transferee, say B
will get the possession of the property only after he attains the age of 18 and marries A’s
daughter.

Section 23 : Transfer contingent on the happening of specified uncertain event.

Section 23 explains that a transfer of an interest in a property is dependent on the happening of

an uncertain event and the time within which such an event is to take place is not specified.
Such a contingent interest fails unless such an event takes place before or at the same time as
the intermediate or previous interest ceases to exist. For instance, A keeps a condition that the
transferee, say B will get the possession of the property only after he gets a job in another
country and buys a property of that country, Here the condition is uncertain and has no specified
time duration.

Section 24 : Transfer to such persons as survive at some period not specified.

Section 24 lays down the transfer of an interest in a property to such persons who are alive at
the specified time. For instance, A transfers property to B for life and after B’s death transfers
to P, Q, R equally between them. P dies during B’s lifetime. On B’s death, the interest in the
property shall pass to Q and R equally.

CONDITIONAL TRANSFER
The relevant provisions of conditional transfer have been explained under sections 25 to 34 of
the Act. Conditional Transfer means a transfer that is dependent on a condition attached to it.
That is when the vesting of an interest created by a transfer depends on the fulfilment or non-
fulfilment of a condition, it is said to be a conditional transfer. A condition is something that
makes the existence of a right dependent on the happening or not happening of a thing. A
condition can be condition precedent, condition subsequent or conditional limitations.

Illustration

A transfers property to B on the condition that B should marry his daughter C. Such a transfer
of property is a conditional transfer, due to the condition imposed by A on B to marry his
daughter C.

It can be of two types namely-

1. Condition Precedent- Section 26 of the Act provides that firstly the condition which is
imposed on the transfer of property has to be complied with or fulfilled before a person can
take an interest in the property. This condition precedes the transfer of property. The court in
Gian Chand v. York Exports Ltd. reiterated that the transfer cannot take place if the prospective
transferee fails to fulfill this condition upon which the transfer depends.
Illustration- A makes a gift of his property to B on a condition that B shall marry with the
consent of C, D, and E. B marries with the consent of only C and D because E died early. In
this case, the property stands transferred in favour of B as he fulfilled the condition imposed
by A.

2. Condition Subsequent– Section 29 of the Act provides that firstly the transfer of
property takes place and the conditions imposed on such transfer have to be complied by the
transferee at a later stage, if he does not comply with the conditions, then the transfer becomes
void. Therefore, the interest of transferee which has already been vested in him shall be affected
immediately by fulfillment or non-fulfillment of the condition when a condition has been
imposed in a transfer. It is to be noted that condition subsequent should be performed strictly
as it operates to divest an interest. A person, who had actual notice of a document that
incorporates a condition that he is supposed to fulfill, cannot make an excuse that he failed to
read the condition though the document would not be admissible in any court.

Illustration- A transfers a farm to B with a subsequent condition that if B goes to England

within 3 years from the date of such transfer, his interest in firm shall cease to exist. B went to
England within 2 years of such transfer. In such a situation, his interest in the farm shall cease
to exist as he did not comply with the condition subsequent to the transfer of property.

CONDITIONAL TRANSFER TO ONE PERSON COUPLED WITH TRANSFER TO

ANOTHER

A. SECOND TRANSFER ON FAILURE OF FIRST

Section 27 of the Act is based on the doctrine of acceleration. It contemplates a situation

wherein if two interests are created in the same transaction and the prior interest/transfer fails
for a reason not contemplated or reasonably foreseen by the transferor, then the subsequent
interest/transfer shall take effect.

Exception-

a) if the prior transfer is void then the subsequent transfer fails to take effect
b) Where the transferor signifies his intention clear that the prior transfer should fail in a
particular manner for the subsequent transfer to take place then the subsequent would not be
accelerated unless the prior transfer fails in that particular manner.

In Debi Shankar v. Nand Kishore[10], An interest was created in favour of A, B, C, D for a

successive period of 21 years and B & C died in the meantime. The court held that the interest
would accelerate in favour of D and take effect as the prior interest of B and C failed due to an
unforeseen situation.

In Gopaldas v. Hemandas, A makes a gift to his wife W and then to the children. The gift to
W was invalid as it was unregistered and the law required it to be registered by an instrument
only. Therefore, the court held that the gift in favour of the children would accelerate and would
take effect immediately and opined that the failure of the prior gift does not accelerate a
subsequent gift unless the two gifts are dependent on each other.

Illustration- A transferred the property to B on a condition that if B fails to commit the murder
of C then the property would transfer to D. In such situation the prior transfer as well as the
subsequent transfer will fail since the condition imposed on prior transfer is void.

B. INVALID SUBSEQUENT DISPOSITION

Section 30 of the Act is an adversary of Section 27. It provides that if the subsequent interest
is invalid and the prior interest is valid, then the subsequent interest can never cast its shadow
on the prior interest. Therefore, valid prior interest should be made effective while subsequent
interest to be ignored if invalid.

Illustration- A made a gift to B with a condition that if B does not set C’s house on fire within
one year of the gift made then it will be given to D. In this situation, B’s interest over the gift
is absolute as if no subsequent condition was attached.

RULE OF ELECTION
Election means the right of choosing between presumptive alternatives. The doctrine of
election is applicable to both movable and immovable properties. It states that, when one
professes to transfer the property over which he has no right, without having informed the
owner, he must approach the owner to seek its disposal. The owner must decide whether or not
to allow it. Henceforth, it can be inferred that he has the right to exercise the doctrine of
election to either confirm or dissent during a transaction.

Raj transfers his house to Mr. Rahul, by a gift and in the same gift deed asks Me Rahul to
transfer his shop to Anuj. Rahul may elect to accept the transfer or reject the transfer. If Rahul
accepts the transfer, he will get the house, but in that case, he will also have to transfer the shop
to Anuj.

Section 35 of the Transfer of property act deals with the Doctrine of election. It provided that
where a property is transferred to a person, then the transferee can make a choice between
whether to accept the transferee or reject it. The burden of the transfer is complimentary along
with the benefits of the transfer. In other words, enshrined in legal maxim qui approbat non
reprobate i.e Aman cannot approbate and reprobate.

The doctrine of election is universally applicable. In reference to the mode of elections, the
election by the owner can either be direct, through communication or indirect, “the acceptance
of the benefit by the original owner is subject to conditions:
1. He has a duty to elect which he must have the awareness, and
2. There must be proof of knowledge of circumstances which would influence the
judgment of a reasonable man in making an election.4
3. Acceptance for two years (Section 188(1) of the Indian Succession Act)
4. Status quo cannot be restored
THE NECESSARY INGREDIENTS FOR THE DOCTRINE OF ELECTION:

• The person transferring the property should transferor should not be the owner of the
property.
• The person transferring must at the same time and in the same instrument, grant some
of his own property to the owner of the property.
• Both the transfers must be made in the same transaction i.e Transfer of the property of
the owner to the transferee and conferring the benefit on the owner of the property.
The doctrine of election is not applicable if the transfers are made by virtue of two
separate instruments.
 • It is required that the owner has a proprietary interest in the property. A person being a
creditor is uncommitted in the election as he merely has a personal right to be paid by
the debtor.
• The owner is not put to election who does not receive direct benefit under the
transaction, but gets some benefit under it indirectly.
• The question of election does not arise when the benefit is received by a person in a
different capacity. For example, a person can accept legacy for an estate, at the same
time in his personal competence, he could retain the property.
CASE LAWS ON DOCTRINE OF ELECTION

Codrington v Lindsay states that the doctrine of election is based on the principle of equity.
One cannot approbate and reprobate at the same time. In layman’s terms, where a person takes
some pleasure or advantage under a deed or instrument, he must also bear its burden.
Andhra Pradesh Financial Corporation v. Gar Re-rolling Mills, relied on by the Plaintiff,
wherein it was held that the Doctrine of Election was applicable if there were two or more
remedies available and if the ambit and scope of the remedies were same. Hence, there would
be an option to elect either remedy.

THE EXCEPTIONS TO THE DOCTRINE OF ELECTION:

As explained through the sec.35 of TP Act that if any person in the time of transfer the
property to another person and make a beneficiary clause for transferee after accepting the
transfer. Than the transferee can deny the transferor can accept the transfer and enjoy the
beneficiary clause. But there is a certain exception regarding this rule that if the transferee
does not give his or her express consent or conclusive decision than in the certain situation is
will be introduced as he or she is accepted the transfer, those are:
1. If the transferee full enjoy the beneficiary clause mention in the transfer or where
transferee enjoyed the full benefit, then it will be considered as an acceptance by the
transferee.
2. If the transferee after one year did not give any consent regarding the transfer of
property than transferee is bound to give his or her reply. If he or she did not do that
then it will consider that he give the assent for the transfer.
3. The duty of election will be suspended in disability cases like minority, lunacy. Unless
the transfer is made by their guardian.
 4. If the transferor at the time of making transfer makes a beneficiary clause and an
independent beneficiary clause. So, if the transferee did not give assent for the
transaction then also he or she will get the independent beneficiary clause.

MODULE-II
➢ TRANSFER BY OSTENSIBLE OWNER AND CO-OWNER
The provision is based on the principle Nemo dat quod non habet i.e. no one can confer a
higher right on property than what he himself possess, and nemo plus iuris transfere ad alium
potest quam ipse habet i.e. no man can transfer a right or title greater than what he himself
has. Sec.41 of TPA is an exception to this general rule. The provisions regarding transfer by
ostensible owner are governed by section 41 of the TPA. The transfer by ostensible owner
underlines the principle of holding out.
The word ‘ostensible’ literally means ‘apparent’ or ‘seeming’. An ostensible owner is a person
who appears to be the owner of immovable property even though he is not the real owner of
the property. The section mainly states that if the true owner of the property permits another to
hold himself as by entrusting him with the documents of title or in some other way, a third
person who bona–fide deals with that other may acquire a good title to the property as against
the true owner. This means that the real owner who allows the other to hold himself out cannot
be allowed to recover from his secret title. Hence the transfer is not voidable on the ground that
the ostensible owner was not authorized to execute a transfer.
The privy council in Ram Coomar v. MacQueen, in regard with transfer by ostensible owner
held that “It is principle of natural equity which must be applicable that where one man allows
another to hold himself as the owner of an estate and a third person purchases it, for value,
from the apparent owner in the belief that he is the real owner shall not be permitted to recover
upon a secrete title, unless he can overthrow that of notice, or something which amounts to
constructive which ought to have put him upon an enquiry, that, if prosecuted would have led
to a discovery of it.”
ESSENTIALS OF SEC.41:
The real owner is deprived of his rights in the property under this section and is binding on
transfer of immovable property by the ostensible owner if the following conditions are satisfied
1. A person must be the ostensible owner of a property-
‘Ostensible owner’
Ostensible owner is not the real owner but who can represent himself as the real owner to the
3 rd party for such dealings. He has acquired that right by the willful neglect or acquiesces by
the real owner of the property thereby making him an ostensible owner. Such ostensible owner
possesses all the rights of ownership in a property without being the real owner of it.
3. That person must be such owner with the consent, express or implied, of the real
owner-
‘Free consent’
The consent must be free and intelligent. Free consent is defined as per section 14 of the Indian
Contract Act, 1872. The intelligent consent is the consent which is not brought by a
misapprehension of legal rights. Consent may be implied or expressed. Since the “consent,
express or implied”, mentioned in section 41, it operates as an estoppel. In the case of Shamsher
Chand v Bakshi Meher Chand, it was held that if a party is not aware of his rights or is silent
about them, then in such case it cannot be said that the real owner had consented to the transfer
of the property.

3. The transferee must purchase the property from such ostensible owner for the consideration-
‘Consideration’
The transferee should give consideration to the transferor in return for the property. There
cannot be a gratuitous transfer of property. Consideration is a compulsory criteria for invoking
transfer under section 41 of the Act. In the case of Padam Chand v. Lakshmi Devi, a gift deed
was executed by the father, who was the ostensible owner of the property, to his daughter and
the consideration was contended to be love and affection. It was held that gift is parting of
property from the owner without any consideration, and hence Sec.41 had no application here.

4. Before taking transfer, the transferee must take reasonable care to ascertain that the transferor
has the power to make the transfer; in other words, he must have acted in good faith.
‘Reasonable care’
With respect to degree of reasonable care to be taken by the transferee, the requisite for
ascertaining whether the transferor has power to make transfer has to be determined with the
reference to the circumstances of each particular case, the test being, whether he acted
• like a reasonable man of business &
• with ordinary prudence.
‘Good faith’
The expression good faith means that the transferee has acted honestly and in the real belief
that the ostensible owner is the true owner. The proviso to section requires that the transferee
must not only take reasonable care to ascertain that the transferor has power to transfer the
property, but also transferee must act in good faith. It is possible that there may be enquiry
without good faith and good faith without an enquiry. In none of the above cases, the real owner
is affected by one’s transaction with ostensible owner. .
BURDEN OF PROOF:
The burden of proof is on the transferee to prove that the transferor was actually the ostensible
owner and had the consent to sell the property. Also he has to prove that he actually acted in
good faith and had taken all reasonable care that was required from him while taking the
property. This is because he has to prove that he was not at fault while taking the property and
to shift the burden on the real owner. Alternatively, to shift his burden, he can also prove that
the transferor did not allow the transferee to know the real facts and tried everything to suppress
the facts.
BENAMI TRANSACTION:
Benami transactions are an example of transfer by an ostensible owner. Benami Transactions
are not illegal per se, if they are within the legitimate scope. In case of such transactions, the
burden of proof lies on the person who claims to be the real owner of the property. In Mahinder
Singh v. Pardaman Singh, the Delhi High Court said that when a transaction is Benami and
transferor is ostensible owner, the burden to prove lies on a person who claims that he is the
real owner.
LANDMARK CASE:
Shafiquallah v. Samiulah, the owner of a property died and thereafter the possession of his
property was with his illegitimate sons who were not entitled to the legal title of the property.
The legal heirs of the owner filed a suit against the illegitimate sons to recover the property
However the illegitimate sons sold the property to a third party, claiming themselves to be
ostensible owners. The court held that the illegitimate sons had no consent of the actual owner
whether express or implied to be ostensible owners of his property. Hence section 41 cannot
be invoked.

➢ APPORTIONMENT
Section 36 & 37 of the Transfer of Property Act lay down the rules regarding the principle of
apportionment. The expression ‘apportionment’ means division of a common fund between
several claimants. Although this principle does not usually apply to transactions of transfer of
property which take place through ‘operation of law’ but there are exceptions in cases where
the rule has been applied on grounds of equity. It is classified into two types- ‘Apportionment
by time’ and ‘Apportionment by estate’.
Apportionment by time

Section 36 deals with the apportionment of property by time. According to the section, in a
transfer of property, all rents, annuities, dividends and other periodical payments in the nature
of income shall be deemed to accrue from day to day and be apportionable accordingly. Thus,
as between transferor and transferee, the periodical income which the property yields, is to be
distributed between transferor and transferee at fixed date on the basis of its accrual on each
date.
This means that when a property yields income which is periodical in nature, the question of
apportionment of this periodical income between the transferor and transferee is bound to arise.
The section clearly lays down that all periodical income shall be accrued and apportioned on a
day to day basis. The general rule of transfer of interest along with the property between the
transferor and the transferee as laid down by section 8 of the Act is inapplicable in cases of
apportionment of the periodical income. The section deals only with the division of periodical
income between the transferor and the transferee, it does not provide for liability of the lessee
or the tenant.
Further, sec.36 is applicable only to transfer inter vivos, i.e. between two living persons.
Transfers made otherwise, e.g. by operation of law, are outside the scope of this section.

Apportionment by estate
Section 37 deals with apportionment by estate. It provides that where an estate is transferred in
such a manner that after the transfer, it is to be divided in several shares then, the obligation of
the benefit of property must be performed in favor of each sharer (owner) in proportion to the
values of each shares. This section basically contemplates a scenario where each share whether
in terms of income or rent of the various owners is apportioned according to their particular
share in the property.
In other words, when the whole of a property is transferred to more than one person, any
benefit arising out of obligation to the property is transferred to the several owners. Therefore
in such a case, the obligation attached to the property must then be performed in favour of each
of the several owners in proportion to their respective share in the property. The rule is
applicable only after fulfilment of the below conditions:
1. The person who is obligated with the duty to fulfil the burden under this section must have
notice of the same.
2. The obligation should be of a character which can be severed.
3. The severance of the obligation should not end up increasing the burden of the obligation.
The rule of apportionment by estate does not apply in the following cases:
• Transfer by operation of law
• Agricultural tenancies

➢ PRIORITY OF RIGHTS
The doctrine of Priority is has been statutorily implemented in the Transfer of Property Act,
1882 under Section 48. The section mainly induces the concept of priority from the legal
maxim, qui prior est tempore potior est jure which means that one which is first in time is better
in law. The principle basically states that when a transferor transfers the same property in favor
of several transferees, each transferee will take the property subject to the rights of the former
transferee. There can be situations when the same kind of interest is transferred successively to
two or more persons in the same property and the enjoyment of such rights of one person may
be against the interest of the other, in such cases this rule is applicable.
For instance, X grants a lease of his house to Y for 2 years. After the execution of the lease
deed for 1 year, he sells the property to Z. Here X has transferred the same property to two
people. The rights of the parties cannot be enjoyed together as the owner and the lessee both
have the right to possession over the property. According to the rule laid out in Section 48 of
TPA, the subsequent transferee will take the property with the right of the former transferee.
Hence, in this case, Z, who is the subsequent transferee, will take the property with the rights
of the prior transferee i.e. Y’s right would be given priority over Z’s right. And Z would not be
able to take the possession of the property with the immediate effect of the transfer but would
have to wait till the determination of the lease.
In Nandkishore v. Harjarilal, the Madhya Pradesh High Court held that “a transfer cannot
prejudice the transferee of the right by any subsequent dealing with the property”.
ESSENTIALS OF SEC. 48:
• The transferor transfers the rights in the same immovable property
• At different times – one interest created should be prior in time and another should be
subsequent.
• Such rights created cannot coexist or cannot be enjoyed in full extent together
• Then, each later right created is subject to the previously created rights.
EXCEPTIONS TO SEC.48:
• Where in prior transfer, the procedure laid down by the law which is compulsory is not
followed-where the prior transfer is incomplete in the eyes of the law, there doesn’t arise any
question of conflict of rights or interest in the property.
• If the subsequent transfer takes place by virtue of court’s order, then the rule of priority shall
not apply and the rights of subsequent transferee shall be given preference over the prior
transferee.
• If the prior transferee is aware of the subsequent transfer taking place, the subsequent
transferee would be given preference. And the rule of priority would not be attracted.
• Where the transfer is executed under fraud, misrepresentation or in gross-negligence, the
doctrine shall not apply and the prior transferee cannot claim priority.
• Rule of priority is subject to doctrine of notice.
CASE LAWS:
In Duraiswami Reddi v. Angappa Reddi, held that even if the documents of a prior transferor
are registered later on, he will still be given priority over subsequent transferee. This also holds
true even when the latter transferee didn’t have any knowledge about the previous transaction.

In Hafiz Md. Anwar v. Jamuna Prasad Singh, it was held that Section 48 of TPA, 1882; if
the same property has been transferred at different times then the subsequent transfer shall not
confer any right or title or interest on any basis of the subsequent transfer over the prior transfer.

➢ RULE OF FEEDING THE GRANT BY ESTOPPEL

The general rule under TPA is that any person who does not have the title of the property cannot
transfer it since he/she is not authorized to do any transfer, however there is an exception to
this rule provided under Section 43 of the Act that is known as “Rule of Estoppel or Doctrine
of Feeding Grant of Estoppel”. The doctrine of feeding the grant by estoppel is based on the
maxim ‘nemo dat quod nonhabet’ which implies that no one can give to another, which he
himself does not possess’. This rule has been adopted in Indian Legislations from the Common
Law.
The section basically states that if a person who although has no title to a property, yet grants
it to another by conveyance, fraudulently causing loss to the other, will lose his subsequent
interest in the property to the other, in case of any subsequent transfer of such property in his
favour. An estoppel arises against the transferor for his conduct, and the law obliges him to
‘feed’ that estoppel by reason of his subsequent acquisition.

ESSENTIAL REQUIREMENTS:
1. Fraudulent or erroneous representation of ownership
The estoppel rests on the representation (express or implied) made by the transferor that he is
authorized to transfer, which representation subsequently turns out to be erroneous or made by
with malice.. It makes no difference that the transferor had no interest whatsoever in the
property or the interest therein that of an expectant heir. Further, it is immaterial whether the
transferor acts bona fide or fraudulently in making the representation. What is material is that
he did make a representation and the transferee acted on it and thus has been misled. .
In the case of Tumma Masjid Mercara v. Kodimaniandra Deviah, it was observed by the
SC that “it is immaterial whether the transferor acts bona-fide or fraudulently in making the
representation. It is only material to find out whether in fact the transferee has been misled. It
is to be noted that when the decision under consideration was given the relevant words of
Sec.43 were ‘where a person erroneously represents’ and now as amended by Act 20 of 1929
they are ‘where a person fraudulently or erroneously represents’ and that emphasizes for the
purpose of the section it matters not whether the transferor acted fraudulently or innocently is
making the representation, and that what is material is that he did make a representation and
the transferee acted on it”.
2. A transfer for consideration:
The doctrine of ‘feeding the grant by estoppel’ is applicableonly to the transfers of properties
for value. This section is not applicable where the transfer is gratuitous, i.e. without
consideration, such as gifts. Thus, the provisions of this section are not applicable to transfer
of property by way of a gift.
3. The transferee enters into a contract, acting on the representation made by
the transferor:
Acting on the representation made by the transferor depicts the lack of knowledge on the part
of the transferee. Hence, for there to be a representation, it is material that the transferee should
be unaware or should not have the notice of the lack of competency on the part of the transferor
to enter into the transaction.
In a case where the transferee knows about the defect in the title of the transferor at the time of
the transfer, Section 43 or the Rule of Estoppel would not apply. Hence, it is a duty on the part
of the transferee to inquire before entering into the transaction as to the title of the transferor
and protect his own interest. The test of reasonable care is the amount of care that an ordinarily
prudent man would take.
4. The transferor, later on, acquires some interest in the property while the
contract is subsisting:
The Rule of estoppel or Section 43 would be applicable only when the transferor subsequently
acquires any interest in the property. The section would apply only when the transferor acquires
the interest in the property and not his successors or heirs. The application of the section is
personal in character and won’t apply against the person who acquires the property in his own
right. Also, the interest must be acquired by the transferor while the contract is still subsisting.
It means that the contract shouldn’t have come to an end before acquiring the interest.
5. The transfer would operate on any such interest acquired, at the option of
the transferee:
The transfer becomes valid when the transferee exercises the option and the title of the
transferor becomes perfect and that it is voidable at the option of the transferee. In Muthiya
Chettiar v Doraswami, it was held that where the official receiver transfers property before it
vests in him, the implied covenant will be treated as erroneous representation, and the
purchaser’s title would be complete as soon as the property vests in him.
6. A subsisting contract of transfer:
The option of the transfer can only be exercised in respect of an interest acquired by the
transferee whilst the contract of transfer “still subsists”. If the transferee (purchaser) had
repudiated or cancelled that transaction, or had recovered his purchase money, or if the
transaction were one of mortgage and the mortgage money had been repaid, then the relation
of the transferor and the transferee has ceased to exist, and no claim in respect of the property
can be made by the latter.

EXCEPTIONS TO THE DOCTRINE OF FEEDING THE GRANT BY ESTOPPEL:

1. When the transferee is aware of the true transaction: The benefit of this section cannot
be claimed by the transferee if he did not believe in or act upon the representation. The doctrine
of estoppel does not operate when both the parties are aware of the true transaction.
Accordingly, if he is aware of the defect in title of the transferor, he cannot get the benefit of
Sec. 43. For ex., when an undivided Hindu father had two sons A and B. A who was entitled
only to 1/3 of property, mortgaged ½ of property to C, who knew that A was entitled to
1/3.Later, A’s father died and A having become entitled to a half share, C sued on the mortgage
seeking to make A’s half share liable, it was held that C could avail only 1/3 share.
2. When the transfer is forbidden by law: The provisions of sec. 43 do not apply if the
transfer is invalid as being forbidden by law or contrary to public policy. Section 43 does not
operate on illegal transactions. Transfer by a minor or lunatic also do not qualify for the
application of sec. 43.
3. When the second transferee acquires rights: The second paragraph of section 43 protects
the rights of the second transferee in good faith and for consideration who has no notice of the
option in favour of the first transferee. Thus, the only person who can defeat the right of an
original transferee is a subsequent transferee. Usually, the deed of transfer is registered, which
operates as a notice of the existence of such contract to the entire world. If however, the deed
is not registered, the original transferee is in a vulnerable position.
CASE LAWS:
• Rajapakse v. Fernando- In this case the basis of the rule of Estoppel stated by the Privy
Council that where a grantor had purported to grant an interest in land which he did not at time
possess but subsequently obtained, the benefit of his subsequent acquisition goes automatically
to the benefit of earlier grantee. This means once the transferor acquires the interest in the
property then the same will automatically transfer to the transferee.
• In Ram Bhawan Singh v Jagdish, 1990 where the court observed that “when a person having
a limited interest in the property transfers a larger interest to the transferee on a representation,
and subsequently acquires the larger interest, the larger interest passes to the transferee at the
latter’s(transferee) option. This doctrine not only applies to sale but also applies to a mortgage,
lease, charge, and exchange. Where no grant or interest in immovable property is involved, the
doctrine would not apply. The doctrine also does not apply in cases where the transferor has
acquired interest not in the property which is the subject matter of the transfer, but in some
other property.

➢ FRAUDULENT TRANSFER
Every owner of a property has the right to transfer his property as he likes. But the transfer
must be made with a bonafide intention. Where the transfer is made with a fraudulent intention,
the object of the transfer would be bad in the eyes of equity and justice, though it is valid in
law. Fraudulent Transfer signifies a transfer that takes place in order to deceive or defraud
other. . The object of the fraudulent transfer is to protect the creditor and subsequent transferee.
Fraudulent transfer is voidable at the option of creditor and transferee. Section 53 of the TPA
deals with the Doctrine of Fraudulent transfers. This section has mainly been divided into two
parts. The first part provides that a transfer with intent to delay or defeat the creditor of the
transferor shall be voidable by such creditor. The second part of this section provides that
gratuitous transfer with intent to defraud a subsequent transferee is voidable at the option of
such transferee. The Section incorporates the common law principle of equity, justice and good
conscience as it attempts to prevent defeat of legitimate claims of creditors or transferees. In
Thakurji vs. Narsinghji (1928), the Patna High Court observed that the primary object of
Section 53(1) of the Act is to make assets of the Transferor available to the general body of the
creditors.

ESSENTIALS OF SEC.53:
1. Transfers of an immovable property- There must be a valid transfer of immovable
property. For applicability of this section, it is necessary that there is a transfer of property and
such transfer is valid and enforceable so that property vests in the transferee. Section 53 does
not apply where the transfer is in itself void.
2. Made with intent to defeat or delay the creditors of the transferors- The intention behind
the transfer must be to delay or defraud creditors. In the case of Bhagwant vs. Kedari Sahu, the
court observed that the term ‘intent’ referred in the section implies “aim” and connotes the one
object for which the transfer is made. It has reference to the dominant motive without which it
would not have been made.
3. Shall be voidable at the option of creditor so defeated or delayed- If such transfer has
been made with the intention to delay or defeat of the creditors – such transfer is voidable at
their option.
SHAM TRANSFERS:
Sham transfer means fictitious transfer. When the transferor does not intend that the property
should be really vested in the transferee, such transfers are therefore unreal or colourable and
never meant to operate between the parties. The transferor may transfer a property in favour of
transferee only for name sake i.e. in the false name of transferee. Such transfers are therefore
unreal or colourable transfers and are not made to operate between the parties.
Benami transaction is also a sham transfer because the real owner has no intention that property
should belong to ostensible owner. Benami transfer is not a transfer as contemplated by section
53. Thus fictitious or Benami transfers are outside the scope of this section. Section 53 only
safeguards the interest of a creditor in case of only real transfer which is made with fraudulent
intention.
BURDEN OF PROOF:
The existence of fraud would not be presumed by the court, it has to be proved. So, when the
transfer of property is challenged on the grounds of fraud then the primary onus is on the
petitioner to show how he was connected to the property and how has the fraud taken place. In
other words, the burden of proof lies on the creditors to show that the transfer was made to
defeat or delay the creditor. Once it has been proved then the burden shifts on the transferee to
prove that he bought the property in good faith and consideration. In the case of Chandradip
v. Board of Revenue, it was observed that the onus to prove the fraud lies on the person
alleging it. But it may be noted that the burden to prove the intention would largely depend
upon the facts and circumstances of each case.

EXCEPTIONS TO SEC.53:
Section 53 recognizes two exceptions which means that the doctrine of fraudulent transfer is
not applicable to:
• The person to whom the transfer is made does the whole deed in good faith and for
consideration- The transferee is protected by law if they took the property in absolute good
faith and gave due consideration for the same. When the transferee purchased any property,
being immovable in nature, possessing such intent which is considered good faith and paid
consideration which is considered adequate – the creditors ( i.e. the people to whom the
transferor owes some kind of liability which is financial in nature) cannot take the help or
derive benefit from Section 53 of the Act.
• Application of any law which relates to insolvency which is being enforced at such time-
The rights of the person to whom the transfer is made, those which stem from any law which
relates to insolvency which is being enforced at such time, are not effectuated by the application
of Doctrine of Fraudulent transfer i.e. Section 53, even if the person transferring the property
possessed such intent which was such to effectuate the interests of the people to whom he owed
any kind of liability which was financial in nature so as to in effect, delay or defeat it.

Gratuitous transfer to defraud under Section 53(2):

Section 53 (2) enacts that gratuitous transfer of an immovable property with intent to defraud
a subsequent transferee shall be voidable at the option of subsequent transferee. This section
explains about the situation where an immovable property is transferred to person without
consideration and the same property is again transferred to another person. So the subsequent
transferee has advantage under this section where he can avoid the first transfer. But in this
case the subsequent transferee should prove that the first transfer was a sham or fictitious
transfer made to defraud him.
The section only protects the interest of the bonafide transferee and the transfer should have
some value (consideration). The mere fact that the first transfer was gratuitous and the later
was for consideration does not essentially raise the presumption that the prior transfer was
made to defraud. Fraud in the prior transfer must be fully established by the subsequent
transferee. For instance, A makes a gift of his house to B in January, 1990. In February, 1990
A sells the same house to C. Here B and C are two claimants of the same property. The general
rule is that first transferee has preference over the second and C should not get the house. But
under this subsection it is provided that if first transfer is proved to be fraudulent, the
subsequent transfer shall prevail and the first would be voidable by the subsequent transferee.
In other words this subsection protects the interest of a bona fide transferee for value from a
fraudulent transfer made earlier.
CASE LAWS:
1)In the case of Muniayammal vs. Thyagaraja (1958), the court laid down following factors
relating to fraudulent transfer:
· Continuance of the transferor in possession of the property he has purported to transfer, when
such continuance in possession is not in accordance with the tenor and object of the transfer
· Insolvency or indebtedness of the transferor
· Lack of consideration for the transfer
· Reservation of benefit to the transferor
· Relationship between the transferor and the transferee
· Pendency or threat of litigation, secrecy or concealment
· Transfer of the debtor’s entire estate, or substantially the whole of the estate
· Fact that the transfer is made after execution has been issued or a writ has been issued against
the transferor
2) In the case of Mahendra vs. Suraj Prasad (1957), the court held that the provisions of
Section 53 of the Act come into operation only where the document is fraudulent in the sense
that, though the transfer is real, the object was to defraud the creditors of the transferor.

➢ DOCTRINE OF PART PERFORMANCE

The Doctrine of Past Performance is a very important provision under the Transfer of Property
Act based on the principle of equity. Section 53A of the Act describes part performance and its
main aim is to protect the transferee from fraud.
This section states that when a transferor or someone on his behalf transfers his immovable
property for some consideration in a written manner that is signed by him to the transferee or
someone on his behalf, and in the advancement of such contract, the transferee had used his
right of part performance to exercise possession over the property or be in partly use of it and
acted on such contract, then the transferor or the person claiming under him shall be debarred
from enforcing against the transferee and the person claiming under him any right in respect of
such property, other than a right expressly provided by the term of the contract. This also
includes his wish to willingly perform his part of contract and also if he has already performed
on his part. In the case of Ramchandrappa v. Satyanarayana, it was held that this section
applies only to contracts of transfer of immovable property and not the movable property.
Further, it has been held in the case Jacobs Private Limited vs. Thomas Jacob that the
doctrine is intended to be used as a shield, not a sword. Also, it is settled law that Section 53-
A confers no right on a party who was not willing to perform his part of the contract. A
transferee has to prove that he was honestly ready and willing to perform his part under the
contract.
ESSENTIAL INGREDIENTS OF SEC.53A:
Bombay High Court in Kamalabai Laxman Pathak v. Onkar Parsharam Patil recognized
the ingredients of the Section 53-A. The following are the main ingredients for basing a claim
on Section 53-A of the TPA:
1. There must be a contract to transfer any immovable property for consideration- It is
an essential condition for this Section to apply is that the transfer should be for a consideration
and where the contract transfer of property takes place without consideration, the Section does
not apply.
2. A written contract for the transfer of an immovable property- The contract must be in
writing and signed by the transferor, or by someone on his behalf.
3. The writing must be in such words from which the terms necessary to construe the
transfer can be ascertained- The written contract on the basis of which the property has been
possessed, must clearly suggest the transfer of property. If the document is ambiguous or
confusing, this section cannot be made applicable
4. The transferee must in part performance of the contract take possession of the
property, or, of any part thereof.
5. The transferee must have done some act in furtherance of the contract- In A.M.A
Sultan and Ors. v. Seydu Zohra Beevi, it was held that the transferee has taken possession or
continues possession in part performance of the contract or, has done some act in furtherance
of the contract.
6. The transferee must have performed or be willing to perform his part of the contract-
In Jacob Private Ltd v. Thomas Jacob , the Kerala High Court held that willingness in the
context of Section 53A must be absolute and unconditional.
COMPARISON OF ENGLISH LAW AND INDIAN LAW:
This ingredient is well established and derived from English law based on the maxim, “He who
seeks equity must do equity.” The two major cases that have helped develop the doctrine of
part performance in England are as follows:
Maddison v. Alderson 1888- B was A’s servant. A had promised B a certain property as life
estate, meaning B could enjoy the property during his life time. B served A for years upon this
promised life estate. The will bequeathing such interest and property to B failed due to want
for proper attestation. After A died, one of his heirs brought action to recover the property from
B.It was held that the act of part performance could not be proof of the contract since the
performance was a condition precedent to the contract. The heir of A was able to recover the
said property.
Walsh v. Longsdale 1882- Walsh took a cotton mill on lease for 7 years from Longsdale, the
owner of the mill. The agreement was prepared but not signed. In the meantime, rent arrears
started to accumulate as Walsh could not keep up with the quarterly payments of rent. An
advance of one year’s rent could be demanded by Longsdale as per the contract. Lonsdale
demanded the advance rent for one year and seized some goods of Walsh when he defaulted.
Walsh sued for damages.
The House of Lords decided in favor of Lonsdale stating that by running the mill, Walsh had
admitted he was a lessee and evidence of his consent to the unsigned lease deed.
Prior to the enactment of the Transfer of Property Act, 1882, the English law of Part
Performance was applied. Before Section 53A was inserted in the Transfer of Property Act,
1882, there were different views upon such application. The Privy Council in Mohd. Musa v.
Aghor Kumar Ganguli 1914 held that doctrine of part performance is applicable in India.
There were divergent views a few years later stating that doctrine cannot be used to override
statutory provisions. Finally in 1929, the Transfer of Property Act was amended and the
English law of part performance became a part of Indian Laws though a little modified.
Difference between the two:
The English Law of Part Performance
1)The contract need not be written or signed by the transferor
2)The right under the doctrine is an equitable right
3) It can be used for enforcing the right as well as defending the right; and
4) It creates a title in the transferee.
The Indian Law of Part Performance-
1) Section 53A deals with the Doctrine and state that the contract has to be written as well as
signed by the transferor
2) It is a statutory right;
3) It can only be used to defend the possession of the transferee; and
4) It does not create a title in the transferee.
LANDMARK CASE:
Nathulal v. Phool Chand- In this case, the Supreme Court has given the following conditions
on which the doctrine of part performance can be taken as defence in case of encroachment by
the transferor,
1. Transferor has contracted to transfer with reasonable terms.
2. Possession has been given to or is with the transferee of the immovable property.
3. In advancement of such contract transferee has also acted upon.
4. If it is clear that transferee has performed or is willing to do his part of the contract. The
court stated that if these conditions are fulfilled then the transferor cannot force for the
ejectment from the property to the transferee.
➢ RULE OF LIS PENDENS
The meaning of lis pendens is - ‘a pending legal action’, wherein Lis means the ‘suit’ and
Pendens means ‘continuing or pending’. The doctrine has been derived from a latin maxim “Ut
pendent nihil innovetur” which means that during litigation nothing should be changed.
The doctrine of Lis Pendens essentially aims at (i) avoiding endless litigation, (ii) protecting
either party to the litigation against the act of the other, (iii) avoiding abuse of legal process.Lis
Pendens is given under Section 52 of the Transfer of Property Act, 1882. The Section basically
prohibits alienation of immovable property when a dispute relating to the same is pending in a
competent court of law. It is based on the principle that the person purchasing an immovable
property from the judgment debtor during the pendency of the suit has no independent right to
property to resist, obstruct or object execution of a decree. The principle is explained in
Bellamy v. Sabine, wherein it was said that, “the doctrine rests upon the foundation that, it
would plainly be impossible that any action or suit could be brought to a successful termination
if alienations pendente lite were to allowed prevail”.
BASIS OF THE DOCTRINE:
The basis of the doctrine is ‘necessity’ rather than actual or constructive notice. The principle
underlying this doctrine is that during the pendency of any suit regarding title of a particular
property, no new interest should be created in respect of that property. Creation of a new
interest or a title counts as a transfer of property. Hence, the doctrine of lis pendens prohibits
the transfer of property which has pending litigation. The doctrine is based upon the position
that the decision of the court is pending upon the parties to the suit and also on those who derive
the title during the pendency of the suit. In the case of Faiyaz Hussain Khan v. Prag Narain,
it was held that the basis of the doctrine under Sec.52 is not doctrine of notice but expediency.

The maxim “pendent lite nihil innovator" is a rule which is based upon the prerequisite for
final adjudication and also on the just ground that it will be impossible to bring a suit to a
successful termination if the alienation is permissible during the pendency of the suit. The
Supreme Court in the case of Jayaram Mudaliar vs. Ayyaswami held that the objective of
this section is not to deprive the parties of any just or equitable claim but decide the claims that
are put before it.
ESSENTIALS OF SEC.52:
The Supreme Court in the case of Dev Raj Dogra and others v. Gyan Chand Jain and others
construed the meaning of Section 52 of the ransfer of Property Act and laid down following
conditions:

1) There should be a pending suit or proceeding- The section applies only when the property
in question is transferred during the pendency of litigation.
2) The suit or proceeding must not be collusive one – The section shall be inapplicable if the
suit is collusive in nature. A suit is collusive if it is instituted with a malafide intention. Such
intention is inferred from the fact that the parties to the suit know their rights in the property
and there’s no actual dispute.
3) The suit or proceeding must be pending in a Court of competent Jurisdiction - The
courts in India have been segregated on the basis of territorial, pecuniary jurisdiction or subject
matter, etc. Hence, the suit must be pending in the court having the jurisdiction to try the suit.
If the suit is presented before a Court not having the competent jurisdiction to try it, a transfer
during the pendency of such a suit would not be hit by the rule of Lis Pendens.
4) The suit or proceeding must be one in which a right to immovable property is directly
and specifically in question – The doctrine is applicable to immovable property only and not
to movable property. The litigation must involve a specific right in such immovable property,
for example right to possession, title, alienation etc. where the question involved in the suit
does not directly relate to any interest in an immovable property, this section cannot be applied.
5) The property directly and specifically in question must not be transferred during such
pendency
6) The transfer by any party to the suit must affect the right of other parties till the time
the case is finally disposed of.
In another case of Hardev Singh v. Gurmail Singh, it was held that the Section 52 does not
render any transfer of a disputed property void or illegal, but instead brings the purchaser within
the binding limit of the judgment that shall be pronounced on the disposal of dispute. In any
case where a transfer is made during the pendency of the suit, if the suit is disposed off in favor
of the transferor then the transferee rights shall prevail whereas on the other hand if the rights
of the transferor are recognized only to a certain extent or part of the property then the
transferee’s right shall also extend up to the limit till which the right of transferor exists.
NON-APPLICABILITY OF THE SECTION:
Lis pendens does not necessarily get applied in every case. Those are the cases which fall under
the exceptions of the section or where the section is not applicable. Following are certain
instances where this doctrine does not get applied:
• A sale made by the mortgagee in the exercise of the power as conferred by the mortgage deed.
The principle of lis pendens shall not be applied in this case and therefore the sale remains
valid, though made during the pendency of a suit filed by the mortgagor.
• In matters of review;
• In cases where the transferor is the only party affected;
• In cases of friendly suits;
• In cases where the proceedings are collusive;
• In cases of execution proceedings where the order is passed against the intervener. In such
matters, an appropriate remedy shall be a suit filed under order 2, rule 63 of the Code of Civil
Procedure, 1908;
• In case of suits involving pending transfers by a person who is not a party to the suit;
• In cases where the property has not been properly described in the plaint;
• In cases where the subject matter of rights concerned in the suit and that which are alienated
by transfer are different.
 CASE LAWS:
1. In T.G. Ashok Kumar v. Govindammal & Anr.,- the Supreme Court observed that if the
title of the pendente lite transferor is upheld in regard to the transferred property, the
transferee’s title will not be affected. On the other hand, if the title of the pendente lite transferor
is recognized or accepted only in regard to a part of the transferred property, then the
transferee’s title will be saved only in regard to that extent and the transfer in regard to the
remaining portion of the transferred property will be invalid and the transferee will not get any
right, title or interest in that portion. If the property transferred pendente lite, is entirely allotted
to some other party or parties or if the transferor is held to have no right or title in that property,
the transferee will not have any title to the property.
2. In Lov Raj Kumar v. Dr. Major Daya Shanker and Ors.- the Delhi High Court observed
that the ‘principles contained in Section 52 of Transfer of Property Act are in accordance with
the principle of equity, good conscience or justice, because they rest upon an equitable and just
foundation, that it will be impossible to bring an action or suit to a successful termination if
alienations are permitted to prevail. Allowing alienations made during pendency of a suit or an
action to defeat rights of a Plaintiff will be paying premium to cleverness of a Defendant and
thus defeat the ends of justice and throw away all principles of equity

TPA MODULE 3 Contents

SALE .................................................................................................................................................... 49
Essentials of a valid sale under TPA: ................................................................................................. 49
Mode of execution of sale ................................................................................................................. 51
Sale under TPA how effected ........................................................................................................... 52
Contract for sale .................................................................................................................................... 52
Difference between sale and contract of sale ................................................................................ 52
RIGHTS AND LIABILITIES OF BUYER AND SELLER ................................................................. 53
Rights of the buyer [Section 55(6)]............................................................................................... 54
Rights of the seller [Section 55 (4)] .............................................................................................. 54
Liabilities of the buyer [Section 55 (5)] ........................................................................................ 54
Liabilities of the seller [Section 55] .............................................................................................. 55
MARSHALLING BY THE SUBSEQUENT PURCHASER ............................................................... 56
MORTGAGE ........................................................................................................................................ 59
Definition of Mortgage ..................................................................................................................... 59
Essential conditions of a mortgage: .............................................................................................. 59
Forms/Kinds of Mortgage ................................................................................................................. 60
 1. Simple Mortgage ....................................................................................................................... 60
2. Conditional Mortgage ............................................................................................................... 60
3. Usufructuary Mortgage ............................................................................................................. 60
4. English Mortgage ...................................................................................................................... 61
5. Deposit of title-deeds ................................................................................................................ 61
6. Anomalous Mortgage................................................................................................................ 61
Rights and Duties of Mortgager and Mortgagee ............................................................................... 61
Marshalling and Contribution ........................................................................................................... 64
Rule of Contribution ......................................................................................................................... 65
CHARGE .............................................................................................................................................. 66
Distinctions between a mortgage and a charge ............................................................................. 67

SALE
Under the Transfer of Property Act 1882, section 54 states that sale is defined as the transfer
of ownership of a property in exchange for a price paid or promised or part paid or part
promised.

Essentials of a valid sale under TPA:

In Short:

1. The seller must be a person competent to transfer. The seller should be either the owner of
the property or should have the authority to dispose of it.
2. The buyer must be a person competent to the transferee.
3. The subject matter must be a transferable immovable property which can be tangible or
intangible.
4. There must be a transfer of ownership
5. The transfer must be in exchange for a price. ‘Price’ in the ordinary sense connotes money
consideration for the sale of the property. The price must be paid or promised or partly
paid.
 1. The parties to the sale (seller and buyer) should be competent to
transfer
The transferor of the immovable property executing the sale is known as the seller. The person
who receives the property sold to him for a consideration that is the transferee is known as the
buyer. The transferor or the seller must be competent to contract and entitled to the transferable
property. That is he must not be a minor, he should be of sound mind and shall not be
disqualified by law to transfer the property. The transfer should either be made by the owner
of the property or a person authorized to dispose of the transferable property which is not his
own. In the case of Biswanath Sahu v. Tribeni Mohan (AIR 2003 Ori 189), it was held that Karta
was authorized to dispose of the property of a joint Hindu family under certain circumstances.

A transferee should be competent to receive the transfer and he shall not be disqualified by law
to receive the property transferred. For example, an official liquidator cannot purchase the
property he is dealing with. A minor can be a mortgagee provided there is no covenant for him
to perform or a minor can be a purchaser when the sale does not impose any obligation upon
him and lastly a minor can also be a donee of a gift provided the gift is onerous.

2. The subject matter of the transfer must be a transferable

immovable property
When a property is transferred with an intention to sell the property to the buyer for a
consideration, the transfer of property includes the delivery of the property along with the
ownership rights of that property. The immovable property can be tangible or intangible. Under
section 6 a property of any kind may be transferred except the following-

1. A transfer of spes succession

2. The right of re-entry

3. Easement

4. Restricted interest which could be right to future maintenance

5. A right to sue

6. Public office
7. Pension or stipends allowed to the military, air force, naval and civil pensioners of the
government

8. A transfer for an unlawful purpose or consideration

9. Statutory prohibitions on transfer of interest (section 6 TPA)

The Official Assignee Of Madras vs Sampath (AIR 1933 Mad. 795) the court held that when a
mortgage is executed by a heir is void eventhough the heir subsequently acquires the property
as spes succession. Hence a transfer of property subject to spes succession is void.

3. The consideration for the sale must be paid, promised, part paid or
part promised

Price is a consideration paid for the transfer of property. Therefore price is money but not
necessarily money immediately paid in notes and coins, it includes money which might be
already due or payable at a future date. A transfer is not a sale if no price is paid or promised
or partly paid or promised. The transaction under sale without consideration will not amount
to gift unless evidence is adduced for it nor can it be an exchange if the transferor does not
transfer ownership of the property. A sale can be executed orally, there is no mandatory
requirement of being transferred through a written document. In the case of Nalamathu
Venkaiya v. B.S. Neelkanta,( AIR 2005 AndhPra 535) the court held that payment of
consideration is of the essence when a transfer of property is made through a sale. The time of
payment of consideration is not material. Consideration may be promised or paid at a future
date.

Mode of execution of sale

A property must be transferred by sale when it is executed by the transferor in writing and is
attested and registered. When a property is of a lower value the sale can be completed by
delivery of the property. Due to minimal value, the formality of registration and attestation is
not mandatory, however, in a sale a property of a value less than rupees hundred the formalities
required are optional. [Arjuna Reddy v. Arjuna C Thanga, (2006) 7 SCC 756] Hence a sale
under the Act only pertains to immovable property and not movable property. Once
registration, attestation and a document in writing called as the sale deed is executed the
transfer of immovable property in form of sale is completed and will be binding on both the
parties to the sale.

Sale under TPA how effected

There must be a registered conveyance in the case of

(i) tangible immovable property of the value of Rs. 100 and upwards;
(ii) a reversion or other intangible thing of any value. Generally, a sale takes place via
a validly executed sale deed which is in writing, properly attested and registered.
In case of property of nominal value, the sale of the property could be completed by simple
delivery of possession of such property or by a registered instrument. If there is no registration
of the sale deed, no property passes as there is no transfer.

Contract for sale

A contract for the sale of immoveable property is a contract that a sale of such property shall
take place on terms settled between the parties. It does not, of itself, create any interest in or
charge on such property. Thus the title in the property passes only upon the delivery of
possession or registration of the document. In a contract for sale, some equities do arise in
favour of the transferee.

Difference between sale and contract of sale

1. The sale of immovable property is a transfer of property along with ownership rights.
Whereas a contract of sale is a mere agreement that a sale of a property is to take place
in future on the terms mutually agreed between the parties. The ownership rights remain
with the seller.
2. In a sale, the seller transfers the legal title of the property to the buyer. Whereas in a
contract of sale no interest or charge is created in favour of the buyer.
3. A sale must be executed by a registered document where the immovable property is of
the value of rupees hundred or more or in case of reversion or in case of any intangible
property. Whereas a contract of sale does not require registration.
 RIGHTS AND LIABILITIES OF BUYER AND SELLER
In sale there are at least two parties involved there are the buyer and seller. The obligations
imposed by section 55 are covenants and are in the nature of statutory obligations. Rights and
liabilities of the buyer and seller can be categorized into two-

1. Before completion of sale

2. After completion of sale
Rights of the buyer [Section 55(6)]

1. Under section 55 (6)(b) before the completion of the sale the buyer is entitled to the
charge on the property for the consideration paid by him in anticipation of the delivery.
He is further entitled to interest on the purchase money and also to the earnest cost
awarded to him in a suit to compel specific performance of the contract or to obtain a
decree for its rescission in case he properly declines to accept the decree. The buyer’s
charge is a statutory charge and not contractual.[ P.Muthusamy vs K.Arumugam AIR
2016] The agreement should be genuine to obtain a charge on the property.[ T.N.
Hardas Vs. BabulalAIR 1973 SC 1363] Such a charge is enforceable not only against
the seller but against all the people that are claiming under it.

2. Under section 55 (6)(a) after the completion of the sale, the buyer is entitled to the
benefit of any improvement or increase in the value of the property. He is also entitled
to the rents and profits resulting from the property.

Rights of the seller [Section 55 (4)]

1. Under section 55(4)(a) before the completion of the sale, the seller is entitled to all the
rents and profits before the ownership of the property passes to the buyer.

2. However, after the completion of the sale, the seller is entitled to charge upon the
property when the whole or a part of the purchase money is unpaid and the ownership
of the property has passed to the buyer under section 55(4)(b).

Liabilities of the buyer [Section 55 (5)]

1. The buyer is bound to disclose to the seller any fact as to the nature or extent of the
seller’s interest in the property of which the buyer is aware and the seller is not aware
and which materially increases the value of such interest. However, the omission to
make such disclosure amounts to fraud.

2. The buyer is entitled to pay the purchase money to the seller or anyone else as he directs.
 3. After the completion of the sale, the buyer is liable for the loss arising from destruction,
injury or decrease in the value of the property.

4. The buyer is liable to pay public charges and rents arising from the property. He is also
liable to pay any principal money due to any encumbrances subject to which the
property is sold and the interest resulting thereon.

Liabilities of the seller [Section 55]

1. The seller is bound to disclose any material defect in the property or the title of which
the buyer is not aware or with ordinary care cannot discover.

2. The seller is liable to produce all documents of title relating to the property to the buyer
for examination.

3. The seller is further liable to answer all relevant questions put to him by the buyer with
respect to the property and its title, and give answers to the best of his information.

4. The seller on receiving the purchase price from the buyer has to execute a proper
conveyance of the property at a proper time and place.

5. The seller is liable to take proper care of the property and all relating documents as a
man of ordinary prudence would take between the date of the contract of sale and the
delivery of the property.

6. Seller is also liable to pay all public charges, rents and interests due up to the date of
sale. He is also liable to discharge all encumbrances on the property existing on the
property.

7. After the completion of the sale, the seller is liable to give to the buyer the possession
of the property.
 8. Seller is further liable to deliver to the buyer all documents of title relating to the
property after the receipt of the purchase money. However, when the seller retains the
part of a property he entitled to retain all documents. When the property is sold in parts
to different buyers, the buyer of the highest value is entitled to retain the property
documents.

9. The seller is deemed to contract with the buyer that the interest which the seller
professes to transfer to the buyer subsists and he has the power to transfer the same.
That is he is bound to give a covenant for the title of the property.

In the case of Nathu Khan v. Burtonath Singh,[ AIR 1922 PC 176] the court held that under
section 55(1)(g) if a sale deed contains a declaration stating the property is free from any
encumbrances, when the property is subject to a mortgage charge, the buyer will be compelled
to discharge the mortgage debt to protect his property from the charge holders, which is
purchased by him. However, the seller will be liable to pay the money paid by the buyer in lieu
of the charge.

MARSHALLING BY THE SUBSEQUENT PURCHASER

If the owner of two or more properties mortgages them to one person and then sells one or
more of the properties to another person, the buyer is, in the absence of a contract to the
contrary, entitled to have the mortgaged-debt satisfied out of the property or properties not sold
to him, so far as the same will extend, but not so as to prejudice the rights of the mortgagee or
persons claiming under him or of any another person who has for consideration acquired an
interest in any of the properties.

Rule of marshalling does not apply between two purchasers, but where out of the two
mortgaged properties, one is sold to a purchaser free from mortgage. And second, is sold to
another purchaser subject to the mortgage, the first purchaser can marshal and require the
mortgagee to proceed against the property in the hands of the second purchaser.

The subsequent purchaser can claim the right of marshalling

only if the interest of the prior mortgagee or persons claiming under him or any other person
who has for consideration acquired an interest in any of the properties is not affected thereby.

Section 56 lays down the provision of marshalling by subsequent purchaser under sale and
section 81 lays down the provision of marshalling under mortgage. The rule of marshalling
safeguards the interests of all the mortgagees whereas the purpose of the rule contribution is to
safeguard the interest of the mortgage.

Marshalling

Under section 81 of the Act “when the owner of two or more properties mortgages the property
to one person and subsequently mortgages two or more properties to another person, the new
mortgagee is, in the absence to the contrary, entitled to have the mortgage debt satisfied out of
the property or properties not mortgaged to him. So far as the same will extend but not as to
prejudice the rights of the mortgagee or persons claiming under him or of any other person who
has for consideration acquired an interest in any of the properties.”

This section applies to mortgages in which the mortgagees have the same debtor. In such a case
the first mortgagee might have one or more properties and the second mortgagee might have
some of those properties and advanced loan without notice of the earlier encumbrance. In such
a case the mortgagee is entitled to Marshall securities and the first mortgagee shall proceed
against the properties which have not been encumbered in favour of the latter.
(KosuriKoteswara Rao v.KothuVenkataramana Rao AIR 1973 AP 46)

Under section 56 of the Act “ when a person who owns one or more properties mortgages them
to a person and subsequently sells one or more properties to third party, the buyer is entitled to
have his mortgaged debt satisfied out of the property or properties not sold to him so far as the
same shall extend but not prejudice the rights of the mortgagees or person claiming under him
or any of the person who has for a consideration obtained an interest in any of those properties.”

The mortgagee who has the means to satisfy his debt out of the properties shall exercise his
rights and not prejudice the rights of the purchaser of one of those properties The object to be
achieved and the principle involved under section 81 and section 56 is the same. These
doctrines are based upon the principle of equity. The interest of both the precedent and
subsequent mortgagees are protected under this section. It aims to provide justice to the
mortgagor and the mortgagee and is based on the maxim “equality is equity”. The first
mortgagee shall not do any act that will harm the interest of the second mortgagee.

Illustration

X is the owner of property A, B and C. X mortgages all three properties (A, B, C) to Y.

Subsequently, X mortgages property B and C to Z. Hence under the rule of marshalling Y can
satisfy is debt out the property A, B and C. If the debt of Y can be satisfied out of property A
alone then property B and C should be left untouched. However, if Y’s debt cannot be satisfied
out of property A alone then he can proceed to satisfy his debt from property B and C also.

Case law

D.C. Johar And Sons Ltd. vs Mathew–Two brothers (A and B) who owned individual
properties mortgaged their properties to Bank 1. Subsequently one of the brothers (A) also
mortgaged his properties to Bank 2. Bank 2 contended that Bank 1 should proceed against the
properties of the other brother (B) first. The court held that this case would not fall under section
81 as there should be a common debtor (mortgagor) of the properties.

In a leading English Case Aldrich v. Cooper, Lord Eldon stated that in a case where a person
has two funds, he shall not by his election disappoint or prejudice the rights of the parties. He
should demarcate the interests and satisfy the precedent mortgagees debt having due regard of
the subsequent mortgagees. Hence, he reiterated the doctrine of marshalling and held that
marshalling can be done in a way by arranging the securities so that one can satisfy various
claims.

Essentials of the Doctrine of marshalling:

1. There should be one common mortgagor between two or more mortgagees. The owner
who is the mortgagor should own two or more properties and out of which he should
mortgage one or more properties to two or more mortgagees.
2. There should be a subsequent mortgage of the said properties to another person.
3. The precedent mortgagee should satisfy his mortgage debt out of the properties
exclusively held by him (if any) and then proceed to satisfy the remaining debt out of
the other properties. In other words, the subsequent mortgagee is entitled to have the
mortgage debt satisfied out of the property not mortgaged to him.
 4. For the application of the doctrine of marshalling notice to the subsequent mortgagee
of the prior mortgage is not relevant. (ChunilalVithaldas v. Fulchand (1893) 18 Bom.
160)

MORTGAGE

Section 58 to 104 of the Transfer of Property Act, 1882 deals with mortgages and charges.

Definition of Mortgage
A mortgage is a kind of security given by the borrower for repayment of the loan to the lender.
The object of a mortgage is to secure the debt or other obligation. It protects a lender for even
if the borrower becomes insolvent the money can be realized from the property given by way
of security.

Section 58 (a) of the Transfer of Property Act states that a mortgage is the transfer of an
interest in the specific immovable 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.

Unlike sale or gift, a mortgage is not the transfer of an absolute interest in the property. In a
mortgage, a right of possession and enjoyment of the usufruct may not necessarily be given.

Essential conditions of a mortgage:

1. There is a transfer of interest to the mortgagee.

2. The interest created in specific immovable property.
3. The mortgage should be supported by consideration.
 Forms/Kinds of Mortgage
As per Section 58 of Transfer of Property, there are six kinds of mortgages

1. Simple Mortgage

• Simple Mortgage is defined under Section 58(b) of Transfer of Property Act, 1882.
• In a simple mortgage, the mortgagor does not transfer immovable property to the
mortgagee but agrees to pay the mortgage money.
• The mortgagee agrees on a condition that in the event of not paying the mortgage
money the mortgagee has every right to sell the property and can use the proceeds
of the sale and such a transaction is called a simple mortgage.

2. Conditional Mortgage

• Mortgage by conditional sale is defined under Section 58(c) of Transfer of

Property Act, 1882.
• In this mortgagee places three conditions to the mortgagor, and the mortgagee shall
have the right to sell the property if:

i. mortgagor defaults in payment of mortgage money on a certain date.

ii. as soon as the payment is made by the mortgagor the sale shall become void.
iii. on the payment of money by the mortgagor, the property is transferred and such a
transaction is called a mortgage by conditional sale.

3. Usufructuary Mortgage

• Usufructuary Mortgage is defined under Section 58(d) of Transfer of Property Act,

1882.
• In this mortgage, the mortgagor delivers the possession of the property to the
mortgagee and authorises the mortgagee to retain such property until the payment
 is made by the mortgagor and further authorise him to receive the rent or profit
arising from such mortgaged property and to appropriate the same instead of
payment of interest. Such a transaction is called a Usufructuary transaction.

4. English Mortgage

• English Mortgage is defined under Section 58(e) of Transfer of Property Act, 1882.
• In this mortgage, the mortgagor transfers the property absolutely to the mortgagee
and binds himself that he will repay the mortgage money on the specified date and
lays down a condition that on repayment of money mortgagee shall re-transfer the
property. Such a transaction is called an English mortgage transaction.

5. Deposit of title-deeds

• Deposit of title -deeds are defined under Section 58(f) of Transfer of Property Act,
1882.
• In this mortgage where a person is in Calcutta, Madras, Bombay and in any other
towns as specified by the state government and the mortgagor delivers to a creditor
or his agent the documents of title of immovable property with an intent to create
security and then such a transaction is called Deposits of title-deeds.

6. Anomalous Mortgage

• An Anomalous Mortgage is defined under Section 58(f) of Transfer of Property

Act, 1882.
• A mortgage which is not any one of the mortgages mentioned above is called an
anomalous mortgage.

Rights and Duties of Mortgager and Mortgagee

Rights of Mortgagor

1. Right of redemption (Sec.60):- the mortgagor has the right to redeem i.e. to get back
his mortgaged property after paying the mortgage money , at any time after the
stipulated date of payment , but he is not entitled to redeem it before the mortgage
money becomes due on the date fixed by partied for repayment of money . For e.g. A
borrows money from B and agrees to pay it after 2 years against the security of his
property. A now wants to pay mortgage money at the end of 1st year and wants to
redeem his property , he is not entitled to do it because his right to redeem arises only
when the money has become due at the end of 2 years.
2. Right to inspection and production of document :- Mortgagor has got the exclusive right
to call for documents and inspect and make copies of all documents, till his right of
redemption subsists, at his own cost of the mortgaged property which is under the power
of mortgagee.
3. Obligation to transfer to third party instead of re-transference to mortgagor :- The
mortgagor after paying the mortgage money may direct the mortgagee to transfer the
property to third person instead of re-transferring to mortgagor.
4. Accession and Improvement to Mortgaged property:- When mortgagee has done any
improvement or accession voluntarily in mortgaged property than on redemption the
mortgagor is entitled to all such accession and improvement, unless there is contract to
the contrary, but if such improvement is done in compliance of lawful order of any
public servant or authority and to save the property from destruction and for property
security, then mortgagor is liable to pay the cost for such in absence of contract to
contrary.

Liabilities of Mortgagor

Following are the duties of mortgagor –

1. The mortgagor must indemnify the mortgagee for the defective title to the property.
2. The mortgagor must compensate the mortgagee for payment of all taxes and public
charges.
3. When the mortgaged property is leased, the mortgagor must direct the rent payable
under the lease, etc to the mortgagee.
Rights of Mortgagee

The mortgagee has the following rights :-

1. Right to sue for mortgage money – The mortgagee has right to file a suit in court for
mortgage money if the mortgagor binds himself to repay the mortgage money or the
mortgage property is destroyed and the security rendered is insufficient and mortgagor
has not provided further security or if mortgagee is deprived of his security by
mortgagee by any unlawful manner.
2. Right of sale – Mortgagee has right to sale the mortgaged property after getting the
decree from court if the mortgage money is not paid. Mortgagee has right to sale without
the intervention of court under certain circumstances mentioned in section 69 of
Transfer of property act.
3. Right to accession of property – If the mortgagee has right to accession to the increased
mortgaged property.
4. Right to foreclosure- The mortgagee has the right to obtain a decree of foreclosure from
the court at any time after which the mortgage money becomes due.
5. Right of possession – Mortgagee is entitled to the possession of mortgaged property as
under the terms of mortgage deed.
6. Right to renewal of lease - If the mortgaged property is under lease, the mortgagee is
entitled for renewal of the lease for purpose of security.

Liabilities of Mortgagee

Following are the liabilities of mortgagee –

1. To manage the property as he would manage if it were his own.

2. To collect the rents and profits of same.
3. In the absence of a contract to the contrary, to pay Government revenue and the other
charges of a public nature.
4. In the absence of a contract to the contrary, to make such necessary repairs as the
income of the property permits.
5. Not to commit any act which is destructive or permanently injurious to the property.
 6. To maintain accounts of all sums received and spent by him and render them to the
mortgagor when asked.

Marshalling and Contribution

Section 81 and 82 of TPA deals with the Rule of Marshalling and contribution respectively.

Marshalling

Section 81 may be understood in the following manner:

1. There must be an owner of two or more properties. He must mortgage two or more
of these properties to any person,
2. He must then mortgage one or more of these properties to another person,
3. The subsequent mortgagee is entitled to have the mortgage-debt of the prior
mortgagee satisfied out of the properties not sold to him. This can be subject to a
contract stating the contrary too,
4. Similar to Section 56, the rule of marshalling here too should not be so exercised
so as to prejudice the rights of the mortgagee or any person who has acquired an
interest with consideration in any of the properties.

Marshalling, in this context, may be explained by an illustration. If the mortgagor mortgages

three of his properties X, Y and Z to A and then mortgages X to B, B is entitled to have the
mortgagor satisfy his debt from the sale proceeds of the properties Y and Z and only if the said
sale proceeds fall short, can property X be sold.

In Barness v. Rector, W mortgaged two of his properties A and B to X. W then mortgaged

property A to Y and property B to Z. Here, the court held that X’s mortgages will be
apportioned proportionately between properties A and B and the surplus of A will go to Y and
surplus of B will go to Z.

The doctrine of Marshalling is thus based on the principle that a creditor who has the means of
satisfying his debt out of several funds shall not, by the exercise of his right, prejudice another
creditor whose security comprises only one of those funds.
Rule of Contribution

The Rule of Contribution relates to the collective contribution towards a mortgage debt by
mortgagors. It gives one mortgagor the right to have the other’s property contribute to the
discharge of the mortgage debt. When a creditor has a single claim against several debtors, he
can realize the debt from any one of them, but as per the rule of contribution he can claim
contribution to the debt by the other debtors, so that the burden might fall on all equally. The
rule is encapsulated under Section 82 of TOPA and may be divided as per the following:

Mortgaged Property Belonging to two or more persons

This is based on the following essentials:

1. A mortgaged property must belong to two or more persons based on a common

loan,
2. Each mortgagor, in absence to a contrary contract, is liable to contribute as per his
share of the mortgage,

For example, X, Y and Z mortgaged their properties to D mortgaging a common debt. Now if
D can recover the entire debt from the properties mortgaged by X, X is entitled to demand Y
and Z to contribute their portion of the debt out of their mortgaged properties. The Privy
Council has lucidly explained it in Kampta Singh v. Chaturbhuj. The Privy Council held that
if a person owns one property subject, with the property of other persons, to a common
mortgage, and has paid off the mortgage debt, he is entitled to call upon the owners of the other
property to bear their proper proportion of the burden.

When One Property is Mortgaged First and then again mortgaged with another Property

When the mortgagor has two properties and he mortgages one to secure one debt and then
mortgages both to secure another debt, if the former debt is paid out of the former property,
each property is then liable to contribute to the latter debt after deducting the amount of the
former debt from the value of the property from which it has been paid.
In Bohra Thakur Das v. Collector of Aligarh, the mortgagor mortgaged the village
of Kachaura to one, Nand Kishore. He again mortgaged
villages, Kachaura and Agrana, to Nand Kishore. The Plaintiffs purchased the equity of
redemption from Agrana. The first mortgagees purchased Kachaura by a decree. The plaintiffs
sued and contended that the first mortgagees were liable to pay the proportionate share of the
debt for redemption of the second mortgage. The court held that since the whole
of Kachaura was swallowed up by the first mortgage by the decree, the entire burden of the
second mortgage fell entirely on Agrana. The Privy Council, in appeal, overruled the decision
of the court and held that the first mortgagees would have to contribute to the second mortgage,
as they purchased Kachaura.

CHARGE
According to Section 100 of the Transfer of Property Act, 1882 Charge means where the
immovable property is transferred by one party to another party for the security of payment of
money. The transaction does not amount to a mortgage and all the provisions which are
applicable to simple mortgages shall apply to the charge. The charge does not transfer any
interest in favour of the charge holder but he has the right to recover his money from the
property.

Essential points to take into consideration as mentioned under Section 100 of Transfer of
Property Act, 1882:

1. A charge can be created either by an act of parties or through the operation of law.
2. It is created as a security for payment of money.
3. The transaction which is created does not amount to a mortgage.
4. A charge can be enforced by a suit.
5. A charge may be extinguished either by an act of parties by way of the release of
debt or by a novation or by a merger.
Distinctions between a mortgage and a charge

Mortgage Charge

A charge which is created as security for

A mortgage is always created only for the payment of a debt. the payment of money may not always be
for debt.

In a mortgage, there is an agreement between the parties that In charge, there is no such formal
a pasty will pay the money. agreement between the parties.

It is said that every mortgage is a charge. Every charge is not a mortgage.

A mortgage involves the transfer of an interest in an In charge, there is no transfer of an interest

immovable property. in favour of the charge holder.

A simple mortgage can be enforced within 12 years and a

mortgage other than a simple mortgage can be enforced A charge can be enforced within 12 years.
within 30 years.

MODULE 5
EASEMENT AND EMERGING TRENDS IN
PROPERTY LAW
CREATION OF EASEMENTS:
An easement can be created in one of three ways: by an express grant or reservation, by
implication, and by prescription.
Creation by Express Grant or Reservation:
The most straightforward method of creating an easement is by express grant. This occurs when
the owner of the servient tenement actually gives the easement to the owner of the dominant
tenement. As we discussed earlier, a grant is assumed to be forever unless noted otherwise in
the terms of the grant.

An easement can also be created by an express reservation. That is, a party selling or
transferring property can reserve for himself or for a third person, the right to use the property
for a specified purpose. For example:

Archie and Jughead are neighbors. Each house has a driveway on front of it. However,
Jughead’s driveway is always filled to capacity because he parks his hamburger selling trailer
there, so he always parks in Archie’s driveway. Archie consents to this arrangement because
he and Jughead are friends and because he has extra room in his driveway anyway. As it stands,
Jughead has a license to park in Archie’s driveway, which Archie can obviously revoke if he
so chooses. One day, Archie decides to sell his house to Reggie. However, Archie is worried
that Reggie will not allow Jughead to continue parking in the driveway. So, Archie has a
provision inserted into the deed that states that Archie reserves the right of Jughead to park in
the driveway. Reggie agrees to the provision and accepts the deed. Archie has reserved an
easement for Jughead in the property. Jughead has an easement (probably an easement
appurtenant) that allows him to park in the driveway forever.

Creation by Implication:
Even if an easement is not created expressly, it can be created by implication. That is, if the
circumstances surrounding a grant of property indicate that the grantor must have intended that
a party retain or obtain an easement, a court can infer an easement even though the easement
was not expressed.

There are two manners in which an easement can be created by implication:

1. Prior Use: If property that is owned by a single person is split by a grant of part of that
property to someone else, or by grants of pieces of the property to different grantees, and it is
apparent that an easement would be required for the continuing use of the property in the
manner that is has been used until now an easement may be implied.

2. Necessity: An easement can be implied from “necessity” when the owner of a parcel divides
the parcel in a manner that deprives one of the resulting subdivisions of access to something
that is absolutely necessary for the use and enjoyment of the property, such as a public roadway.

Easement by Prescription:
Acquiring an easement by prescription is the equivalent to acquiring a parcel of property by
adverse possession. In other words, an easement can be acquired if a person uses property that
does not belong to him or her in a manner consistent with the existence of an easement for a
period longer than the jurisdiction’s statute of limitations for land ejectment actions. For
example:
John owns a parcel of land. For 25 years, every day, Mike walks across the same path on John’s
property to access a road beyond John’s property. John never gave Mike permission to do so.
By such continuous, open and hostile use, Mike can gain an easement that allows him to
permanently walk across the property by “prescription.”
The elements necessary for acquiring an easement by prescription are identical to the elements
for acquiring real property by adverse possession. The easement must be used in an open and
notorious manner. The use must be continuous. The use must be hostile to the ownership of the
property owner and under a claim of right (i.e., without the owner’s permission).

The one difference between the elements necessary for easement by prescription and those
necessary for adverse possession is the element of exclusivity. Recall that for property to be
acquired by adverse possession, the possessor must be in exclusive possession of the property
for the entire statutory time period. However, in the case of an easement by prescription being
acquired, an exclusivity requirement would make no sense because the use of property that
constitutes an easement is inherently shared with the owner of the property. Therefore, the
acquisition of an easement by prescription does not require that the use be exclusive.

NATURE AND CHARACTERISTICS OF EASEMENTS:

NATURE OF EASEMENTS:
The concept of easement has been defined under Section 4 of The Indian Easements Act, 1882.
According to the provisions of Section 4, an easementary right is a right possessed by the
owner or occupier of the land on some other land, not his own, the purpose of which is to
provide the beneficial enjoyment of the land. This right is granted because without the existence
of this right an occupier or owner cannot fully enjoy his own property.

It includes the right to do or continue to do something or to prevent or to continue to prevent

something in connection with or in respect of some other land, which is not his own, for the
enjoyment of his own land.

The word ‘land’ refers to everything permanently attached to the earth and the words
‘beneficial enjoyment’ denotes convenience, advantage or any amenity or any necessity. The
owner or occupier referred to in the provision is known as the Dominant Owner and the land
for the benefit of which the easementary right exists is called Dominant Heritage. Whereas the
owner upon whose land the liability is imposed is known as the Serviant Owner and the land
on which such a liability is imposed to do or prevent something, is known as the Servient
Heritage.

CHARACTERISTICS OF EASEMENTS:
• There must be two distinct tenements. A dominant tenement and servient tenement.
• The easement must accommodate the dominant tenement.
• The dominant and servient tenements must be owned or occupied by different persons.
 • The easement must be capable of forming the subject matter of the grant for example,
there must be a capable grantor or grantee.
• The easement must be of the known and usual kind, and not novel or fanciful.
• The easements are imposed upon the property of servient tenements, and not upon the
owner personally.
• An easement cannot confer an exclusive use of the servient tenement, because this
would pass the ownership.

EXTINCTION, SUSPENSION AND REVIVAL OF

EASEMENTS:
EXTINCTION OF EASEMENTS:

Section 37 to 47 of The Indian Easements Act, 1882, provides for the mode of extinction of
easements.

• Dissolution of Servient Owner’s right

In the situation where the grantor ceases to have any right in the servient tenement because of
some reason, then the right of easements ceases to exist as well. This has been specified
under Section 37 of the Act. For eg- X grants a piece of land to Y for a period of 20 years in
the year 1970. In the year 1971, Y imposed an easement in favour of Z. In 1990 Y’s interest
came to an end. Thus, easementary right granted to Z ceases to end as well.

• Expiry of time or happening of an event

When an easement is acquired on certain conditions or for certain purpose or for certain period
of time. On the fulfilment of such condition or purpose or expiry of the time, the right of
easement extinguishes as well as in accordance with Section 6 of the Act.

• Extinction by release

Where in a situation the owner of the dominant heritage releases the right of easement to the
servient owner, the right ceases to exist. Such a release can be both expressly or impliedly
made. For eg- P has a right to discharge water through the eaves to Q’s yard. P authorized Q
to construct a building to such a height as not be able to discharge water. Q builds it and P’s
right comes to an end.
 • Termination of necessity

When necessity terminates the easement of necessity terminates as well. For example- A grants
a piece of land to B on which easement of necessity for B is the right of his way over A’s land.
Later on, B purchases a part of the A’s land over which he may pass to reach his own land.
Here, the necessity has ended and so does the easement.

• Useless Easements

When easement is of such a nature that is not useful or becomes incapable of being beneficial
at any time or under any circumstances, then the right of easement ends.

• Permanent change in the Dominant Heritage

When the nature of the dominant heritage changes permanently with increase in burden on
tenement, then the right of easement ceases to exist as the purpose of it was the beneficial
enjoyment of the dominant heritage. For example- A’s house is located such that he has a right
of way by passing through B’s house. Later, due to earthquake, B’s house got cut off and thus,
right of easement ends.

• Extinction by destruction of either of heritages

When either of heritages gets destroyed, the easement ends as it is essential for two properties
to exist for exercising the right.

• Unity by ownership

By unity of ownership it is indicated that when one person becomes the owner of both the
dominant and servient heritage then the right of easement terminates. For instance, A has right
of easement over B’s property. Later on, A purchases B’s property and becomes the owner of
B’s property. In such a case, easement extinguishes.
Another example which can be stated here to explain the concept is that A has a right of
easement over B’s land. In future A takes B’s land on rent, here A becomes the occupier of B’s
land. Thus, easement terminates.

SUSPENSION OF EASEMENTS:

Section 49 of the Act provides that easement can be suspended under the following
circumstances-

1. An easement is or can be suspended when the dominant owner becomes entitled to

the possession of servient heritage for a limited interest. An example which can be
stated here to explain the concept is that A has a right of easement over B’s land.
In future A takes B’s land on rent, here A becomes the occupier of B’s land. Thus,
easement suspends.
2. When the servient owner becomes entitled to the possession of dominant heritage
for a limited interest, the easement is suspended.

Thus, where both the dominant and servient owner becomes one, easement is suspended.

REVIVAL OF EASEMENTS:

Section 51 of the Act provides for the situations wherein easement suspended or extinguished
can be revived, which are as follows-

1. When an easement is extinguished by destruction of either of the heritages then it

can be revived-

• If the heritage is restored in 20 years.

• If the heritage is rebuilt in 20 years

2. In case of unity of ownership, if the unity breaks due to some reason, then easementary
right can be revived and also through an order of a competent court.

RIPARIAN RIGHTS:
MEANING OF RIPARIAN RIGHTS:
The term ‘riparian’ has been derived from the Latin word ‘ripa’ which means riverbank. A
riparian owner is the one who owns land along the bank of a river or lake or any other water
body. Certain rights enjoyed connected to the land owned by a riparian owner, are called
riparian rights. In other words, a riparian owner is the owner of land adjoining a water body.
These rights are natural rights that have arisen due to the location of the house of the riparian
owner. These rights exclusively belong to the riparian owners who reside along the shore or
banks of the river.

ILLUSTRATIONS:

1. Right to use the bank or shore of a water bed

2. Access to and from the water
3. Building of structures
4. Swimming
5. Boating
6. Right to fishing
7. Right to navigation
8. Use of water
9. Protection from soil erosion
10. Drinking and for domestic purposes

In M.C.Mehta v. Union of India, (famously known as the Ganga River case) the Supreme
Court reiterated the doctrine of riparian rights. It held that the petitioner was a riparian owner
who was troubled by the nuisance created by the contamination of the river Ganga. Such a
contamination was a public nuisance and the petitioners were entitled to riparian rights of
access to unpolluted water and hence a Public Interest Litigation was a valid remedy.

In Vippalapati v. Raja Vizianagram, the court held that riparian rights are encompassed of a
right to access free-flowing water without any obstruction if it is an obstruction by a dam.
Hence section 7 clarifies the general principle of law that essentially easements are restrictive
in nature, that is they do not operate to exclude the rightful owner from enjoying his property.

RIPARIAN OWNER:
A riparian owner under the Indian Easement Act 1882 is a person who owns the land adjoining
a water body. He is bestowed with the rights ancillary to the location of the land owned by him.
He is entitled to make use of the water body equally along with other riparian owners. He is
also entitled to have access to undiminished flow of water and quality and quantity of such
water body without obstruction. Under section 7 of the Act, a riparian owner has been defined
as a person legally entitled to a right to continued flow of water without any destruction or
unreasonable contamination of it. However a riparian rights are not absolute rights, they are
subject to Government’s rights to regulate the collection, retention and distribution of water
flowing in the natural channels.

SCOPE OF RIPARIAN RIGHTS:

Every riparian owner who owns a land abutting to a natural stream, lake or pond is entitled to
use and consume its water for drinking, household purposes and watering his cattle and sheep
and to consume the water for irrigating such land and for the purpose of any manufactory situate
thereon, provided he does thereby cause any material harm or injury to other like owners. A
natural stream is a stream whether permanent or intermittent tidal or tideless on the surface of
the land or underground which flows by the operation of nature only and in a natural and known
course. Hence a riparian owner is a person whose land abuts on a natural stream. Streams may
be natural or artificial. Riparian owner can be anyone who owns a land which comes in contact
with a river and even which has a reasonable proximity to a riverbank.

The rights of a riparian owner are threefold

1. He has a right of user that is he can use the water for certain purposes
2. He has a right to flow. He has a right to have the water come to him and go from
him without any obstruction
3. Lastly, he has a right to purity. He is entitled to have the water come to him
unpolluted.

In the case of M. Seshareddy v. K. Gopala Reddy, the Andhra Pradesh High Court reiterated
that a person as a riparian owner of a land abutting a natural stream has a natural right to use
the water of the stream to irrigate his land without diminution of the flow of water and without
affecting the right of the riparian owners below the stream.

LICENSES:
DEFINITION:

As per Section 52, if a person gives or proceeds to do in or on the grantor’s immovable property
anything that may be unlawful, or the rights are not easement or interest in the land, to another
person or a certain number of certain people, in the absence of such right is called a license.

The license, in a popular sense, means three things:

 • Authorization to do it,
• Certificate or document embodying the authorization in question, and
• License fee which is the price granted for the privilege.

ESSENTIALS OF A LICENCE:

• Two different persons.

• There has to be a grant.
• License is always useful.
• License is granted to do something in or upon the grantor’s immovable property.
• The license does not relate to ownership of any land but only creates a personal right
or obligation.

CASES:

Associated Hotels of India v. R.N. Kapoor:

According to Section 52, as stated in the case, where an agreement only allows the right to use
the land in a specific manner or under certain conditions while it remains in the possession and
control of the owner, thereof, it shall be a licence. Therefore, legal possession remains with the
property’s owner, but the licensee is allowed to use the premises for a particular purpose.

But his occupation would be unlawful for the permission. This does not establish any estate or
interest in the property in his favour. Therefore, the distinction between the two concepts is
clear. The dividing line is clear though it gets very thin or even blurred at times. At one time,
the application of the exclusive possession was considered unfailing and if a person was
granted exclusive possession of a premise, it would be conclusively proved that he was a lessee.

It is important to take note of the essential features of licence as under:

1. A licence does not apply to land or property possession but merely provides a legal
right or duty.
2. Licence only tends to create a title or interest in the immovable property to do
something under the authority of the licence.
 3. Licence neither can be transferred nor assigned.
4. The Licence shall be a strictly permissive right that occurs through permission,
express or implied, and not by adverse exercise or otherwise.
5. It only legalizes a certain act that would otherwise be unlawful and does not grant
any interest in the property itself in or upon or over which such an act is carried out.
6. A licensee cannot sue outsiders on his behalf.

Errington vs Errington:

If we talk about the facts of this case, in 1930, a father purchased a house along with his son
and daughter-in-law (Wood) and told her that the downpayment was a gift from him and said,
“After his retirement, the house would be transferred to them when the mortgage is paid.”
Wood regularly paid mortgage instalments, but Errington left the property in his wife’s name
after his death. Later, both Wood and son of Errington split. Errington was sued for possession
of the property. So the issue arose if after the death of the offeror, can a unilateral contract be
cancelled. However, the appeal was dismissed by the Court.

The Court ruled that the son and daughter-in-law had no explicit obligation to pay the
instalments and the Court could not infer those terms. He characterizes the pledge of the father
as a unilateral contract; the performative act that pays for the mortgage and hence it will only
be revocable if the couple did not make the payments. The offeror cannot cancel the offer once
success has begun. The implicit purpose of the father was to hold the house in their hands if
the mortgage was paid for. The pair were on a lease, short of a tenancy, but a statutory or at
least equal right to live that would develop into a good equal title until the mortgage was paid.

REVOCATION OF LICENSES:

License can be revoked in following ways-

1. If from the cause of preceding the grant, the grantor himself ceases to have any
interest in the property, the license gets revoked. Grantor’s interest comes to an end.
2. By express and implied release of the license by licensee.
3. There are certain cases wherein a license is issued under certain conditions or
limitations. This includes a license issued on a condition that if a certain act is doe
 or is not performed then the license may become void. In such a situation wherein
these acts are performed then license can be revoked. Also, licenses are granted for
the fulfillment of certain acts and once it is fulfilled license can be revoked.
4. Where a property in relation to which a license was granted gets destroyed due to
any reason, then a license can be revoked.
5. Where, a licensee himself becomes the owner of the property for which license was
granted, then the purpose for which license was granted ceases to exist and thus, the
license also ceases to exist and gets terminated.
6. When licensee does not use it for a period of 20 years then the license gets revoked.

TRANSFERABLE LICENSES:

According to Section 56 of the Act, a license can be transferable under the following
conditions-

1. A license to attend a place of public entertainment may be transferred by the

licensee. This may be gathered from the grant or contract, or from surrounding
circumstances or local usage. For instance, P grants Q, a right to walk over P’s field
whenever he pleases. The right is not annexed to any immovable property of Q. The
right cannot be transferred.
2. Transfer by licensee- The general rule is that the licensee cannot transfer his license.
If he transfers then the transferee becomes a trespasser and can be or may be ejected.

IRREVOCABLE LICENSES:

Section 60 provides that license can also be irrevocable. If the license is coupled with a transfer
of property and the transfer is in force, it cannot be revoked. This is subject to the agreement.
Hence, the power can be reserved. The rule is that a bare license may be revoked but if coupled
with a transfer of the property, then it is irrevocable.

A license coupled with an interest in a land is binding. A license coupled with profit a prendre
is irrevocable, for example, Right to excavate earth and carry it to make earthen wares, right to
cut and carry timber on payment of royalty.
If the licensee, has executed some work which is permanent in nature and has incurred
expenses, the licence cannot be revoked and hence, is irrevocable. For example, there are two
companies, namely X and Y having lands adjoining to each other. The agents were common
who managed to put up the building and tank on X’s land for use by Y. License is irrevocable
as the rule applied as was held in Ramson V dyson.

Tabular difference between Licenses and Easements:

License Easements

1. Right of easement is a right

1. License is a form of personal right
appurtenant to immovable
attached to an immovable property.
property.

2. It is a right in personam. 2. It is a right in rem.

3. It is a right which can be annexed

3. This right cannot be attached.
to the property to which it is attached.

4. License is revocable. 4. Easements are not revocable at all.

5. It is a permission given by the licensor

5. It is acquired as of a right.
i.e the grantor.

EMERGING TRENDS – BENAMI TRANSACTION ACT 1986,

BENAMI TRANSACTIONS (AMENDMENT) ACT, 2016 AND
OTHER RECENT DEVELOPMENTS:

BENAMI TRANSACTION ACT, 1986: (No content was available on this,

got content on the following):
BENAMI TRANSACTION (PROHIBITION) ACT, 1988:
LEGISLATIVE BACKGROUND:
The original law relating to Benami transactions was laid down in The Benami Transactions
(Prohibition) Act, 1988. This Act consisted of only eight sections. The same was later amended
by The Benami Transactions (Prohibition) Amendment Act, 2016 which was made up of 72
Sections.

BENAMI PROPERTY:
Any property, whether movable or immovable, tangible or intangible, which has been the
subject matter of a Benami transaction, is a Benami property. This would also include the
consideration received from such property. Benami property would also include the right or
such other document evidencing title or interest in such property.

BENAMI TRANSACTION:
Let us understand what a Benami transaction is and who are the parties involved with this
example:
In a Benami transaction, a property is transferred or held by one person (Mr A, the
‘Benamidar’) and the consideration for such property is paid by another person (Mr B, the
‘beneficial owner’) for whose benefit such property is held. The following transactions also
fall under the definition of Benami transactions:

• Where a property related transaction is carried out under a fictitious name – The
Benamidar can also be a fictitious person
• Where the owner of the property has no knowledge / denies having any knowledge of
the ownership of such property
• Where the person providing the consideration is untraceable or fictitious – the identity
of the beneficial owner may also be unknown.

Exceptions:
The following type of transactions will not be treated as Benami transactions:

1. Property is held by a member of the HUF for the benefit of the HUF and the
consideration is paid from the known sources of income of such HUF;
2. A person who holds the property in a fiduciary capacity for the other person – for
example, a trustee for the trust, a director for his company, a depository/depository
participant for a trader (holder of shares in demat form), etc.;
3. An individual holding property in the name of his spouse or child and where the
consideration is paid from the known sources of such individual ;
4. An individual holding property jointly with a brother, sister or lineal
ascendant/descendant and where the consideration is paid from the known sources of
such individual.

INSTANCES OF BENAMI TRANSACTIONS:

• Every state has a certain limit on the amount of agricultural land that an individual or
his family can hold. Thus, where such a limit is reached, people try to purchase the
 property in the name of another person but provide the consideration for the said
property.

• A person who has access to price sensitive information of a company as a result of

being in a position of power within the company would not be allowed to trade in the
shares of the company since it would amount to insider trading. Therefore, to find a
way out of this, they involve a third unrelated party and give him the funds to trade on
their behalf.

• During demonetization, there were many instances of persons depositing old notes into
their bank accounts which belonged to another person and then exchanging them for
new notes. The definition of property under the benami act is very wide and also
includes cash. Hence such a transaction would also be termed as a benami transaction.

PUNISHMENT UNDER THE BENAMI ACT:

The various forms of punishment under the Benami Act are as follows:

• Confiscation of benami property

• Where a benami transaction has been entered into to defeat the provisions of any law,
avoid payment of statutory dues or avoid payment to creditors, any person who enters
or abets/induces another person to enter into such a transaction would be punishable
with:
o Imprisonment between 1 to 7 years and
o Fine up to 25% of the fair market value of the property
o Where a person who is required to provide information under this Act provides
false information, he shall be punishable with:
o Imprisonment between 6 months to 5 years and
o Fine up to 10% of the fair market value of the property

BENAMI TRANSACTIONS (AMENDMENT) ACT, 2016:

The word ‘Benami’ means without name. Benami transaction means any transaction of
property which is done in the name of one person and consideration is paid by another person.
Also it must be in the future benefit, directly or indirectly, to the person who has paid the
consideration.This type of transaction mainly take place in the real estate sector. The property
can be moveable or immoveable, tangible or intangible, corporeal or incorporeal.
Before 1988, benami transactions were not illegal and there was no law for people who commit
fraud by entering in such transactions. The only thing that was not allowed was to recover the
property by the real owner from the benamidar.

Therefore, Benami Transaction (Prohibition) Act came into force in 1988 with intention of
prohibiting benami transaction and right to recover the property held benami.
The main purpose behind this act is to nab those people with undisclosed income by prohibiting
the benami transactions and to prevent tax evasion in the country.

This act was amended in 2016 and now referred as Benami Transaction (Prohibition)
Amendment Act, 2016.

The amended act seeks to amend the definition of benami transaction. It has established
authorities and procedure to inquire into such matters and specified the punishment.

Under section 10 of The Benami Transactions (Prohibition) Amendment Act, 2016:

"Benamidar" means a person or a fictitious person, as the case may be, in whose name the
benami property is transferred or held and includes a person who lends his name;

A transaction is said to be benami if:

It is made under some fictitious name

The benamidar is not aware of the property and is found to be too poor to purchase that property

The real beneficiary of the property i.e. the person who has financially dealt with it is not
traceable.

There are 4 authorities appointed by the central government to enquire into the matter of
benami transactions. They are:

• The Initiating officer

• The Approving authority

• The Administrator

• The Adjudicating authority

Punishment : Under section 53(2), Whoever is found guilty of the offence of benami
transaction shall be punishable with rigorous imprisonment for a term which shall not be less
than one year, but which may extend to seven years and shall also be liable to fine which may
extend to twenty-five per cent. of the fair market value of the property. Also that person can be
prosecuted for tax evasion charges under income tax act of 1961. Basically this amended act
widened the scope of the 1988 act so that it can stop people to utilise the black money and to
make India, a corruption free and a better country to invest it.

EXCEPTIONS OF BENAMI TRANSACTION:

A property will not be said to be benami if that property is held by:

• Karta of Hindu Undivided Family and the property is held for his benefit or for any
member of his family and the consideration has been paid from some known sources of
the Hindu Undivided Family.
• Any person transferring the property has a fiduciary relationship and is doing so for the
benefit of another person such as trustee, partner or director of the company, or a
 depository or an agent of a depository under the Depositories Act, 1996 or any other
person as may be notified by the Central Government regarding this.
• Any person transferring the property in the name of his spouse or in the name of his child
and the consideration for such property has been paid from his known sources ;
• Any person transferring the property in the name of his brother or sister or lineal
ascendant or descendant, where the names of brother or sister or lineal ascendant or
descendant and himself appear as joint-owners in any document, and the consideration
for such property has been paid from his known sources.

AMENDMENTS DONE IN THE BENAMI TRANSACTION

(PROHIBITION) AMENDMENT ACT, 2016:

The previous act of 1988 had only 9 sections. In the act of 2016, there are 72 sections.

• It has widened the scope of the original act Benami Transaction (Prohibition) Act, 1988
and has been made strict.

• It has clearly defined the meaning of benami transaction, its exceptions.

• It has established the authorities to enquire into such matter.

• It has amended the penalty for entering into benami transactions.

• It has established an appellate tribunal for hearing appeals regarding benami

transaction.

• In the previous act, there was section for confiscating the benami property but not the
procedure. In the amended act, the procedure is given.