University of allahabad

Transfer of property
Act 1882
LLB hons 3rd sem
Mridul Pandey

2024-2025
 Transfer of property Act 1882

Unit:-1st
1. Definitions: Immovable Property

Introduction

A word can be interpreted in as many ways as one might choose. Similarly, the term ‘property’ is
said to have a wide range of connotations. Even the Indian legislature has accorded the term with a
multitude of elements. It has been used in an array of senses.

Property constitutes an essential element of the common English terminology, and its importance in
today’s world can’t be ignored. Before diving into the peculiarities of this term, it is crucial to
understand the term in its ordinary sense without any complexities. The most general classification
of the term can be as; Incorporeal’ or ‘Corporeal’, ‘Tangible’ or ‘Intangible’, ‘Personal’ or ‘Private’,
and ‘Movable’ or ‘Immovable’ Property. However, this article focuses on diverse aspects of
immovable property by considering the legislation as well as some important judicial decisions in
the light of immovable property.

What is property

As very well quoted by Frederic Bastiat, a former member of the National Assembly of France, “Life,
liberty, and property do not exist because men have made laws. On the contrary, it was the fact that
life, liberty, and property existed beforehand that caused men to make laws in the first place.”

The concept of property is dynamic. It has evolved drastically and has been elucidated in diverse
manners in the domain of the legislature, society, and different eras of the time. The term property
is transitional, just like the other inventions and creations of the human mind, and is rich with
meanings.

The word ‘property’ is derived from the Latin word ‘proprius’, meaning ‘one’s own’. Though there
exist several explanations and definitions of the word, which may not be very much similar to each
other, the Sanskrit term ‘Swatva’ closely resembles the meaning of the Latin term ‘propirus’. The
root of the term ‘propirus’ is ‘proprietas’, which is in turn very much similar to the English word
property. This English term is formed from the noun ‘proper’ with the suffix ‘ty’. To sum up, all these
terms from different languages etymologically hold a single meaning, i.e., something that an
individual owns.

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In an ordinary sense, property is something that a person exclusively owns and something peculiar
to a person. Property is ownership of something, thus, giving an exclusive and unrestricted right. In
the case of McAlister v. Pritchard (1921), the Supreme Court of Missouri, Division One, held that the
term ‘property’ is believed to be extended to every category of valuable rights and interests. Thus,
anything that a person owns can be considered to be a person’s property.

However, in the recent judgements and the evolving concepts of law, it is of no surprise that the
term property is now found to be used in an extended notion. For instance, now, even a man’s
reputation is considered property, and often much more valuable than any other property. This
view was opined in the case of Dixon v. Holden (1996) by the Supreme Court of Missouri.
Alternatively, even the ideas of intellect and expressions fall under the category of property. For
example:- trademarks, copyrights, patents, etc. fall under the category of intellectual property.

Thus, it is clear from the above discussion that the term property is not just confined to ownership
when looked at from a broader perspective, considering both political and sociological factors,
along with its most acceptable sense. It confers upon an individual a bundle of powers. Property not
just includes the things that are the subject matter of the ownership but also extends to the right of
ownership or dominium or partial ownership, as the case may be. In legal notion, the term property
is to include a bundle of rights and especially in the case of tangible rights, its scope extends to the
right to enjoy, retain, alienate, possess and much more. In light of the Transfer of Property Act,
1882, the property is suggestive and illustrative of every possible interest a person can possess. In
Indian legislatures, the term is mostly used in a broad sense.

Immovable and movable property as per the Indian property regime

The term property concerning this article can be broadly classified under two subheadings, namely,
movable and immovable property. A brief explanation of the two is as follows;

Immovable property

Generally speaking, the word immovable property connotes anything that a person owns which
cannot be moved from one position to another. It can be said that anything which is affixed to land
under someone’s ownership falls under the category of immovable property. The immovable
properties are entitled to be protected by legal statutes and are liable to taxation. Such an
immovable property has rights of ownership attached to it.

The General Clauses Act, 1897 defines immovable property under Section 3(26), stating that the
term shall include land, things affixed to earth or permanently fastened to anything affixed to earth,
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and any benefits arising out of the land. On the other hand, Section 3 of the Transfer of Property
Act, 1882, does not provide an exhaustive definition. It states that immovable property is not to
include standing timber, growing crops, or grass. None of the above definitions is exhaustive. These
definitions just denote what is to be included or excluded from the purview of immovable property.

Thus, after clubbing the definitions provided under the two statutes, immovable property can be
defined as permanently affixed to the earth, like land, trees and other substances that do not include
standing timber, growing crops, or grass. There are further qualifying nuances to the term
‘immovable property’, and they have been addressed suitably later.

Section 2(6) of the Registration Act, 1908 also provides for the definition of the term immovable
property. As per this Section, lands, buildings, hereditary allowances, rights to ways, lights, ferries,
fisheries, any profit that arises out of the land, and any other thing that is attached to the earth, or
something permanently fastened to anything which is in turn attached to the earth, provided it shall
not include standing timber, growing crops, nor grass falls under the category of immovable
property.

Even the definition provided under the Registration Act, 1908, is not exhaustive; however, it helps to
a certain extent to understand the nature and concept of immovable property. In the case Shree
Arcee Steel P. Ltd. v. Bharat Overseas Bank Ltd. (2005), the Karnataka High Court held that the
term ‘immovable’ in immovable property means permanent or fixed, which cannot be moved and
which is attached permanently to the immovable property.

Movable property

The term movable property in common parlance constitutes any physically mobile property or
something that can be easily moved by any person. Movable property connotes almost everything
that is not affixed to land, irrespective of appearance, shape, size, colour, etc. The items that fall
under the category of immovable property are subject to various conditions and restrictions as
stated under various Indian statutes.

The term movable property has been defined diversely in various Indian statutes.

The General Clauses Act, 1897, in Section 3(36), defines the term to include property of every
description, except immovable property.

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The Registration Act, 1908, in Section 2(l)(9), provides an inclusive definition of movable property.
According to this, it is to include standing timber, growing crops and grass, fruits on the trees, and
juice in trees, along with the property of every description other than immovable property.

The term movable property is also defined under Section 22 of the Indian Penal Code, 1860. It states
the term is to include corporeal property of every description, provided that the same is not affixed
to the land. The main proposition to be understood here is that the property must not be attached to
the land. However, the same immovable property might become movable as soon as severed from
the earth.

The Supreme Court of India in the case of State of A.P. v. N.T.P.C. Ltd. (2002), held that electricity
falls under the category of property, and merely because it cannot be felt or touched or moved, it
will not cease to come under this category. Anything that possesses all the attributes of a property
can be considered property, be it a book, a piece of wood, patents, copyrights, etc.

In the case of State Bank of Patiala v. Chohan Huhtamaki (India) Pvt. (1981), the Himachal Pradesh
High Court held that standing timber, growing crops, grass, or other such things which are
attached to the earth, but the intention of making them a permanent part of the land is not present,
for example, machines that are attached to land but can be shifted, all these come under the purview
of movable property. Apart from this, the right to worship, promissory notes of the government,
rights of a purchaser to register his land, royalty, etc also fall under the category of movable
property.

When can property be classified as immovable property

To sum up, all the definitions provided under various Indian legislations, it can be said that mainly
three things constitute immovable property, namely, land, benefits arising out of the land, and
things attached to the earth. The last classification can further be divided into three categories:
things rooted in the earth, things embedded in the earth, and things attached to what is embedded in
the earth. Among the things attached to the earth, standing timber, growing crops and grass fall
under the exceptional category. Let’s have an overview of the abovementioned classifications of
immovable property.

Land

In common parlance, the term ‘land’ constitutes a proportion of the earth which is not covered by
water. It can be connoted as an area of ground with regard to its ownership or use. The term is
intended to include all the things on the surface of the earth, feasibly the column of space above the

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earth, and the ground below the surface of the earth. The word is comprehensive enough to engulf
even the things below the surface of the earth, say sub-soil, mines, and minerals. It even covers the
objects placed by the human agency on or under the earth’s surface, provided it shall be done with
the intention of permanent annexation. The term also covers the things which are said to be land
covered by water, for instance, well, tubewell, rivers, ponds, lakes, and streams, which are dug on
the earth’s surface. These may be natural or artificial, as the case may be.

Benefits to arise out of the land

The phrase ‘benefits to arise out of land’ is considered under the purview of immovable property
since it is an interest in land. Even the definition provided in Section 2(6) of the Registration Act,
1908 expressly includes this phrase under the category of immovable property. Some examples of
benefits arising out of land include rent received from the house, revenue from agriculture, rent
from shops and jagir, right to catch fish from pond or river, and right to collect lac from trees. Also,
the right to collect dues from the market or fair situated on a plot of land, interest on the income
from immovable property, lease of land, etc. even the right to extract any minerals, right to conduct
an exhibition of a piece of land, right to possession, establish a hoarding or advertisement of the
part of the land, right of the priest to recover dues from the funeral, management of Sarjan land,
interest of the mortgagee in the property that has been mortgaged, etc. are all considered
immovable property.

In the case of Ananda Behera And Another vs The State Of Orissa And Another (1955), the Supreme
Court of India held that a person’s right to enter upon land and to take away fish from a pond is ‘A
profits a prendre’, which is the right to take something from somebody else’s land. Thus it falls
under the purview of immovable property through the category of benefits arising out of the land.

Things attached to the earth

The above-stated expression is separately defined under Section 3 of the Transfer of Property Act,
1882, to include three categories: things rooted in the earth, things embedded in the earth, and
things attached to what is embedded in the earth.

Things rooted in the earth

By virtue of the definition provided under the General Clauses Act, the things rooted in the earth are
considered immovable property. Thus, trees and shrubs are considered immovable property.
Similar is the case with plants and herbs. However, it is pertinent to mention that this expression
does not include standing timber, growing crops and grass in this category.

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In the case of Suresh Chand v. Kundan (Dead) By Lrs. And Ors. (2000), the Supreme Court of India
held that standing timber is a part of the earth by virtue of it being rooted in the earth. When any
transfer of property of such a land takes place with timber rooted in it, then the interest in the
property is bound to include that standing timber or any other thing attached to the earth unless it
expressly or impliedly provided otherwise. Thus, the thing attached or rooted will go to the
transferee due to a legal incident of the property so transferred. Hence, the general rule says that
trees, shrubs, herbs, and plants are immovable properties.

However, when detached or cut from the earth, trees and shrubs can be sold separately as movable
property. This view was expressed by the Supreme Court in the case of Mathura Das v. Jadubir
(1905). Trees and shrubs though considered immovable property, as soon as they get detached or
are cut down, become movable property since it loses the character of immovable property.

Things embedded in the earth

Etymologically, the term ‘embedded’ connotes something that is firmly fixed in a surrounding mass.
Embedding denotes a thing whose foundation is laid underneath the earth’s normal surface and
which becomes a part of the earth. Take, for instance, where stone blocks are placed on one another
to frame a wall. Though no mortar or cement is used, they will be considered immovable property
since it has become a part of the land. However, when the same stone blocks are just stacked on top
of each other in a builder’s yard in the form of a wall, they will be treated as movable property.

There may be instances where the article is firmly fixed in the land; however, if the same has not
been done with the intention of it being a part of the land, then the same will not fall under the
purview of immovable property. For example, an anchor stands firmly fixed to the ground to hold
the ship, but the anchor was never fixed to the ground with the intention of it being a part of the
land. Thus, it will not fall under the category of immovable property. Similarly, a road roller, heavy
stone, etc will not be considered immovable property. In cases where the property is embedded only
up to an extent where its weight forces, it shall not fall under the category of the term embedded.

Attached to what is so embedded

The things falling under this category are the ones through which permanent beneficial enjoyment
can be drawn from the immovable property to which they are attached. A thing will only be said to
be attached to the earth when in some way or the other, its permanent beneficial enjoyment can be
done. Doors, windows, shutters, etc are a few examples that fall under this category. These are said
to fall under this because they are attached to the house. These things have no existence or meaning
of their own. What good will a door do if there is no house? However, it is important to understand

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that these things must be attached with the intention of permanent fixation or attachment.
However, fans, A.C., window blinds, sashes, etc. will not be considered immovable property, even
though they may be attached to the house.

Thus the two most important things that need to be established while dealing with the fact of
whether a thing falls under this category or not are;

 Permanent attachment of the thing must be there; and

 It must be attached in order to experience the beneficial enjoyment of the thing to which it is
attached.

Exceptions

As discussed above, trees, shrubs, herbs and plants fall under the purview of immovable property.
However, in cases where such trees, shrubs, and herbs constitute standing timber, crops and grass,
they are movable property.

In the above case the term ‘standing timber’ includes trees whose woods will be used to develop
buildings, houses or any other infrastructure, to make ships, bridges etc. The English Law includes
oak, ash or elm trees under this category. In India, trees like neem, babul, sheesham, teak, or
bamboo are considered standing timber. However, ordinarily, the trees that bear fruit stand on a
different footing. These do not fall under the category of standing timber. For example, mahua,
mango, jack fruit, jamun trees, etc. are not considered standing timber. The reason is they were
grown with the intention of using their fruit and not for the intention of cutting them and using
them later on for construction or as wood. If their intention would have been otherwise, it shall then
be considered immovable property. Since standing timber is not an immovable property, a
document concerning it does not require registration.

As stated above, crops also do not fall into the category of immovable property. In this relation the
term ‘crop’ means any plant grown for food mainly; it includes all the fruit plants, fruit leaves,
barks or roots, etc. It is to be noted that these crops are movable.

The third exception is grass. It consists of all the short plants having long harrow leaves. These are
movable properties, whether they are cut or not. The main use of grass is for fodder purposes.

Difference between movable property and immovable property

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As a general rule, a determinate or specified portion of land, or benefits that arise from that land,
along with the things attached to the earth, falls under the purview of immovable property, whereas
the movable property includes standing timber, grass, crops, stocks, shares or any other property
that a person owns, and that is capable of being moved from one place to another.

In the case of Baijnath v. Ramadhan and Anr. (1962), it was held that the intention of the owner
while planting the tree clarifies whether a tree will be considered as standing timber or not. In
another case of Kapoor Construction v. Leela Nagaraj & Ors. (2005), it was held that three factors,
namely, intention, mode of annexation and degree of annexation, determine whether the property is
movable or immovable.

It is pertinent to note that while distinguishing between the above two, the first thing that is
considered is that movable property can be transferred from its position without causing damage or
change in its shape, size, colour or appearance. The same is not the case with immovable property.
Any attempt made to move immovable property might affect the property.

A sale deed of a mortgaged property, right of worship, promissory note, a piece of machinery or
whole machinery, a right to recover maintenance or any allowance, royalty, gold or any jewellery
that a person owns in his name, all these come under the category of movable property. Factory,
right of the ferry, fishery, harvesting, right to collect rent, a reversion in property leased, right to
collect the fruits of trees that are grown in one’s ownership, etc., are some examples of immovable
property.

If a thing or even the slightest of its parts is attached to the earth and goes deeper, then it is
considered immovable property. However, if something is just lying on the earth on its own weight,
then the same is regarded as movable property. While considering the provision of transfer,
registration is required in immovable property, but this is not the case in movable property.

Case laws

Jagdish v. Mangal Pandey (1985)

Facts of the case

In the present case, the respondent herein filed a money suit against one Chingi and his son in
regard to the execution of a decree. In this case, one-half of the share constituted agricultural land
which consisted of trees and bamboo clumps attached to the land. The decree was passed by the
lower court and also the execution took place, considering the trees, and bamboo clumps as movable
property. These trees and standing timber were put to auction, which was later purchased by the

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respondents. The plaintiff objected to this auction and said it could not have been sold without their
knowledge. The purchaser was trying to cut these trees and bamboo.

Issue before the Court

The question before the court was to decide whether these trees and bamboo clumps will be
considered immovable property or movable property.

Judgement and Observation

The Allahabad High Court held that to determine whether a property will fall under the category of
immovable or movable property, the nature and intention must be taken into account first. In the
case of trees, the nature of the tree and the intention to cut will be considered first. If the intention is
to let it remain attached to the earth, it will be deemed as immovable property, and if the intention is
to cut it, the same shall be considered movable property.

State of Orissa v. Titagarh Paper Mills Company Limited

Facts of the case

In the case of Titagarh Paper Mills, a dispute arose concerning a notification issued by the
government in view of Section 3B of the Orissa Sales Tax Act, 1917, where the Government of Orrisa
stated that standing trees and bamboos are liable for taxation on the turnover of purchase. Several
writ petitions were filed by the persons who entered into a contract with the state for the sale of
timber and bamboo. The petitioners contended before the High Court that the subject matter in
relation to the contract was not the sale or purchase of goods but for the lease of immovable
property. Thus, the royalty paid in such a case is not liable for taxation under sales or purchase tax.

Issue before the Court

The court was to decide whether the above-mentioned trees and bamboo will fall under the category
of benefits arising out of the land.

Judgement and observation

The Supreme Court affirmed in favour of the respondents stating that “felling, cutting, obtaining
and removing bamboos from forest areas for the manufacture of paper” fall under the category of
benefits arising out of the land. Thus, it amounts to interest in immovable property.

Conclusion

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 Transfer of property Act 1882
The concept of property has been in existence for hundreds and thousands of years, and the same
has seen a drastic evolution in its meaning, nature and scope. The term property as focused on in
this article is divided into two subheads, namely, movable and immovable property. Both categories
of property consist of certain rights and duties on the owner’s part as stated under the Indian
Statute. To sum up, generally, it can be said that everything attached to the earth with the intention
of permanently fixing the same comes under the purview of immovable property. Apart from this,
everything else falls into the category of movable property.

Notice (Actual and Constructive) Actionable Claims

Introduction

The concept of Notice for the purpose of The Transfer of Property is given under Section
3 of Transfer of Property Act, 1882 (TPA). Notice means to have knowledge of something i.e. to
know something. In law, it means knowledge of a fact. It is used to decide on conflicting claims of
two parties. In law, the Notice or Knowledge of a fact affects one’s legal rights and liabilities.

Under Section 3 of TPA Notice can be; “Actual or express Notice” or “Constructive Notice”, or it may
be imputed to the transferee when information of the fact has been obtained by his Agent.

Express or Actual Notice

Actual notice means when a person actually knows about the existence of a fact. The fact must be
definite information given in the course of negotiations by a person interested in the property. The
information of fact should not be a rumour or hearsay and thus is not bound by such information.

In other words, actual notice takes place when the information is such that it would operate upon
the mind of a rational man and would make him act based on the knowledge so acquired.

Constructive Notice

According to Section 3, a person is said to have notice of a fact, which he would have known, but for
his “gross negligence” or “willful abstention from making an enquiry or search” does not know.
However, it is such knowledge which a person with ordinary prudence ought to have known. In

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other words, constructive notice of facts are those facts which a person ought to have known, but
because of gross negligence or wilful abstention does not know it.

Thus in Constructive notice, there is a legal presumption, that a person should have known a fact as
if he actually knows it.

Therefore Constructive notice is knowledge of those facts which a court imputes on a person. If the
circumstances indicate that a reasonably prudent person ought to have known a particular fact
related to the transaction of transfer, then he will be deemed to know it.

Illustration: A sells the house by a registered document to B. He later enters into a contract with C
to sell him the same house. Law imposes a duty upon C to inspect the registers at the Registrar’s
office, and if he does that, he would come to know about the sale in favour of B. A failure to inspect
the register will be detrimental to the interests of C, as he would be imputed with constructive notice
of the registered transaction.

Wilful abstention from enquiry or search

Wilful abstention can be understood from observations in Jones v. Smith (1841)

“cases in which the court is satisfied from the evidence before it that the party charged has
designedly abstained from the inquiry for the purpose of avoiding it”.

For wilful abstention, there has to be some starting point, some hint or suspicion which would
require some investigation to reveal the truth about a transaction. If in such cases the transferee
fails to investigate, with a fraudulent intention to not know the real truth, then the court will assume
that the transferee had some idea of that fact.

For instance, if a property is mortgaged to a bank by deposit the title deeds and the mortgagor later
sells the property to a lady without disclosing the fact of the mortgage, and she does not insist on
inspecting the title deed, then it will be presumed that the buyer willfully abstained from inquiring
and will be imputed with constructive notice of the mortgage.

Gross Negligence

Constructive notice also applies where the transferee ought to have known some fact, but because of
gross negligence, he is unaware of it. Gross Negligence was explained in Hudston v. Viney as gross
negligence “does not mean mere carelessness”. It means carelessness of such an “aggravated
nature”, that indicates an attitude of “mental indifference to obvious risks”.
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For instance, If the transferee fails to read a note on the paper that the property is subject to a
charge, while the papers are in his possessions, then the court will not entertain the plea of no Notice
and will impute knowledge or notice of charge.

Thus Constructive notice demands due diligence with respect to transactions related to the transfer
by the transferee.

Illustration: A sold his property to B for 10lakhs and delivered possession of it to B. B pays 5 lakh
immediately, at the time of conclusion of the contract and promises to pay the balance 5 lakh after 6
months.

The fact that the balance of 5 lakh has to be paid by B to A is written in the title deed. B eventually
fails to pay A the remaining amount and mortgages this property by depositing the title deed to C
and gets a loan of 5 lakh from C on the basis of the title deed.

B fails to pay C also and this property which was mortgaged to C is sold by C.

Now A files a suit against C to recover his 5 lakh. The question whether C is liable or not will be
decided by imputing Constructive Notice to C. It must be noted that it was already written in the
title deed that B has to pay A the balance amount and these title deeds were in possession of C and
on the basis of these title deeds the loan was advanced to B. Thus it can be said that C “would have
known” about the nature of the title deed.

Moreover, C as a reasonably prudent person ought to have examined the title deed carefully to get
notice of the fact that B is supposed to pay A 5 lakh.

If he fails to do that he has committed “gross negligence” under Section 3 of TPA. Further, if he had
examined the deeds and discovered the fact of payment to A, then he ought to have investigated
further. If he does not do it then he is guilty of “willful abstention from making an enquiry or search”
under section 3 of TPA.

Thus, whether the transferee is to be imputed with constructive notice or not has to be determined
by the circumstances, surrounding a transaction. Thus it is a question of fact and not of law.

Similarly, where the bank returns the title deeds, which are the only security it has against the loan
advanced by it, and the owner mortgages the same title deeds with another bank to secure an
overdraft, the first bank is guilty of gross negligence in parting with the title deeds. (In Lloyd’s Bank
v. PF Guzdar & Co)

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Registration of Document as Constructive Notice

According to Explanation 1 to Section 3, if a transaction relating to the immovable property needs to

be effected by a registered instrument, under law, then the registration of the document will be
deemed as Constructive Notice. The notice of such instrument will be deemed from the date of
registration of such instrument.

It must be noted that registration amounts to notice only when it is required by law. If registration
is not compulsory under law, then the fact of registration does not amount to notice under TPA.

A sells the house by a registered document to B. He later enters into a contract with C to sell him the
same house. Law imposes a duty upon C to inspect the registers at the Registrar’s office, and if he
does that, he would come to know about the sale in favour of B. A failure to inspect the register will
be detrimental to the interests of C, as he would be imputed with constructive notice of the registered
transaction. All purchasers are thus under a legal obligation to exercise diligence in examining the
title recorded in the register to avoid uncertainties and the risk of any sort.

Further Explanation 1 to Section 3 states that Constructive notice of registration will take place only
if 3 conditions are satisfied:

1. That the document was registered in accordance with the Registration Act, 1908.

2. That the instrument or memorandum has been duly entered in the book or registers kept
under Section 51 of the Registration Act, 1908.

3. And that the particulars of the transaction have been correctly entered in the index
under Section 55 of the Registration Act.

Actual Possession as Notice

According to Explanation 2 of Section 3, a person acquiring an immovable property shall be deemed

to have notice of the title of any other person, who for the time being actually possesses the
property.

It means that when a person, other than the transferor/owner, is in actual possession of the
property, then it is necessary for a prospective buyer of that property, to ascertain all the rights,
which the person in actual possession really has related to the property.

Thus it is the duty of the subsequent purchaser to inquire, about the precise character of possession,
from the person, who for the time being actually possesses the property.

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For instance, A lets out his property to B by a registered lease deed for 10 years. Before the expiry of
the said period, A enters into another contract with C, by which he agrees to sell it to C for a
consideration. Now C must inquire from the tenant (B), about the nature of possession by B, because
C nevertheless will be bound by the constructive notice of B’s title.

However, for constructive notice of possession, the possession must be actual possession and not
constructive possession. For instance, A contracts to sell land to B, and B puts another person in
possession of the land. A further sells land to C. In this case C is not affected by the notice of B’s
interest.

Notice of Agent

The general principle of the law of agency is that an agent stands in the place of the principle thus
notice of fact by the agent will be deemed to be noticed by principle as well. This is based on the legal
maxim qui facit per alium facit per se i.e. He who does by another does by himself.

The notice of a fact will be imposed on the principal irrespective of whether his agent did actually
communicate the fact to the plaintiff or not. The principle behind this is that no person would be
allowed to get rid of the doctrine of notice by simply employing an agent. This is to protect the
innocent party. In Gokul das v. Eastern Mortgage & Co. it was held that knowledge or information
obtained by a solicitor or, in any case, will bind him as well.

However, the agent’s knowledge will not operate as knowledge of the principal, where the agent
fraudulently conceals the fact from the principal. But mere concealment of fact will not amount to
this aspect as a defence. For this to act as a defence, the party imputing Constructive notice to the
principal must act in collusion with the agent or is aware of agents’ fraud.

Conclusion

Thus it can be said that Constructive notice is a manifestation of the rule of Caveat Emptor. This is
because according to Constructive notice, a person ought to have known a fact as if he actually does
know it. It presupposed that in property translation a transferee ought to ascertain and verify
certain facts for safeguarding his own interest. Thus he must be aware of the nature of the
transaction. These facts may relate to property or the transferor, like whether the property is free of
any charge or encumbrances or whether the transferor is competent to transfer the property or not.

If the property is encumbered, then the exact nature of the encumbrance ought to be ascertained by
the transferee. Law puts it as the duty of the transferee, as a reasonably prudent person to be
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reasonably vigilant and diligent to ascertain the facts, inspect the documents relating to property in
possession of the transferor, inspecting concerned persons, even with relevant statutory authorities,
if required. Failure to do this would result in the imposition of Constructive notice.

Actionable claim is defined under section 3 of the Transfer of Property Act 1882. According to
section 3 of the transfer of property Act, actionable claim means, a claim to any debt, other than a
debt secured by mortgage of immovable property or by hypothecation or pledge of moveable
property, or to any beneficial interest in movable property not in the possession, either actual or
constructive, of the claimant, which the civil courts recognize as affording grounds for relief,
whether such debt or beneficial interest be existent, accruing confidential or contingent.

Actionable claims are recognised by the court of law in order to provide with relief in reference to
unsecured debt or beneficial interest in movable property.

Debt: A debt is a liquidated or certain sum of money which debtor is under the obligation to pay. It
can vary from being in present and in future. Debts can be secure and unsecured. When the debt is
due in present it becomes and existing debt and when it is due in future it is called accruing debt.

Unsecured money debts:

i. When in a security of an immovable property, the debt is secured by a mortgage.

ii. When the security is some movable property and that property is pledge and hypothecation.

When the security is debt secured by a mortgage, hypothecation, pledge it can not be claimed under
actionable claim.

Secured debts: The debtor can have debts under certain payable conditions, which refer as
conditional debt. In a similar way there is contingency and the debts payable on the happening of a
contingency it is called contingent debts.

Actionable claims include:

1. A maintainer allowance payable at a future date

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2. A right to the proceed of a business

3. A partners right to sue for an account of a dissolved partnership

4. Annuities payable under deed of wakf

5. The price payable by a purchaser of immovable property before the execution of the
conveyance

6. The right to recover the money left in the hands of vendee

7. An amount due under a policy of insurance

8. An amount due under letter of credit

9. Right to recover back the purchase money on the sale of being set aside

10. Arrears of rent

11. Future rents

12. A decretal debt or

13. Interest of purchaser of the lottery in the prize money

Non actionable claims

1. A judgement debt or decree

2. A claim to compensation for a canal constructed by the government on a part of mining site
before the transfer of the mining lease and

3. A claim to mesne profits as they are unliquidated damages

Actionable Claim can be transferred under Section 130 of Transfer of Property Act, 1882

1. The transfer of an actionable claim whether with or without consideration shall be effected
only by the execution of an instrument in writing signed by the transferor or his duly

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authorized agent, shall be complete and effectual upon the execution of such instruments, and
thereupon all the rights and remedies of the transferor, whether by way of damages or
otherwise, shall vest in the transferee, whether such notice of the transfer as is hereinafter
provided be given or not:
Provided that every dealing with the debt or other actionable claim by the debtor or other
person from or against whom the transferor would, but for such instrument of transfer as
aforesaid, have been entitled to recover or enforce such debt or other actionable claim, shall
(save where the debtor or other person is a party to the transfer or has received express
notice thereof as hereinafter provided) be valid as against such transfer.

2. The transferee of an actionable claim may, upon the execution of such instrument of transfer
as aforesaid, sue or institute proceedings for the same in his own name without obtaining the
transferor's consent to such suit or proceedings and without making him a party thereto.

Illustrations

i. A owes money to B, who transfers the debt to C. B then demands the debt from A, who, not
having received notice of the transfer, as prescribed section 131, pays B. The payment is valid,
and C cannot sue A for the debt.

ii. A effects a policy on his own life with an Insurance Company and assigns it to a Bank for
securing the payment of an existing or future debt. If A dies, the Bank is entitled to receive the
amount of the policy and to sue on it without the concurrence of A's executor, subject to the
proviso in sub-section (1) of section 130 and to the provisions of section 132.

General Principle

The transfer of an actionable claim whether with or without consideration shall be effected only:

i. by the execution of an instrument in writing;

ii. signed by the transferor or his duly authorised agent;

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iii. it shall be complete and effectual upon the execution of such instrument, and thereupon;

iv. all the rights and remedies of the transferor, whether by way of damages or otherwise

v. shall vest in the transferee;

vi. irrespective of whether such notice of the transfer be given or not.

Following are valid transfers:

i. An actionable claim includes future debts, and therefore there can be a valid assignment of
future book debts;

ii. Transfer of a right to a sum of money;

iii. Transfer of the right to participate in the draw to be held in a lottery;

iv. Assignment of dividends of a share in a company;

v. A gift of actionable claim valued at rupees three lakhs;

vi. The right, to demand the re-conveyance of property;

vii. The interest of a buyer of goods in a contract for forward delivery;

viii. The benefit of a contract giving an option to purchase land may be assignable;

ix. If the contract has been broken, a difference due on cross contracts in which delivery is not to
be given or taken, is a debt or actionable claim and is assignable;

x. An engagement to pay out of a specific fund can be conferred in favour of a creditor by way
of an irrevocable power of attorney and constitutes an equitable assignment.

Following are invalid transfers:

1. A decree is not an actionable claim, and therefore, there cannot be transfer of part of the
decree;

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2. There cannot be an assignment of the promissory note, though there can be an assignment of
debt;

3. Transfer of a collateral security does not transfer the loan; mortgage debt is not an
actionable claim, and an unregistered assignment of a mortgage debt might be treated as an
assignment of the debt dissociated from the security;

The benefit of a contract giving a power of submission to arbitration is personal to the parties and
cannot be assigned.

Definition and Meaning of Transfer

Non-Transferable Properties

Introduction
Meaning of Transfer of Property

Section 5 of the Transfer of Property Act, 1882 defines the term transfer of property. According to
this section, transfer of property means an act by which a living person conveys property, in
present or in future, to one or more other living persons, or to himself and other living persons. The
phrase “living person” includes a company or association or body of individuals, whether
incorporated or not, but nothing in this section shall affect any law for the time being in force
relating to or by companies, associations or bodies of individuals.

The word property in the Act has been used in one of the following senses:

(i) Tangible material things like house.

(ii) Rights which are exercised over material things like the right to sell or make a gift of things.

(iii) Rights which are not exercised over any material such as the right to repayment of a debt.

The expression transfer of property implies various meanings. One sense maybe transfers of things
such as the sale of a house. Another sense maybe transfer of one or more of the rights in a thing such
as mortgage of a house or transfer of a debt.

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Thus, if a new title has not been created or some interest has not been transferred in favour of the
Transferee, then the transfer of property cannot take effect.

An analysis of section 5 helps us understand the meaning of the phrase, “transfer of property”.
Thus, transfer of property means an act which may take effect in the present or future. The property
in question must be in existence at the time the transfer takes place. Moreover, the conveyance of the
property must be from one living person to another.

What may be Transferred

Section 6 of the Transfer of Property Act, 1882 discusses the property which may be transferred. The
section states that property of any kind may be transferred. However, Clauses (a) to (i) of section 6
mention the properties which cannot be transferred.

Clause (a) describes spes successionis cannot be transferred. This clause states that the transfer of a
bare chance of a person to get a property is prohibited under this section. For example, Arun
expecting that Chandini, his aunt, who had no issues, would bequeath her house worth Rs. 50,000
transfers it to Bhushan. The transfer is invalid as it is a mere matter of chance of receiving the
property on the part of Arun. Thus, it is invalid.

Clause (b) mentions that the right of re-entry cannot be transferred. The right to re-entry implies a
right to resume possession of the land which has been given to someone else for a certain time. The
section mentions that the right of re-entry cannot be transferred by itself apart from the land. For
example, A grants a lease of a plot of land to B with the condition that if shall build upon it, he would
re-enter — transfers to C his right of re-entering in case of breach of the covenant not to build. The
transfer is invalid.

Clause (c) mentions that easement cannot be transferred. An easement is a right to use or restrict
the use of land of another in some way. For example, the right of way or right of light cannot be
transferred.

Clause (d) mentions that an interest restricted in its enjoyment of himself cannot be transferred. For
instance, if a house is lent to a man for his personal use, he cannot transfer his right of enjoyment to
another.

Clause (dd) restricts the transfer of the right to maintenance. Such a right cannot be transferred as
such right is for the personal benefit of the concerned person.

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Clause (e) provides that mere right to sue cannot be transferred. The prohibition has been imposed
as the right to sue is a right which is personal and exclusive to the aggrieved party. For example, a
person cannot transfer his right to sue for the damages suffered by him due to breach of contract by
the other party.

Clause (f) forbids the transfer of public offices. The philosophy behind the prohibition is that such a
transfer may be opposed to public policy in general. A person is eligible to hold a public office on the
grounds of his personal qualities, and such qualities cannot be transferred. Thus, the transfer of
public offices is prohibited under this section.

Clause (g) of section 6 provides that pensions cannot be transferred. Pensions allowed to military
and civil pensioners of government and political pensions cannot be transferred. In simpler terms, a
pension may be understood as any periodical allowance which may be granted in regard to any
right of office but only on account of the past services offered by the pensioner.

Clause (h) of this section is titled as nature of nature. This clause prohibits transfer which will
oppose the interest affected thereby. The transfer is also forbidden if the object or consideration of
the transfer is unlawful. Moreover, a transfer by a person who is legally disqualified from being a
transferee is also forbidden.

Clause (i) of section 6 was inserted by the Amendment Act of 1885. The clause declares that certain
interests are untransferable and inalienable. For example, a farmer of an estate, in respect of which
default has been made in paying the revenue, cannot assign his interest in the holding.

Thus, section 6 containing clauses (a) to (i) specifically mention that certain things cannot be
transferred. Such a transfer if undertaken would be invalid in the eyes of the law in India.

Person competent to Transfer

Section 7 enumerates the concept of competency of persons who may be allowed to transfer
property. According to this section, a person is allowed to transfer property if he satisfies two
conditions. The first condition is that the person must be competent to enter into contracts with
other persons. The second condition is that the person who is willing to transfer property must have
title to the property or authority to transfer it if he is not the real owner of the property.

An important point to be noted in this regard is the conditions mentioned in section 11 of the Indian
Contract Act, which specifies the category of persons who may be competent to transfer. In the
section, it is stated that the person must have attained majority, he must be of sound mind, and he
must not be disqualified to enter into contracts by any other law applicable in India.
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Operation of Transfer

Section 8 of the Transfer of Property Act expresses the concept of operation of the transfer. The
first paragraph states that the courts must, in the absence of a contrary intention, hold that the
transferor indented to transfer all his interests and legal incidents in the property. Where the
property transferred island, all the legal incidents such as easements, rents and profits and things
attached to earth shall be transferred. Where the property to be transferred is a house, easements,
the rents accruing after the transfer, locks, keys, bars, doors etc. shall also be transferred. Where the
property to be transferred is machinery attached to the earth, in such a case, movable parts of the
machinery shall also be transferred. In cases where the debt is transferred, the legal incident that is
securities shall also be transferred. Where the property is money or other property which may yield
some kind of income, then the interest or income accruing after the transfer takes effect shall also be
transferred. In other words, the property and the legal incidents attached to the property shall be
transferred as part of the same transaction.

Oral Transfer

Section 9 of the transfer of property act, 1882 elaborates the concept of oral transfer. It mentions
that property may be transferred orally in cases wherein it has not been expressly mentioned that
the property must be by law transferred in writing. Writing is necessary in the following cases:

(i) Sale of immovable property having a value of more than rupees hundred. (Provided under
section 54 of the Transfer of Property Act, 1882)

(ii) Sale or reversion of other intangible things. (Provided under section 54 of the Transfer of
Property Act, 1882)

(iii) Simple mortgage. (Provided under section 59 of the Transfer of Property Act, 1882)

(iv) All other mortgages are securing rupees hundred or more. (Provided under section 59 of the
Transfer of Property Act, 1882)

(v) Leases of immovable property from year to year or for a term exceeding one year or reserving a
yearly rent. (Provided under section 107 of the Transfer of Property Act, 1882 )

(vi) Exchange. (Provided under section 108 of the Transfer of Property Act, 1882)

(vii) Gift of immovable property. (Provided under section 123 of the Transfer of Property Act, 1882)

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(viii) Transfer of actionable claim.(Provided under section 130 of the Transfer of Property Act,
1882)

Condition Restraining Alienation

The section 10 of the Transfer of Property Act states that where a property is transferred subject to a
condition absolutely restraining the Transferee from parting with his interest in the property, the
condition is void. For instance, if A transfers his property to B with the condition that B shall never
resell it. The condition imposed is void and B may sell or not sell as he wishes to do. The philosophy
behind this section is that a right of transfer cannot be separated from the ownership of the
property. The rule that a condition of absolute restraint is void is based on the principle of a public
policy allowing free circulation and disposal of property.

Illustrations

A transferred a field to B with the condition that if B sold it, he must sell it to C and to nobody else.
The condition was held to be void as the name of the person who alone was permitted to purchase
might be so selected as to render it reasonably certain that he would not buy the property at all.

Restrictions Repugnant to Interest Created

Section 11 of the Transfer of Property Act, 1882 is titled as restriction repugnant to interest created.
The section states that any condition restraining the lawful enjoyment of the property which is
transferred absolutely is void. Any such condition if imposed shall be considered non-existent and
any such transfer will operate as if no such condition was imposed in the first place. In other words,
if a man makes a transfer of property absolutely, he shall not be allowed to impose upon the
Transferee any condition which imposes a restriction on the right of the Transferee to dispose or
enjoy the property as per his own will. The section refers to absolute interest only. Absolute interest
implies that:

(i) There should be a transfer of property.

(ii) An interest in the property in favour of Transferee should be created.

(iii) The term of transfer should direct that such interest shall be applied for enjoyment in a
particular manner only.

A careful reading of section 11 helps us understand that the second paragraph of the section states
the exception that has been provided by the Act. The second paragraph states that,

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

Thus the general rule provided under section 11 is subject to the above-mentioned exception. In
simpler words, the transferor may impose condition restraining the enjoyment of land if such
restriction is for the benefit of the adjoining land.

Illustrations

A makes a gift of the house to B on a condition that the gift will be forfeited if B does not reside in it.
The Condition is valid for the gift is not an absolute gift. The condition would have been void if the
gift was an absolute gift.

Conclusion

Hence, it can now be clearly understood that the transfer of property is a multi dimensional
concept. The person transferring the property and the person receiving the property become a part
of the transaction owing to their rights and legal obligations enshrined in the Transfer of Property
Act, 1882

Transferable property refers to property that can be legally transferred or assigned to another
person. The transfer of ownership can be either by way of sale, gift, or any other legal means.
Examples of transferable property include real estate, vehicles, shares, and patents.

Non-transferable property, on the other hand, refers to property that cannot be legally
transferred or assigned to another person. Examples of non-transferable property include personal
talents, skills, and abilities. For example, a professional athlete cannot sell their ability to play a
sport to another person.

NON-TRANSFERABLE
BASIS FOR TRANSFERABLE PROPERTY
PROPERTY
COMPARISON
Definition Property that can be legally Property that cannot be legally
transferred or conveyed from one transferred.

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NON-TRANSFERABLE
BASIS FOR TRANSFERABLE PROPERTY
PROPERTY
COMPARISON
person to another.

Ownership Can be owned by individuals, legal Usually owned by the government

entities, or even animals or birds. or held in trust.

Transferability Can be transferred through a legal Cannot be legally transferred.

process, such as sale, gift, or
exchange.

Legal Restrictions May be subject to certain legal Often subject to stricter legal
restrictions, such as zoning laws, restrictions and regulations, which
building codes, or environmental may limit its use or even prevent its
regulations. transfer.

Marketability Usually more marketable and May have limited or no commercial

valuable because it can be legally value.
bought and sold.

Transfer in favour of Unborn Persons.

Introduction

Section 5 of the Transfer of Property Act, 1882 defines the phrase “transfer of property”. The
section provides that “transfer of property” means an act by which a living person conveys
property, in present or in future, to one or more other living persons, or to himself and one or more
than one living persons; and “to transfer property” is to perform such act. Further provision to the
section mentions that “living person” includes a company or association or body of individuals,
whether incorporated or not, but nothing mentioned here shall affect any law which is operational
in India relating to transfer of property to or by companies, associations or bodies of individuals.

Thus, bare reading of the above mentioned section helps us understand that the conveyance of the
property must be from one living person to another living person. When it is said that both the
individual must be living, it is implied that transfer by will does not come within the scope of section

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5 as such transfers come into effect only after the death of the person who is executing the will.
However an exception to this section is section 13 which facilitates the transfer of immovable
property in favour of an unborn person.

The provisions of Transfer of Property Act, 1882 in general do not allow the transfer of property
directly to an unborn person. Before discussing the concept further, let us understand the meaning
of unborn person in reference to this act. A person who does not have any current existence but has
a specific reference to one and who may be born in the future is considered to be an unborn child or
person. Even though a child in mother’s womb is simply not a person in existence, but has been
treated as a person under both Hindu Law and English Law. Therefore, it should be noted that the
term ‘unborn’, refers not only to those, who might have been perceived but not yet born, that is a
child in womb, but also includes those who are not even perceived. Whether they will be born at all
or not is all possibility, but a transfer of property is admissible to be effected for their benefit. After
understanding the meaning of the phrase “ unborn person”, now let us examine the concept
enshrined under section 13 of the Transfer of Property Act, 1882.

Provision Under Transfer of Property Act, 1882

Section 13 of the Transfer of Property Act, 1882 provides that when for the transfer of property, an
interest therein is created for the benefit of an unborn person at the date of the transfer, a prior
interest is to be created in respect of the same transfer and 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 person
transferring the property in the property to be transferred.

Thus, in order to transfer a property for the benefit of an unborn person on the date of the transfer,
it is imperative that the property must first be transferred by the mechanism of trusts in favour of
some person living other than the inborn person on the date of transfer. In simpler terms, it can be
said that the immovable property must vest in some living person between the date of the transfer
and the coming into existence of the unborn person as the property cannot be transferred directly in
favour of an unborn person.

In other words it can be said that the interest of the unborn person must in all cases be preceded by
a prior interest. Moreover,when an interest is created in favour of an unborn person, such interest
shall take effect only if it extends to the whole of the remaining interest of the person transferring
the property in the property, thereby making it impossible to confer an estate for life on an unborn
person. The interest in favour of the unborn person shall constitute all of the entire remaining

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interest in the estate. The underlying principle in section 13 is that a person disposing of property to
another person shall not cause obstruction in the free disposition of that property in the hands of
more than one generation. Section 13 does not apply restrictions on the successive interest being
created in favour of several persons living at the time of operation of the transfer. What is provided
as a restriction under section 13 of the Transfer of Property Act, 1882, is the grant of interest,
limited by time or otherwise, to an unborn person.

Thus, it can be said that if the persons for whose benefit the transfer is to take effect are living, any
number of successive life interests can be created in their favour. However, an important point to
note here is that if the interest is to be created in favour of persons who have yet not taken birth,
then in that case absolute interest must be granted to such unborn persons.

Essential Elements of Section 13

The essential elements of section 13 have been discussed below. They are as follows:

1. No Direct Transfer

A transfer cannot be directly made to an unborn person. Such a transfer can only be brought into
existence by the mechanism of trusts. It is a cardinal principle of property law that every property
will have an owner. Accordingly, if a transfer of property is made to an unborn person, it will lead
to a scenario wherein the property will remain without an owner from the date of transfer of
property till the date the unborn person comes into existence.

2. Prior Interest

If the circumstances are such that there is no creation of trust, then in that case the estate must in
some other person between the date of transfer and the date when the unborn person comes into
existence.In simpler words we can say that the interest in favour of an unborn person must always
be preceded by a prior interest created in favour of a living person.

3. Absolute Interest

The entire property must be transferred to the unborn person. The transfer to an unborn person
must be absolute and there should be no further transfer from him to any other person.An interest
which remains only for the lifetime cannot be conferred on an unborn person. Under the English
law, an unborn person can be conferred an estate only for his lifetime. This concept of English law,
however, is subject to a restriction known as the rule of double possibilities. This rule was
recognised in the case of Whitby Mitchell. The rule states that life interest to an unborn person

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should not be transferred as doing so will give rise to existence of two possibilities. The first
possibility will be the birth of the unborn person to whom the life estate was to be transferred and
the second possibility will be the coming into existence of issues of that unborn persons. Thus, the
transfer of property to an unborn person can be permitted only if the absolute interest is transferred
and not just the life estate.

Illustration

“A” owns a property. He transfers it to “B” in trust for him and his intended wife successively for
their lives. After the death of the survivor, it is to be transferred to the eldest son of the intended
marriage for his life, and after his death, it is to be transferred to A’s second son. The interest so
created for the benefit of the eldest son does not take effect because it does not extend to the whole of
A’s remaining interest in the property.

When an Unborn Person Acquires Vested Interest

The provisions of section 20 of the Transfer of Property Act, 1882 mention the concept that in what
circumstances unborn person acquires vested interest. Unborn person may not be able to enjoy the
possession of property as soon as he is born but he may, however, acquire a vested interest in the
property since his birth. Where, on a transfer of immovable property interest is created for the
benefit of an unborn person, he acquires upon his birth, a vested interest, although he may not be
entitled to the enjoyment thereof immediately on his birth.The mentioned provision however may be
waived off if the terms of the agreement mention a contrary clause.

The section lays down that an interest created for the benefit of an unborn person vests in that
unborn person as soon as he is born. Such interest remains vested interest even though he may not
be entitled to the enjoyment thereof immediately on his birth.

For example, if “A” transfers an estate to trustees for the benefit of A’s unborn son with a direction to
accumulate the income of such estate for a period of ten years from the date of the birth of A’s son
and then to hand over the funds to him. A’s unborn son acquires a vested interest upon his birth,
although he is not entitled to take and enjoy the income of the property for a period of ten years.

Views of the Apex Court in Reference to the Transfer to Unborn Person

The Supreme Court of India in various cases from time to time has interpreted the provisions of the
Transfer of Property Act,1882 in respect of the transfer of property done for the benefit of unborn
persons. In the famous case of Girjesh Dutt vs. Datadin, the Apex Court made important
observations. Facts of the case enumerate that “A” made a gift of her properties to “B”, who was her

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nephew’s daughter. The gift made by A was made for the life of B and then to B’s daughter without
power of alienation and if there was no heir of B, whether male or female, then to A’s nephew. B
died without having any children. Thus considering the facts of the case, the court held that the gift
in favour of unborn daughters was invalid under Section 13 as the gift was a limited interest and
also subject to the prior interest in favour of B.

Another case related to this concept is of Raja Bajrang Bahadur Singh v. Thakurdin Bhakhtrey
Kuer. In the instant case the Apex Court had observed that no interest can be created in favour of an
unborn person but when the gift is made to a class or series of persons, some of whom are in
existence and some are non existent, it does not fail completely, it is valid with respect to the persons
who exist at the time of testator’s death and is invalid with respect to the rest.

Conclusion

Thus from the above discussion it is clear that the transfer of property can be executed in respect of
unborn persons. Though, the transfer cannot be operated directly but it can be executed indirectly
by the machinery of trusts. In other words, the interest in favour of the unborn person shall
constitute the entire interest in that particular immovable property. The underlying fundamental
principle enshrined under section 13 of the Transfer of Property Act is that a person disposing off
property to another person shall not create hurdles for the free disposition of that property in the
hands of one or more generations.

Thus, for the validity of a transfer in favour of an unborn person, it is important that the whole of
the remaining interest of the person transferring the property should be conveyed to the unborn
person. Moreover, as soon as the transfer of property comes into operation, the vested interest is
also transferred to the unborn person. The transfer of immovable property to unborn persons can,
thus take effect only according to the provisions discussed above. Else, the transfer will be declared
as void.

Rule against Perpetuity

Only if human beings had their way they shall wish to live perpetually. However, laws of nature
prevail over mankind and all living beings are destined to perish. So, the next best Homo sapiens’
desire is to preserve and pass his real assets from generation to generation or vernacularly ‘pust
dar pust’, ‘naslan bad naslan’, ‘pidhi dar pidhi’.

Effects of perpetuity or generation to generation phenomena

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Imagine an asset that shall forever continue to remain within a family till eternity, and deprive all
others from enjoying its benefits. This impedes free and active circulation of property both for
purposes of trade and commerce, as well as betterment of the property itself. Can you imagine,
even the owner himself is denied the right to dispose it for higher value or to tide away difficult
times. Similarly, the state is divested from earning revenue, which is only possible if property can
change hands frequently. So, if perpetuities are allowed then even though the transferee has
received the property, he has no power to alienate it. To quote Sir D. Mulla, “It is illogical to
imagine a dead person below the grave controlling properties above his grave.” For this very
reason, the state and the lawmakers felt the need for drafting the ‘Rule against perpetuity’.

Perpetuity may arise under two circumstances: –

1. Transferor of property is deprived of the power of alienation.

2. Remote interest is created in the property but without the right of alienation to the
transferee.

However, a condition restraining alienation is void under section 10 of ‘The Transfer

of Property Act,’ (TPA), and remote interest is governed by section 14 of TPA.

Rule against Perpetuity

Section 14 of the ‘The Transfer of Property Act, 1882’ (TPA) is rightly called ‘Rule against
perpetuity’ as it limits the maximum time period beyond which property cannot be
transferred. Starting from the date that the transferor transfers the property + lifetime of the last
prior interest holder’s + gestation period of the unborn beneficiary + 18 years, ( ‘Age of majority of
persons domiciled in India’ under section 3 of The Majority Act, 1875). This period is called the
perpetuity period, and vesting of the property in the transferee cannot be postponed beyond this
limit.

The above transfer is contingent to many other conditions viz. sections 5, 10, 13, 15, 16, 18 and 20
of TPA. However, it is to be borne in mind that section 18 of TPA allows transfer in perpetuity for
benefit of public, and so provisions of section 14 & 16 do not apply in such cases.

Understanding section 13, 14 & 16 of TPA

These sections are complex and intertwined, so we will do ourselves a favor by breaking them
threadbare.

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 Transfer of property Act 1882
Section 13 TPA

“Transfer for benefit of unborn person – Where, on a transfer of property, an interest is created for
the benefit of a person not in existence at the date of the transfer, subject to prior interest created by
the 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.”

1. Person in existence: To begin with, the ultimate beneficiary of the transfer is an unborn
person, who is not yet in existence. Child may not be physically born, but from conception
itself, he is considered as a person in existence. Transfer of interest in property is valid from
the day of conception, though the same shall vest on birth of such child.

2. Prior Interest: Section 5 of TPA mandates transfer of property inter vivos or between
living persons only. Since, the transferor wishes to pass interest on to a person not in
existence, to overcome this predicament a prior interest is created in favor of living person on
the date of transfer.

3. Whole remaining interest: Prior interest transferred to a living person is lifetime

interest, which means he can enjoy the benefits of the property without alienation. In other
words, transferor transferred limited and not absolute interest. The remainder interest in the
transferred property is the right of alienation, which is still held by the transferor. For the
transfer to be valid in the hands of final beneficiary this right of alienation plus prior
interests together should reach the beneficiary.

Additional salient features of Section 13 TPA

1. Transferor cannot fetter the free disposition of the property in the hands of more than one
generation.

2. Section 13 does not prohibit successive interests, limited by time or otherwise, created in
favor of several persons living at the time of transfer. Prohibited is grant of interest,
limited by time or otherwise, to a person not in existence.

3. After the last life-interest if more than one, property must rest in someone for resting cannot
be perpetually delayed.

When all the above conditions are met, then only the transfer is held to be valid under section 13.

Section 14 TPA

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 Transfer of property Act 1882
“Rule against Perpetuity – 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.”

1. After the life-time: Here again, to safe-guard against violating section 5 of TPA, transfer
of property has to take place latest; during life-time of prior interest and conception of
beneficiary, otherwise the transfer shall fail.

2. Attains full age: The degree of transfer of interest in favor of beneficiary can be broken
into 3 stages. On conception interest is created, which becomes vested interest on birth i.e. as
per section 20 of TPA, and on attaining age of majority; absolute interest that includes
enjoyment of property, possession, alienation etc.

Section 16 TPA

“Section 16: Transfer to take effect on failure of prior interest – Where, by reason of any of the rules
contained in sections 13 & 14, an interest created for the benefit of a person or of a class of persons
fails with regards to such person or the whole of such class, any interest created in the same
transaction and intended to take effect after or upon failure of such prior interest also fails.”

1. Prior Interest fails under section 13 & 14: Before section 16 comes into operation, the
prior interest created should fail. This is because it does not fulfil either of the conditions
mentioned in section 13 & 14 for a person or a class of persons.

2. Fate of second interest: On failure of prior interest, the second interest which too is
created in the same transaction, and was to be exercised after or on failure of prior
interest, shall fail for all purposes.

Per contra under 15 of TPA, if interest is created in the same property for more than one person,
then it shall be valid for only those who fulfil the conditions of section 13 & 14 and fail for the rest.

Application of law against perpetuity in the practical aspect

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 Transfer of property Act 1882
To understand the same let us study the 1934 judgment of High Court of Oudh in case titled Girjish
Dutt vs. Data Din. Brief facts of the case are that one Mt. Sugga made a gift deed in favor of Mt.
Ram Kali who is the daughter of Data Din, son of Mt. Sugga’s real brother. The gift contained three
alternative contingent grants independent of each other namely: –

“12…..(1.) A grant to Mt. Ram Kali for life, with remainder to her sons and grandsons, dependent
upon the contingency that there was a son or a grandson or sons or grandsons alive at the time of
her death. (2.) A grant to Mt. Ram Kali for life, with remainder to her daughters for life,
dependent upon the contingency that there were no sons or grandsons alive at Mt. Ram Kali’s death,
but that there was a daughter or daughters alive at that time, and (3.) A grant to Mt. Ram Kali for
life, with remainder to Data Din, dependent upon the contingency that there were no sons or
grandsons or daughters alive at the time of Mt. Ram Kali’s death.”

Infra table about the gift deed: –

Validity of Gift deed as per Section 13 & 16 of TPA

Interest transferred Life

Contingency Ultimate beneficiary & Interest Transferred.
or Absolute

Life interest in favor of Remainder / Absolute interest in favor of

One
Mt. Ram Kali son/grandson if alive at the death of Mt. Ram Kali

Life interest in favor of Life interest in favor of daughters i.e. in the absence
Two
Mt. Ram Kali of sons / grandsons.

No issue of Mt. Ram Kali i.e. neither sons, grandsons

or daughters.
Life interest in favor of
Three
Mt. Ram Kali Therefore, absolute interest is transferred to Mr.
Data Din father of Mt. Ram Kali

“18. Admittedly Mt. Ram Kali had no children at the time when the gift was made in her favor and
she died issueless. The gifts therefore in favor of her male or female descendants were in favor of

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 Transfer of property Act 1882
unborn persons. These gifts were also clearly subject to the prior interest created by the same
transfer in favor of Ram Kali. Section 13, Transfer of Property Act, requires that such a transfer in
order to be valid must extend to the whole of the remaining interest of the transferor in the property.
As the gift over in favor of the sons or grandsons of Mt. Ram Kali related to the absolute interest, it
was clearly valid. It seems equally clear that the gift over to the daughters was void because the
transfer in their favor related merely to a limited interest….”

“19. If we analyze the section it will be seen that three conditions are necessary for its implication:
(1) There should be an interest created for the benefit of a person or a class of persons which must
fail by reason of the rules contained in Sections 13 and 14; (2) there should be another interest
created in the same transaction; and (3) the other interest must

be intended to take effect after or upon failure of the prior interest. We have already held that the
interest created for the benefit of the daughters fails by reasons of Section 13, T.P. Act. It is also clear
that the interest created in favour of Data Din is an interest created in the same transaction. There
can therefore be no doubt about the first two conditions being satisfied. The only question is whether
the interest created in favour of Data Din was one intended to take effect after or upon failure of
the prior interest created in favour of the daughters. It is agreed by both parties and is also clear
from the terms of the will that the gift in favour of Data Din was not intended to take effect after
the gift in favour of the daughters. The intention of the donor clearly was that Data Din should get
the property only in case the gift in favour of the male-descendants and the daughters of Ram Kali
failed. The case therefore seems to be fully covered by the words “upon failure of such prior
interest.”

Indian Succession Act (ISA) & TPA

Sections 113, 114, 115 and 116 of Indian Succession Act, 1925, (ISA) are true reflections of
sections 13, 14,15 & 16 of TPA. This is because, transfer of property also takes place under ‘Indian
Succession Act, 1925’ (ISA). It regulates intestate and testamentary succession i.e. when testator a
person makes a will before his death for the disposition of his property or when he dies without
making a will. A will comes into operation only on the death of the testator.

Exceptions to rule of perpetuity

1. Section 18 of TPA provides protection from rule against perpetuity when the transfer is in
favor of public viz. advancement of religion, knowledge, commerce, health, safety or any
other object beneficial to mankind.

2. Does not apply to personal agreements that do not create interest in property.
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 Transfer of property Act 1882
3. Renewal of lease agreements.

4. Covenant for redemption of property under mortgage.

5. Charge created over property, as this does not amount to transfer of interest.

6. Contract of pre-emption.

Conclusion

The rule against perpetuities limits the duration by imposing certain restrictions on the use,
enjoyment and transfer of property. Nevertheless, the rule against perpetuity along with relevant
sections of TPA are complex and abstract in its application, especially when seen through the eyes of
the transferor. Despite the best of intentions, the ultimate beneficiary or grantee may be deprived of
their interests through an inadvertent choice of words while drafting the pertinent covenant. It shall
not be an understatement that the majority of the so-called learned advocates drafting such
instruments are themselves incompetent to understand the subtilties of the law.

Rule against Accumulation

Introduction

 Doctrine of accumulation is a way to restrain the enjoyment of property. Put differently, it would
imply restricting the favorable use and pleasure derived from the property.
 The provision for Direction for accumulation is provided under Section 17 of the Transfer of
Property Act, 1882 (TPA).

Section 17 - Direction for Accumulation

 (1) Where the terms of a transfer of property direct that the income arising from the property shall
be accumulated either wholly or in part during a period longer than—
o (a) the life of the transferor, or
o (b) a period of eighteen years from the date of the transfer,
o Such direction shall, save as hereinafter provided, be void to the extent to which the period during
which the accumulation is directed exceeds the longer of the aforesaid periods, and at the end of
such last-mentioned period the property and the income thereof shall be disposed of as if the period
during which the accumulation has been directed to be made had elapsed.
 (2) This section shall not affect any direction for accumulation for the purpose of—

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o (i) the payment of the debts of the transferor or any other person taking any interest under the
transfer, or
o (ii) the provision of portions for children or remoter issue of the transferor or of any other person
taking any interest under the transfer, or
o (iii) the preservation or maintenance of the property transferred; and such direction may be made
accordingly.
For Example:
 A transfers his property in favour of B for life with the condition/direction that the income of the
said properties shall be accumulated during A’s life and shall be given to C is a valid direction of
accumulation.

Rule Against Accumulation Explained

 As per Section 11 of TPA, any condition which is repugnant to the interest created or
which restraints the enjoyment of property which was transferred absolutely is void
and in operative.
 The direction of accumulation of income is a kind of condition which is contrary to the interest
created or limiting the right to enjoyment in favour of the transferee to whom the property is
transferred absolutely.
 Section 17 of TPA is an exception to Section 11 as it permits a direction of accumulation of
income to operate in certain cases. But Section 17 and 11 are different in terms as Section 11 is only
applicable in cases of transfer of absolute interest whereas section 17 is applicable to all kinds of
transfer.
 Direction of accumulation of incomes and profits of property transferred as per the terms of TPA as
a separate fund means postponing the transferee’s right of beneficial enjoyment of the property
transferred.
 Like the postponement of vesting of interest is discouraged under Section 14 (rule against
perpetuity) the postponement of transferee’s right of beneficial enjoyment of property is also
discouraged under Section 17 (direction against accumulation) of the Act.
 Section 14 fixes the maximum permissible limit for postponing the vesting of interest and Section
17 prescribes the maximum permissible period up to which income and profits of the property
transferred can be accumulated. Section 17 allows accumulation of income during either of the two
following periods:
o The life of the transferor
o Period of 18 years from the date of transfer (whichever is longer one).

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 Transfer of property Act 1882
 Therefore, any direction or condition which makes accumulation of income is beyond the prescribed
period shall be held void. The result will be that at the end of the last-mentioned period (permissible
postponement) the property together with the incidental benefits shall go to the transferee.

Exceptions

 Payment of Debts
o If the purpose of the accumulation is payment of debt incurred by the transferor or anyone having
interest in property, then Section 17 shall not be applicable in that case.
 Raising Portions
o Raising portion means providing for a portion of income for maintenance. If the purpose of the
direction of accumulation of income on the property transferred is providing maintenance to the
children or remoter issue of the transferor or any other person interested in transfer.
 Preservation of Property
o In case the income of property was directed to be accumulated for the purpose of preservation and
maintenance of the property so transferred then also section 17 will not have application.

Concept under English Law

According to the English Law of Property Act, 1925, the income may be accumulated during any of
the following periods: -
 The life or lives of the transferor or transferors.
 21 years from the death of the transferor.
 During the minority of any person living at the death of the transferor.
 During the minority of any person, who would be entitled to the property, if he was of full age.

Doctrine of accumulation is a way to restrain the enjoyment of property.

According to Section 17(1), if the conditions of the transfer of property direct the income that arises
out of the property to be accumulated either wholly or in part for a period of time that is longer than
the lifetime of transferor or for a period of 18 years shall be considered to be void. These conditions
are alternative and not a combination, such as the lifetime of transferor and 18 years. This Section
sets limits for the direction of accumulation such as lifetime of transferor and as well as a time
period of 18 years. This principle is derived from Theluson v. Woodford[1]. However, the
registration of documents is compulsory as mentioned under Section 17.[2]

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The enactment of Section 10 to 17 of TOPA is for free alienation and circulation of property.[3]A
direction for the accumulation with gift is not considered to be profoundly wrong, it is said to be a
failure in case it is offending an independent rule of Hindu Law[4]. In instances of religious
endowment, direction of accumulation shall not be held illegal when the direction is not made for
the advantage either for the settlor or for the family members or when the object is reasonable
without the opposition by public policy.[5]

Section 17 is enacted on the terms based in English law, which are now combined in Sections 164-
166 of the Law of Property Act, 1925[6]that are reenacted with certain changes[7]. The purpose of
invalid provision is to make the accumulation void if it surpasses two statutory limits. However, the
accumulation disobeying the period as per the statute is void only to that extent.

Under the Mahomedan Law, the provision for accumulation will make sure that it is for the
advantage of the charitable purpose and shall not transgress the rule of perpetuities. The validation
of the object of wakf comes from the presentation of Fateha that includes the involvement of
expenditure.[8]The direction of accumulation of income in wakf is considered to a valid one.[9]
In instances, where the direct for accumulation of income is exceeding the time period specified, and
nonetheless authorizes the transferee to disregard the time period but without causing any defect to
the transfer, then Section 17 will make this valid. If the time period varies in few cases, then
maximum amount of time to be permitted will be based on the facts. Either the lifetime of transferor
or 18 years whatsoever is longer will be applied.

The exceptions mentioned under Section 14,16 and 17 shall not apply to cases where transfer of
property is for the public benefit with respect to advancement of religion, knowledge, commerce,
health, safety or any such beneficiaries. Similarly, rule of perpetuity would not apply. This exclusion
is incorporated in the Hindu law.[10]The main purpose of this Section is to distinguish transfer of
commercial and personal nature.

Idol is not considered to movable property. An image that is considered as a legal and spiritual
entity would not be called a property that is subject to gift.[11]A gift made for the purpose of dharma
is void and not certain.[12]Settlements for religious purposes[13], worship[14]or formation of
wakf[15]are good in law if there is no violation of rule against perpetuity. Whereas, a gift made for
the usage of playground for children or gymnasiums to endorse health will be considered as public
purpose.

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The property that is used for endorsing a hospital[16], eye care centers[17], places offering medical
facilities will be exempted from the rule against perpetuity. So, under these circumstances the
doctrine of accumulation of income shall remain inapplicable as it is meant for the purpose of the
public benefit.

UNIT:-2nd
Vested and Contingent Interests

Concept of Vested Interest

Section 19 of the Transfer of Property Act, 1882 states about Vested Interest. It is an interest
which is created in favour of a person where time is not specified or a condition of the happening of
a specified certain event. The person having the vested interest does not get the possession of that
property but has the expectancy to receive it upon happening of a specified certain event.

For example, A promises to transfer his property to B on him attaining the age of 22. B will have
vested interest in A’s property till the time he does not get the possession of it.

Death of the person who is having this interest will not have any effect over that interest as after the
deceased, the interest will vest in his legal heirs.

For example, in the above example, if B dies at the age of 21, then the interest vested in B will pass on
to the legal heirs of B and they will be entitled to the property in the prescribed time period.

There are the important aspects of a vested interest as stated above, all these are
discussed in detail below:

1. Interest should be vested: This is the basic meaning of the provision that lays down that
interest should be created in favour of a person where time is not specified or a condition of
the happening of a specified certain event. A person should profess to transfer a particular
property in order for this interest to be created.

2. Right to enjoy property is postponed: When interest is vested in a person, he does not
immediately get the possession of that property and hence cannot enjoy that property.

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But any person who is not a major and has a guardian is only entitled to the vested interest after he
attains majority.

For example, X agrees to transfer the property ‘O’ to Y and directs his guardian Z to give him the
property when he attains the age of 22. Y gets vested interest once he attains the age of 18.

1. Time of vesting: The interest is vested right after the transfer is initiated. Nothing can stop
the interest from vesting in the person in favour of whom the transfer is to be made.

2. Contrary Intention: The transferor can specify a particular time as to when the interest
will be vested in the person who will receive the property.

3. Death of the transferee: If the transferee dies before getting the property in his
possession, the interest vested in him will now vest in his legal heirs and they will get the
possession of that property once the condition is fulfilled.

In the case of Lachman v. Baldeo (1), a person transferred a deed of gift in favour of another
person but directed him that he will not get the possession of that property until the transferor
himself dies. The transferee will have a vested interest even though his right of enjoyment is
postponed.

Characteristics of Vested Interest

1) Vested interest creates a present right that is in effect immediately, although the enjoyment is
postponed to the time prescribed in the transfer. It does not entirely depend on the condition as the
condition involves a certain event.

2) Death of transferee will not render the transfer invalid as the interest will pass on to his legal
heirs.

3) Vested interest is a Transferable and heritable right.

Section 20 of the Transfer of Property Act, 1882 states about vested interest to an unborn child.
The interest in the property will be vested in him once he is born. The unborn child may not get the
right of enjoyment of the property immediately after having vested interest.

Concept of Contingent Interest

Section 21 of the Transfer of Property Act, 1882 states about Contingent Interest. It is an
interest which is created in favour of a person on a condition of the happening of a specified
uncertain event. The person having the contingent interest does not get the possession of that

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property but has the expectancy to receive it upon happening of that event but will not receive the
property if the event does not happen as the condition is not fulfilled. Contingent interest is entirely
dependent on the condition imposed on the transfer.

For example, A agrees to transfer the property ‘X’ to B on the condition that he shall secure 90 % in
his exams. This condition is uncertain and the happening of the event or not happening is in doubt
and therefore B here acquires a contingent interest in the property ‘X’. He shall get the property only
if he gets 90 % and when the condition is fulfilled.

In the case of Leake v. Robinson (2), the court held that whenever a condition involves a bequest
that is to be given ‘at’ a particular age or ‘upon attaining’ a particular age or ‘after’ attaining this
particular age, then it can be derived that the transfer involves a contingent interest.

Characteristics of Contingent Interest

1. A) This interest is entirely dependent upon the condition. It only happens when the condition
is fulfilled.

2. B) Death of the transferee before getting the possession of the property will result in the
failure of continent interest and the property will remain with the transferor.

3. C) Contingent interest is a Transferable right, but whether it is heritable or not, it depends

upon the nature of such any transfer and the condition.

There are some important aspects surrounding contingent interest which are explained in detail
below:

1. Interest: In a transfer if a condition is such that the transfer will take effect only upon the
fulfilment of that condition and till that time, the interest is contingent.

2. Contingent Interest exists in wills: Any bequest to a wife, son or daughter can be a
contingent interest if the condition provides so.

3. Exception: When a person who has an expectancy in the rights of ownership of a particular
property, and he for the time being till the happening of the event, gets any sort of income
that arises from that property. This interest in the property does not come under the aspect of
contingent interest.

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Section 120 of the Indian Successions Act, 1925 lays down the exceptions for
contingent interest.

Section 22 states about the transfer to a group or class of members with a contingent interest. For
example, there is a transfer to a group of 5 people, and the condition is that the property will be
vested in persons who attain the age of 40 years on this particular date. The persons who have
attained this age will get an interest in the property and people who have not, will not get an
interest in that property.

Section 23 states about a transfer that happens after happening of an event that was mentioned in
the transfer involving contingent interest. This provision simply lays down one of the two branches
of Section 21 that laws down about contingent interest. The two branches are happening of an event
and non-happening of an event. This Section states about what happens after the happening of the
specified uncertain event.

Section 24 states about a transfer to a group or class of members who will get the property on a
condition that they shall be living at the specified date. This is also a contingent interest as the event
mentioned here is an uncertain event. The transfer will only take place for those people who satisfy
the condition of surviving at a particular date. The legal heirs of the deceased cannot claim an
interest in that property as a transfer involving a contingent interest solely depends upon the
fulfilment of the condition.

Difference between Vested & Contingent Interest

Sign Ground of
Vested Interest Contingent interest
number Difference

Vested interest is Contingent interest is

provided in Section provided in Section 21 of
1. Section
19 of the Transfer of the Transfer of Property
Property Act, 1882. Act, 1882.

It is an interest which is It is an interest which is

created in favour of a created in favour of a
2. Definition person where time is not person on a condition of the
specified or a condition happening of a specified
of the happening of a uncertain event. The person

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 Transfer of property Act 1882
specified certain event. having the contingent
The person having the interest does not get the
vested interest does not possession of that property
get the possession of that but has the expectancy to
property but has the receive it upon happening of
expectancy to receive it that event but will not
upon happening of a receive the property if the
specified certain event. event does not happen as the
condition is not fulfilled.

The condition involves

The condition involves
a specified uncertain
a specified certain
event. There is a chance of
3. Condition event. A certain event
the happening or non-
means an event that will
happening of that particular
eventually happen.
event.

Vested Interest does not

entirely depend on
the condition as the Contingent interest
condition involves a is entirely dependent on
certain event. It creates a the condition imposed on
Fulfilment of
4. present right that is in the transfer. Interest is only
conditions
effect immediately, transferred to the transferee
although the enjoyment on the fulfilment of the
is postponed to the time condition imposed.
prescribed in the
transfer.

This right is created as There is mere chance to be

Right of
5. soon as the interest is having the ownership
Ownership
vested. rights.

Death of Death of the person who Death of the transferee

6.
transferee is having this before getting the possession

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 Transfer of property Act 1882
interest will not have of the property will result
any effect over that in the failure of continent
interest as after the interest and the property
deceased, the interest will will remain with the
vest in his legal heirs. transferor.

Contingent interest is
a Transferable right, but
Vested interest is
Transferable and whether it is heritable or
7. a Transferable and
heritable? not, it depends upon the
heritable right.
nature of such any transfer
and the condition.

There is present, There is no present

The present right immediate right even right of enjoyment, there is
8.
of enjoyment. when its enjoyment is a mere expectancy of having
postponed. such a right.

X professes to transfer the

X professes to transfer property ‘O’ to Y on the
the property ‘O’ to Y condition that he shall
when he attains the age construct a well in his
9. Examples
of 20. There is a vested property. If he constructs, Y
interest with Y for the shall get contingent interest
property ‘O’. in the property until the
condition is not fulfilled.

Conclusion

The Transfer of Property Act, 1882 deals with two kinds of interest that are vested interest and
contingent interest. The concepts of vested interest and contingent interest are something that is
very important to understand as there are many sections relating to these concepts. The main point
to understand about both the concept is that the transfer of property involving Contingent interest
takes effect only after the condition is fulfilled, if the condition is not fulfilled then the transfer will
not take effect.

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The conditions are required to be fulfilled and they have to necessarily comply with the rules of the
preamble that talk about justice, equity and good conscience, the three major principles of the
natural law on which this whole act is based upon. In a transfer of property involving vested
interest, the transfer is not invalidated if the condition mentioned is not fulfilled. The reader will get
to know about the basic meaning and interpretations of the sections involving the two concepts with
the help of various examples. The author has tried to explain the two concepts by discussing all the
aspects of both for a better understanding of the provisions. Towards the end, the author has also
discussed certain judicial pronouncement in a brief manner as to make sure that the reader
understands the concept in a more direct and easier way and so that he can get into more and more
specific details of the two concepts.

Conditional Transfers under Transfer of

Property Act, 1882

Introduction
Section 25 of the Transfer of Property Act, 1882 provides for Conditional Transfer. It means
that any transfer that happens on the fulfilment of a condition that is imposed on the other party for
the transfer of property. For example, A agrees to transfer his property to B if he gets selected for a
job. The requirement of A for B to get a job is called a condition.

For any kind of a conditional transfer to be valid, the condition that is imposed should not
be:-
1. Prohibited by law,

2. Should not be an act that involves fraudulent acts,

3. Should not be any act that is impossible,

4. Should not be an act that is termed as violative of public policy,

5. Should not be immoral,

6. Any act that incurs any harm to any person or his property.

For example, X transfers a property ‘B’ to Y stating that he shall murder Z as a condition for the
transfer. Such transfer is void as the condition is prohibited by law.

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Types of Conditions on Transfer
There are three specific types of conditions that are imposed in a transfer of property and there are
some more types provided. All these conditions should also satisfy all the requirements of a
condition as mentioned in Section 25 of the Transfer of Property Act, 1882.

Condition Precedent
It is given in Section 26 of the Transfer of Property Act, 1882. Any condition that is required
to be fulfilled before the transfer of any property is called a condition precedent. This condition is
not to be strictly followed and the transfer can take place even when there has been substantial
compliance of the condition. For example, A is ready to transfer his property to B on the condition
that he needs to take the consent of X, Y and Z before marrying. Z dies and afterward, B takes the
consent of X and Y so the transfer can take place as there has been substantial compliance. These
facts were from a case of Dawson v. Oliver-Massey (1).

In the landmark case of Wilkinson v. Wilkinson (2), the condition where one party was required
to desert her husband for the transfer to go through, this was held by the court as invalid as it was
against public policy.

Condition Subsequent
It is given in Section 29 of the Transfer of Property Act, 1882. Any condition that is required
to be fulfilled after the transfer of any property is called condition subsequent. This condition is to be
strictly complied with and the transfer will happen only after the completion of such condition. For
example, A transfers any property ‘X’ to B on the condition that he has to score above 75 percent in
his university exams. If B fails to achieve 75 percent marks then the transfer will break down and
the property will revert back to A.

Although it is an essential requirement that the condition needs to lawful and if it is not then the
condition will be held as void and the transfer will not break down and will be finalized. For
example, A transfers the property to B on the condition that he shall murder C. This condition is void
and hence transfer will go through and the property will be kept by B.

Condition Collateral
Any condition that is required to be fulfilled simultaneously after the transfer of any property is
called condition collateral. It needs to be strictly followed otherwise the transfer will break down.
For example, A transfers property ‘X’ to B on the condition that he shall maintain A’s wife C for a
period of 10 years. If B complies with it and maintains C, the transfer will be valid and the property
will be in the possession of B.

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Also it has been recently clarified by the Hon’ble Supreme Court in a case in 2018, in case of a
conditional gift where there was no recital of acceptance and no proof or any sign of acceptance. If
the possession of that gift is with the donor for his lifetime and it is not completed during his lifetime.
The deed of gift might be cancelled at the option of the donor as it has not violated any principles
required in a valid transfer of property and the donor is within his rights to cancel any gift deed of
such kind.

Other Types of Conditions

Section 27 of the Transfer of Property Act, 1882 provides for any transfer to any other
person if the first transfer fails. For example, A transfers a car to B on condition that he shall
transfer his bike to C, if he does not the car shall go to D. So if B does not transfer his bike to C, the
car shall go to D on failure of ‘prior disposition’ as said in the section.

It should be noticed that the condition on the first transfer was valid otherwise, the subsequent
interest or transfer also fails. Only when the valid condition is not fulfilled or ‘shall fail’ then only the
subsequent transfer takes effect.

The Doctrine of Acceleration comes into the picture here, it is based on the principle that one
property should be passed on to some other person if the first condition fails as if the property was
never vested in him. In the case of Ajudhia v. Rakhman Kaur (3), where the property when not
registered in the name of the mother because of a local act and she could not have received the gift,
the property was accelerated to the children as a gift

There is an exception to this section which is when it is a situation of a transfer in form of a gift,
doctrine of acceleration does not apply unless the first transfer fails in a particular specified manner
only.

Section 28 of the Transfer of Property Act, 1882 provides for any subsequent transfer that
takes place on not happening of a specified event.

Conditional Limitation is something that is applied here and it affects any ulterior disposition
and if a vested property involves any condition that does not happen, it takes place and property is
transferred to the ulterior disposition which is the ultimate beneficiary.

This section is subject to rules which are present in the sections 10,12,21,22,23,24,25
and 27 of the Transfer of Property Act,1882.
For example in Contingent interest which is mentioned in Section 21 of the Transfer of Property Act,
1882 when the condition is put that A’s land which is transferred to B will be transferred to C if B

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dies. Hence the interests created in C is ulterior transfer. The requirement here also is that the
conditions need to be lawful and satisfy all other requirements in Section 25.

This event is a condition of defeasance i.e. the act of making something null and void. The only
exception is where a person is vested with an absolute interest and thereafter to a person. The
interest for the third person is on termination of the person vested with absolute interest and not on
defeasance.

Section 30 of the Transfer of Property Act, 1882 provides that any transfer will not be
affected by the invalidity of the ulterior disposition, which means that is the subsequent transaction
as it is rendered void because of some default, then the first transaction will not be held invalid
because of it.

For example if X transfers land to Y and then, after his marriage, life interest to his male offspring.
As the transfer to the male offspring is not valid as per Section 13 of the Transfer of Property Act,
1882 which prohibits any life interest created in favour of unborn. The substance of Section 30
provides that the transfer to B will not be affected even when the ulterior disposition (transfer to
unborn son) is not valid.

Section 31 of the Transfer of Property Act, 1882 states that any transfer where the condition
of happening of an event or not happening of an event takes place is applied, the transfer shall cease
to have an effect. The condition mentioned in this section is a condition subsequent and not a
conditional limitation which is in favour of any third party. This condition is given in a negative
sense, as the transferor prescribes when the transfer shall cease to have effect.

For example, A can put a condition on B to plant a tree and then the transfer will have an effect. If B
plants, then he will get the property.

In the case of Ambika Charan v. Sasitara (4), it was held that even condition collateral is a valid
condition under the application of Section 31 and in this case, one party was required to live at a
particular residence and as long as this condition is fulfilled, the transfer shall continue to have an
effect.

Even where the condition where there is a prescribed penalty, it can be extracted by way of
compensation, for example for forfeiting an estate, compensation can be demanded.

Section 32 of the Transfer of Property Act, 1882 states that the condition mentioned in
Section 31 should not be invalid or prohibited by law. Although Section 30 is also kept in mind
that any condition in ulterior disposition which is invalid will not invalidate any transfer that
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happened prior to it. As for condition precedent or subsequent, for the transfer to be valid the
conditions need not be invalid and all the requirements mentioned in Section 25 should be met.

Section 33 of the Transfer of Property Act, 1882 states about any transfer where on a
condition, time is not specified for the happening or non-happening of an act. This transfer ceases to
have effect only when the act is made to be impossible permanently or for a great period of time.

Section 34 of the Transfer of Property Act, 1882 states about any transfer where on a
condition, time is specified for the happening or non-happening of an act and on the failure of such
condition, the interest of the property is to go to another person. If the condition is fulfilled within
the prescribed time, then the transfer will continue to have effect, and if not then the transfer shall
cease to have an effect. For example, M agrees to transfer land ‘X’ to N on the condition that he shall
go to England in a span of 2 months. If N goes to England within the prescribed time period then the
transfer shall go through and N shall get the property, but if he fails to do so inside the 2 months
specified by M, the transfer shall cease to have effect.

But, it has to been seen that, what caused the delay of the condition to be fulfilled. If the performance
of the specified condition that may be either subsequent or precedent is prevented by a person who
is interested in its non-fulfilment, the delay is condoned and the condition is discharged.

X transfers property to Y with a condition that if he does not go to U.S. within 2 years, the
property will pass on to Z. Later on if Z, by playing a fraud, prevents Y from performing the
condition, the delay in such performance is excused.

Conclusion
Conditional Transfers form a very crucial aspect in day to day transactions of transfer of property.
It is important to know about provisions relating to this concept. All types of conditional transfers
are given from Section 25 – 34 of the Transfer of Property Act, 1882. It is important to note that the
condition on any transfer should not be prohibited by law and can be ideally performed. This article
conveys the basic principles and mechanisms behind these provisions, and how they fare out with
practical examples that will help the reader relate it with the real time events.

Doctrine of Election

Introduction

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The doctrine of election is stated in transfer of property act 1882 in section 35 and within 180-190 of
Indian succession act. Election means a choice between two alternative or conflicting rights.
Granting two rights in such a way that one is higher than the other, you can choose either of them.
You cannot have both. The applicant cannot use both, the recipient must choose between two
inconsistencies or alternative rights. Basically it means that the person taking the benefit should
also bear the burden. (C. Beepathuma V. Viduri Shankar Narayana Kadambolithya AIR
1965SC 241).it is an important part of the transfer of property act 1882 to resolve property
conflicts among people. This principle was derived from the equity principle where a person cannot
retain all the benefits of a transaction thus, he cannot keep the property and get benefits still. They
have to elect for Or against the instrument. The doctrine of election is a general legal rule that
requires the recipient to choose whether the heir wants to own someone else#39;s property and
decide whether to preserve the property or accept his intentions. (Shukla S. N transfer of property
act 24 the edition edited by Dp Ghousal reprint 2007).

Example: A promises to give B, 50 lakh but only on one condition that he will sell his house to C,
now B here has to make the election on what to do? If he takes A’s offer he will have to give his house
to C. On the other hand if he doesn’t, he won’t get 50lakh also hence he has to make an election on
what to choose. (Ibid) Maitland’s describes its doctrine of election as (Maitland’s lecture on equity)

 Adopt all the contents of that instrument.

 Accord to all its provisions.

 Cede all rights that are inconsonant.

Election when necessary (section 35)

 Concede to transfer property on which he has no rights.

 In the same transaction, they must elect either to accept it or not, in case he doesn’t.

 He must release the benefits till then.

 The benefits he had till then goes back to the transferor as if not given.

Although when benefit is transferred back, he must make some good to the transferee at least it can
be done in the following cases:

 Where the transfer is voluntary and the Transferor had died or had become incapable of
doing a fresh transfer.

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 Transfer is for consideration.

Example: The farmhouse at Udaipur is a property of C. A by gift means promises to give B

1,00,000. He accepts it although C now wants to retain his farmhouse and A forfeits his gift. In such
a course of action B died, now his representative must pay C 1,00,000.

Who doesn’t have to elect?

The person who indirectly derives benefits from the transactions and not directly according to
section 35 does not need to elect.

Example:: A promises to give B 1000 given if his son buys C’s house for 1200, Nowhere n’s son
doesn’t have to elect as it is B who will have to make the decision on what to do.

When does a person elect to dissent?

According to section 35 If the owner decides not to approve the transfer, he will surrender the
transferred service to him and this service will be returned to the transferor or his representative as
if he had not been released. Following could take place:

 The transfer is voluntary and the Transferor had died or had become incapable of doing a
fresh transfer.

 In all cases where the transfer must be checked, it is the responsibility of the transferor or his
representative to compensate disappointed buyers. The compensation amount is the amount
or value of the property that will be transferred if the option.

Exceptions to this doctrine as stated by section 35

Section 35 states that if the property owner is transferred by the seller, a particular service is
started and that the service is pressed to apply to that property if the owner claims the property.
Which must release the performance of certain properties. He is not obliged to release the
compensation given to him by the same transaction if you receive such compensation for two years,
you must assume that you have chosen the transfer.

Section 35 determines
The reception of the service by the person to whom the service is available is a decision by that
person to confirm the transfer if they know the service. The obligation to choose and know
circumstances that will affect the judgment of reasonable people in the election, or it refuses to
adapt to the Situation. Knowledge or rejection is assumed if the opposite evidence is not available, if
the person providing the service has used it for two years without taking action to explain their

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disagreement. Section 35 also determines this knowledge or rejection can be inferred from any
action by that person, so that it is not possible to place people who are interested in the property,
which is believed to be transferred, in the same conditions as if the action was not carried out.

Time limit for election

According to section 35, when the owner of the property within one year after the date of transfer
signifies to either transferor or his representative. Even if they know the expiration period and even
after knowing from their representatives does not make a decision they are deemed to have elected
to confirm the election if they don’t reply after the period is over.

Election by a disabled person, a disabled person cannot do election until and unless:
 His disability ceases.

 Someone else on his behalf makes election who is not disabled.

Doctrine of election applied

Hindu law
This principle has always been applied to Hindus. According to Rungamma v atchamma, the privy
council made a rule that a person cannot accept and reject according to him. One cannot accept
until he gains from it and stop accepting it until prejudiced.

English law
The buyer chosen not to be transferred, does not lose profits, but is obliged to compensate
disappointed people. Difference between English law and Bangladesh law. There is a difference
between English and! Bangladesh law in relation to elective teaching. The main differences are as
follows British law applies the principle of compensation, while English law applies the rules of
confiscation. English law does not regulate the time for election. British law stipulates a year in
which the property owner must decide whether to confirm the transfer or not. If the owner does not
comply with the reuse, he is deemed chosen to confirm the transfer.

Basic requirements for applying this teaching

The basic conditions for applying this teaching are as follows: The seller may not be the owner of
the buyer’s property. The seller must transfer ownership to another athlete owner The seller must
simultaneously make all property available to property owners using the same instrument outside
the owner. Two transmissions, Transfer of ownership to the owner of the transmitter and provision

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of benefits to the owner of the property must be done through the same transaction. The Election
obligation does not arise if the two transfers are carried out through two separate instruments. The
owner must have an ownership interest in the property Owners who do not benefit directly from
the transaction, but indirectly divert the benefits from the transaction, do not have to make a choice.
Mandatory choice does not appear if it benefits someone of a different quality.

Case Laws
Mohd. Kader Ali fakir V lukman hakim

The basis of the doctrine of choice is that the person who uses the instrument must also bear the
burden imposed in this way and that he cannot carry under and against the same instrument. This
is a violation of general rules that cannot be accepted or rejected by anyone. This doctrine is based
on the fictional intent of this ether that the law implies that the author of the instrument intends to
manifest any part of it. There is an obligation for anyone using a will or other instrument to make
that instrument fully effective, which donors or settlers cannot have. However, what effect can be
obtained from his agreement that has received compensation based on the same instrument? The
law will apply to the applicant’s obligation to use the instrument in full force and effect. If the tool is
partially invalid, the rest is enough to place someone to vote if they say so.

Dr Ally’s Wobben V Shri Yogesh Mehra and ors on 6 December 2010

The Supreme Court, in National Insurance Company v. Masan & Anr., 2006 (2)
SCC 641 IA

No.12638/2010 in CS(OS) No.1963/2009 Page 4 spelt out what is the rule, in the following terms:

“A party to a Lis, having regard to the different provisions of the two Acts cannot enforce liabilities
of the insurer under both the Acts. He has to elect for one. The ‘doctrine of election’ is a branch of
‘rule of estoppel’, in terms whereof a person may be precluded by his actions or conduct or silence
when it is his duty to speak, from asserting a right which he otherwise would have had. The doctrine
of election postulates that when two remedies are available for the same relief, the aggrieved party
has the option to elect either of them but not both. Although there are certain exceptions to the same
rule but the same has no application in the instant case.”

Baisakhi Ram Binjhwar vs South Eastern Coalfields Ltd on 11 September, 2017

The observations of Scrutton, L.J. are as follows:

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“A plaintiff is not permitted to ‘approbate and reprobate’. The phrase is apparently borrowed from
the Scotch law, where it is used to express the principle embodied in our doctrine of election-namely,
that no party can accept and reject the same instrument: Ker v. Wauchope (1819) 1 Blight 1 (21) (E):
Douglas- Menzies v. Umphelby 1908 AC 224 (232) (F). The doctrine of election is not however
confined to instruments. A person cannot say at one time that a transaction is valid and thereby
obtain some advantage, to which he could only be entitled on the footing that it is valid, and then
turn round and say it is void for the purpose of securing some other advantage. That is to approbate
and reprobate the transaction. “Hence it is proved that the doctrine of election is based on the
principle of Estoppel.

Conclusion
Election is choosing between two alternatives or conflicting rights. By giving two rights so that one
is higher than the other, you can choose one of them. You cannot have both. The applicant cannot
use both, the recipient must choose between two inconsistencies or alternative rights. Basically, this
means that the recipient must also bear the burden. Being derived from the equity principle which
clearly states that a person cannot have benefited from both the sides. This doctrine has been
successful and many poverty conflicts can be resolved using it.

Transfer of Ostensible Owners and Benami

Transaction Prohibition Act 1988
Introduction
‘Property’ acts as one of the most indispensable needs of human life. In India, the right to property
was provided as a fundamental right under Article 31, but it was abrogated by the 44th
Constitutional Amendment Act, 1978 and subsequently replaced by Article 300A, which made it a
constitutional right instead.

Possession, contract, title documents, and other methods can be used to transfer properties from one
person to another for consideration. Various laws have been created to guarantee the seamless
transfer of property, whether it be movable or immovable. The Transfer of Property Act (‘the Act’)
was enacted in 1882 to codify and harmonise all of the existing customary rules regarding the
transfer of property. It solely deals with the transfer of property inter-vivos, that is, between living
persons.

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The transfer of property by way of gifts, succession, inheritance, or testamentary is not covered by
this statute. The Act establishes clear legislative regulations that govern the rights of the real owner,
ostensible owner, and third party concerning the transfer. The goal of the Act was to make the
transfer of land and property convenient and hassle-free for the general public. This Act establishes
certain broad guidelines for the transfer of property that must be observed.

The principle of an ostensible owner performing the transfer of property was established to defend
the rights of innocent third parties against actual property owners, it is codified under Section 41 of
the Act. Innocent third parties’ rights are protected by this principle. It also discusses the different
components and requirements that must be met in order for the plaintiff to profit from this concept,
as well as its implementation in several case laws both before and after India’s independence.

What is Section 41 of Transfer of Property Act

The transfer of property to an ostensible owner is dealt with under Section 41 of the Transfer of
Property Act, 1882. According to it, when a person acts on the express or implied consent of a
person who is vested in a certain immovable property, that person is deemed the ‘ostensible owner’
of that property.

Necessary conditions for the application of Section 41 of Transfer of Property Act

To make use of this Section, one must meet specific prerequisites. They’re as follows:

1. The most fundamental criterion is that the individual transferring the property must be the
ostensible owner.

2. The actual owner’s consent, which might be implied or expressed, is necessary.

3. In exchange for the property, the ostensible owner must be compensated.

4. The transferee must use reasonable caution over the transferor’s power over the property,
and whether the transferee acted with bona fide intention.

5. This section, needless to say, does not apply not to the transfer of movable property, and only
to that of immovable.

An exception to the ‘Nemo Dat Quod Non Habet’ rule

The rule enunciated in Section 41 acts as an exception to the general principle that a person cannot
transfer a superior title to property than what he holds i.e. ‘Nemo Dat Quod Non Habet‘. Section 41
is a well-accepted exception to this general principle. If the real owner, for example, entrusts a
particular person with the title papers in any reasonable manner and makes him an ostensible
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owner, then a third party who (after appropriate investigation) trades with such an ostensible
owner in a bona fide manner might obtain a valid title to the property as against the real owner.

Can the property be transferred to an ostensible owner

The term ‘ostensible’ refers to what seems to be real. Therefore, the ostensible owner of a property is
not the real owner. To third parties, he just portrays himself as the legitimate owner. Without really
owning the property, an ostensible owner has all of the rights to it. By the explicit or implied consent
of such an owner, he obtains these rights from the real owner. The real owner is the qualified owner
of the property, whereas the ostensible owner is the full yet unqualified owner.

Persons who are not ostensible owners include:

1. A self-proclaimed manager or agent

2. A mortgagor is someone who has a small stake in a property and works as a servant.

3. A co-sharer in occupation in a jointly shared family property of residence.

4. The trustee or manager of the idol, because the idol is neither conscious nor capable of
providing consent.

The ostensible owner is not the real owner, but he might pretend to be the real owner in such
transactions. He obtained that right as a result of the real owner’s intentional neglect or
acquiescence, making him an ostensible owner. The concept of assigning an ostensible owner is a
universally applicable rule of natural equity, that if one man lets another hold himself out as the
owner of a property, and a third person acquires it for value from that ostensible owner under the
impression that he is the real owner, the person who thus allows the other to hold himself out must
not be authorized to reclaim his ‘secret title’, unless he can overturn the purchaser’s arguments by
proving that the third party had a direct notice, or constructive notice, of the genuine title, or that
there should’ve been proper circumstances to prompt him to conduct an investigation which could
have led to the discovery of true ownership.

‘Indicia’ of ownership
The facts of each case determine what an indicia of ownership is. Possession, for one, acts as a form
of ownership evidence. Possession is ostensibly an act of ownership, but it is not necessary, because
the real owner may not be capable of handling his own property. He could hire a manager to look
after his estate. Although management implies possession, the manager may be hired to conduct
additional management tasks such as leasing, collecting rentals, and overseeing the estate assigned
to his care.

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Involuntary transfer and partial transfer
Transfer of property ownership might be involuntary or voluntary. It is a voluntary transfer when
the owner of the property transfers it willingly. It might be accomplished in the following ways:

1. In exchange for consideration, such as a mortgage, sale, lease, or exchange,

2. As a gift, and

3. By will

When a court seizes a person’s property, it is known as involuntary transfer or involuntary

alienation. This approach may also alienate the joint family’s assets or a co-undivided partner’s
participation in the estate. The provision under Section 41 of the Act only pertains to voluntary
transfers. It is not applicable upon coercive, involuntary, or legally compelled transfers, such as
judge-ordered auction sales.

Benami transactions
The Benami Transaction (Prohibition) Act of 1988 states that when the transfer of a property is
done benami (that is, under the name of some other person), the person who holds the property
becomes the real owner. The benamidar is only a trustee for the real owner and merely acts as a
representative. If a property is acquired in the guise of a benamidar and the indicia of ownership
are entrusted to him, the real owner can only overcome the impact of alienation by demonstrating
that it was done without his consent and that the buyer was aware of it. No litigation, actions, or
claims to enforce any right concerning the property held benami against the person in whose name
the property is held, or any other person claiming to be the real owner of the property, is allowed
under the Act.

In other words, following the implementation of the Act, the real owner is no longer able to reclaim
the property from the benamidar by instituting any legal suit. The argument of being the real owner
is likewise unsustainable.

However, the Act offers certain exemptions when the provision of

Section 41 do not apply:
1. When the person in whose name the property is held acts as a coparcener and that property
is being held for the benefit of all coparceners in the Hindu Undivided Family, or

2. Where the person in whose name the property is held is a trustee or some other person acting
in a fiduciary position, and the property is held for the benefit of another person towards
whom he acts as a trustee or in a similar capacity. Excluding the cases where he is a
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coparcener in a Hindu Undivided Family or a trustee acting in a fiduciary capacity, an
ostensible owner or benamidar will become the real owner. Therefore, except if benamidar is
a coparcener or a trustee acting in a fiduciary position, the provision established by Section
41 of the Act stands to be modified.

The Supreme Court noted in Jayadayal Poddar v. Bibi Hazara (1974) that whether a person is an
ostensible owner is a subjective matter that depends on specific facts and circumstances. When
determining whether a person is an ostensible owner or not, the following factors must be
considered:

1. Who paid the price, or who paid the purchasing money?

2. Who held possession following the purchase, i.e. who owned the property?

3. The motive for acquiring the property in a benami fashion i.e. why was the property acquired
in the name of someone else?

4. Relationship between the parties, i.e., whether the real and ostensible owners were familiar
with each other or not?

5. The parties’ conduct in managing the property, i.e. who used to look after, oversee and
manage the property?

6. Who had custody of the title deeds?

Requirements of transfer by an ostensible owner

The following are the main requirements for a lawful transfer by an ostensible owner:

 The individual must be the ostensible owner of the property.

 He must hold the property with the express or implied consent of the real owner.

 The transferee must acquire the property for consideration from such an ostensible owner.

 The transferee must take reasonable precautions before accepting the transfer to ensure that
the transferor has the authority to make the transfer, i.e., he must act with bona
fide intentions.

The transferee would not be entitled to derive the benefits of this Section if any of the foregoing
requirements were not met. If all of the following requirements are met, the actual owner’s stake
will be taken away.

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The transferor must be an ostensible owner
When it has already been proven that the transfer was performed with the real owner’s permission,
the real owner will be estopped from making a claim on the property. It will be applicable even if
the transferee had performed no investigations to see if the transferor had the authority to make the
transfer, which is otherwise essential for this section to apply. Hence, the transfer itself does not
need to be done with the approval of the real owner for this provision to apply. It is sufficient if the
transferor is the ostensible owner with the approval of the real owner at the moment of transfer.

The real owner’s consent is essential for ostensible ownership

Unless the ostensible ownership of the transferor has been formed, allowed, or acquiesced in by him,
the real owner will not be barred under this provision. This can be done by:

 express words of consent, or

 acts or behaviour that indicate consent, so that the real owner establishes or enables the
impression of ownership or acquiesces in it.

1. Express Consent:

The consent is said to be express when:

1. the owner clearly says using words, spoken or written that:

(a) he has no interest in the property or

(b) that another person has an interest in the property; or

2. The owner performs any act that demonstrates that he has no interest in the property, such
as attesting a deed stating that he has no interest in the property, or that a third party has an
interest in the property, such as getting the property mutated in the name of another and
disclaiming his interest. Unless there is a responsibility to speak, or the inactivity or silence is
comparable to speaking, mere inaction or silence is not material.

3. Implied Consent:

Implied consent refers to consent that can be inferred from a person’s actions or behaviour. If the
real owner is aware that someone else is handling his property and agrees to it, his silence or
inaction might imply consent.

However, prior to such a consent being inferred, it must be established that the person delivering
the consent was cognizant of his right, interest or title to the property and that despite that

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knowledge, he provided the consent. His act or conduct at a time when he was unaware of his own
right does not preclude him from pursuing his own claim against the transferee.

The transfer must be for consideration

A transferee can only profit from Section 41 of the Act if he can show that he received the property in
exchange for something. There should be a quid pro quo in the transaction.

The transferee must take reasonable precautions

The clause states that a transfer made by an ostensible owner is not voidable because the transferor
was not allowed to perform it, as long as the transferee was:

 Taking reasonable precautions to ensure that the transferor has the necessary authority to
effectuate the transfer, and

 Acting with bona fide intention.

If a transferee does not have constructive knowledge of the real owner’s title and no means to
investigate the real title-holder of the property, he may be protected under this clause.

1. Degree of Care: In order to determine whether the transferee has the authority to affect the
transfer, the following requirements to ensure a certain degree of care must be met:

2. Ordinary Prudence and Reasonability: Whether the transferee took reasonable care to
ensure that he had the authority to make the transfer must be decided in light of the facts of
each instance. The test for the same is to see whether the transferee acted

(a) like a reasonable man, and

(b) with ordinary prudence.

2. Standard of diligence: The conventional standard of diligence for determining whether

the transferee has the power to affect the transfer is requesting and examining the title under
which he claims to be the owner. If in the document itself, that is produced as the title deed for
the transferee’s examination, there is any indication to put the transferee on enquiry with
respect to the possibility of some other document or improper ownership of title, then the
matter needs to be investigated further.

2. The transferor must demonstrate that he has conducted the usual title search: The
proviso states that the transferee must have taken reasonable care to ascertain that the transferor
possessed the power to make the transfer, and this is an essential requirement for the provision to

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apply. Therefore, the transferee must demonstrate that he conducted the standard title
investigation. He would not have been granted the benefit of the clause if he had not done so.

3. If the title is obvious, no inquiry is necessary: In case the title is obvious, no inquiry may
be carried out. When a person appears to be in possession of the property, is documented as the
owner, retains the property’s title deeds, and talks with a third party about it, there is nothing to
establish that the third party acted with mala fide intentions in dealing with him about the property.

4. Impact of a lack of reasonable care: If this aspect of lack of due care used to determine the
true fact is missing the transferee cannot enjoy the benefits of the Section.

5. The transferee must act in Good Faith

It is essential for the transferee to act with a bona fide intent. It is possible that there may be
investigation without good faith as well as good faith without investigation. The real owner will not
be affected by the transactions being entered into by the ostensible owner in either of these
scenarios. This provision requires honesty as “good faith.” A person may commit a mistake, but he
must do so in good faith. A transferee cannot claim protection under this clause simply because he
was unaware of the actual owner’s title. He must not close his eyes and make a hasty purchase from
an ostensible owner without first determining whether the transferor has the authority to make the
transfer. The mere fact that the buyer’s name was registered in the revenue papers at the required
period is insufficient to establish that he was a genuine buyer. He must conduct a reasonable
investigation into both the transferor’s title and his authority to sell.

Rule of estoppel under Section 41 of Transfer of Property Act

The law of estoppel argues that when the real owner of property depicts some other person as the
owner to third parties, and the latter act on that depiction, the real owner cannot rescind his
representation. This provision establishes an estoppel rule against the real owner. The rule of
Section 41 of the Act, 1988 is derived from Section 115 of the Indian Evidence Act, 1872, which
defines the law of estoppel. The House of Lords articulated this concept in Cairncross v Lorimer
(1860) as, a party, either by words or conduct, representing to consensually perform or abstain
from doing an act, and the other party acts on that representation, the former will have to stick to
his representation.

Burden of proof
The burden of proof for the transferee seeking immunity under this provision is on the transferee to
show that he or she was an ostensible owner. He must establish that the transferor is the property’s
ostensible owner or that the transaction is a Benami transaction. He must also show that he took
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reasonable precautions to protect his interests. The burden of proof transfers to the other side if the
other party claims to have evidence leading to a starting point of inquiry that, if pursued or studied,
would have led to the disclosure of truth. If a person claims ownership of property that has been
transferred to another person, he must prove it.

The essential legal principle is that unless the legitimate owner has done something to fool innocent
purchasers or pledges into assuming that the immediate possessor is the actual owner, his rights
should be protected prima facie. He would have to show that the real owner has forfeited his right to
reclaim possession as a result of his actions or omissions.

Non-applicability of the provision under Section 41 of Transfer of Property Act

If during the pleadings, it is not mentioned that the transferor was an ostensible owner with the
voluntary consent of the real original owner of the property, the plaintiff’s claim for the title to the
property as a result of a transfer of land by an individual besides the owner to him would be
dismissed. The cancellation order can be appealed on the merits by subsequent purchasers, but the
sale in their favour is not protected by Section 41 of the Act. The following vendor can only request
compensation or refund from his seller. Section 41 cannot be used to create a transferee pendente
lite since he wouldn’t be a bona fide transferee without notice.

Landmark case laws concerning Section 41 of Transfer of Property Act

1. Ramcoomar Koondoo v. John and Maria McQueen (1872)

The notion of transferring property by an ‘ostensible owner’ was developed to defend the rights of
innocent third parties against property owners, which was initially used by the Judicial Committee
in the landmark case of Ramcoomar Koondoo v. John and Maria McQueen, and then subsequently
reflected as Section 41 in the Act.

Facts

The land, which was perpetually leased at a set rate, was sold to Bunnoo Bebee, mistress of
Alexander Macdonald by deed of sale by the then landlord. It could not be said with certainty that
the father, Macdonald, had possession of the property. In any case, the evidence does not indicate
that he ever lived on the land, yet there is sufficient evidence of Bebee’s residence upon the land.

Subsequently, Bebee died and the plaintiff (Ramdhone, Ramcoomar Koondoo’s father), inherited the
property, discovered that Bebee had previously acquired the property in her name, and then sold it
to a third party (John and Maria McQueen) by convincing them that he possessed sufficient title to
the land. The entire transaction was a benami transaction, which meant that only the individual

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who sold the land knew about it. John and Maria McQueen, who lived on the property but failed to
pay rent, were sued by the plaintiff for recovery of the possession of the land. The Calcutta High
Court ruled in Mcqueen’s favour, prompting Ramcoomar (who had filled in for his father following
his death) to file an appeal with the Privy Council.

Issues

1. Whether or not the property belonged to Macdonald?

2. Whether Maria McQueen received it by his will?

3. Whether the appellants acquired bond bonds without notice for a good sum?

Judgement
The appellants’ response is that their father acquired Bunnoo Bebee’s estate without being aware of
the benami title, and therefore they are entitled to keep it, despite the fact that there was initially a
resultant trust in favour of Macdonald. In such a circumstance, they bear a disproportionate
amount of the burden of proof, and hence they must first prove that the purchase was done on
Macdonald’s behalf and with Macdonald’s money. The proof for this was not produced by the
respondent. Furthermore, Bunnoo Bebee treated the land as part of Macdonald’s inheritance
following his death. The appellants proved their right to keep the property against the benami title,
according to their Lordships.

It’s unlikely that the buyer was aware that the title was not the same as or similar to the one that
appeared. There is no indication in any of the paperwork that the transaction was not what it
looked to be. All of the documentation, on the other hand, point to Bunnoo Bebee making the
transaction herself or for her benefit. Even if Macdonald was the real owner and Bunnoo Bebee was
merely an ostensible owner, the Privy Council held that because Macdonald had given implied
consent to Bunnoo Bebee to hold herself out as the real owner. Therefore, the plaintiff or his
representatives couldn’t recover the title unless they could prove that they were the real owners. It
was then decided that the plaintiff could not reclaim the property from the third party and in the
eyes of the law, the transfer was held to be legally sustainable.

2. Md. Shafiqullah Khan v. Md. Samiullah Khan (1929)

Facts

In this case, regardless of the fact that they were legally unqualified to possess the land, the owner’s
three illegitimate sons (Nuhullah, Hakimullah and Halimullah) got it after his death. The genuine
heir, the defendant Muhammad Shafiqullah Khan who is admittedly his son, filed a lawsuit to assert
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his inheritance rights. The possessors, on the other hand, kept control of the property and sold it to a
third party (Samiullah, the defendant) while pretending to be the legitimate owners.

Issues

Whether the illegitimate sons were ostensible owners under Section 41 of the Act?

Judgement

On the issue of the benefit of Section 41 of the Act, the lower court found that Samiullah had no
knowledge of Shafiqullah’s suit, that he acted in good faith and took the property from Nuhullah and
others believing they had the title, and that this belief was induced in his mind by Shafiqullah Khan’s
previous conduct, which had allowed the names of Nuhullah and others to remain in the revenue
papers. Hence, he determined that the mortgagee Samiullah was protected under Section 41 of the
Act and that Shafiqullah Khan was barred from establishing his own title.

The Allahabad High Court, however, stated that this legal situation would not satisfy the
requirement for Section 41 because ownership was not obtained with the express or implied consent
of the lawful owner. Hence, they were not deemed to be the ostensible property owners.

3. Niras Purbe And Anr. v. Musammat Tetri Pasin And Ors. (1915)
Facts

In the instant case, while on pilgrimage, a husband registered his land in the revenue records under
his wife’s name. He then permitted her to take out a mortgage on the property. When the husband
moved out, the wife sold the property to a third party, who paid off the mortgage. He claimed to
recover the land from these defendants on the ground that his wife had no power to sell it to them.

Issue

Whether the husband can reclaim the title of the property?

Judgement

The court ruled that the spouse could not reclaim or redeem the land from the buyer if the buyer
acted in good faith and took reasonable steps to verify the land’s ownership, as had been done.

Conclusion
Section 41 of the Transfer of Property Act has done a decent job of safeguarding the interests of the
unsuspecting third party. Although the section may appear to be prejudiced in favour of the third
party, this is only the case if the real owner is at fault. No one can simply claim that he now owns

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the property and therefore cannot be evicted. The third party must use extreme caution when
acquiring the property, and these criteria were imposed by law to prevent the ostensible owner and
the third party from abusing this provision. In a manner, this also protects the real owner’s
interests.

In a nutshell, Section 41 of the Act, specifies the powers of the ostensible owner and discusses the
nature of his transactions. The power provided by the property owner to enter transactions on his
behalf is the most noticeable feature of the ostensible owner. The consent for this authority might be
expressed or implied, as defined by several landmark case laws. Additionally, consent cannot be
obtained by deception. Also, once done, a property transfer is irreversible at the owner’s discretion.
This includes partial transfers such as mortgages and leases, as well as complete transfers of rights
such as sales and exchanges. Furthermore, the law sets the burden of proof on the transferee to
show that the transferor is the ostensible owner. He must also act with bona fide intention and make
appropriate investigations about the progress of the transfer of property while being sufficiently
cautious.

Feeding the Grant by Estoppels.

Introduction
SECTION 43: Transfer by an unauthorised person who subsequently acquires interest in property
transferred.—Where a person fraudulently or erroneously represents that he is authorised to
transfer certain immovable property and professes to transfer such property for consideration, such
transfer shall, at the option of the transferee, operate on any interest which the transferor may
acquire in such property at any time during which the contract of transfer subsists. Nothing in this
section shall impair the right of transferees in good faith for consideration without notice of the
existence of the said option.

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

The rule incorporated in this section governs transfers where the transferor, to begin with, has no
capacity to transfer the property, yet has entered into the transaction with a misrepresentation
with respect to his title to the property. He makes the other party act on this representation, and

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then acquires a good title to the same property in future. In such cases if the contract is subsisting
and the property is available, then it gives the transferee the option to either go ahead with the
transfer or rescind the same. If the transferee still wants the transferor to perform his part of the
contract, he can exercise his option to validate this transfer that was imperfect to begin with and the
transfer shall become valid on the exercise of such option by the transferee. Here the willingness of
the transferor to go ahead with transfer is immaterial and it is solely on the wishes of the transferee,
which he has to show by exercising the option that the transfer shall become valid, or in other
words, Where 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
transfers to the transferee at the option of the latter

Analysis of section 43 and its essential ingredients

1. The transferor makes a representation to the effect that he is competent to the transfer a
particular piece of immovable property.

2. This representation may be fraudulent or erroneous.

3. This representation is not true.

4. The transferee believes or is made to believe that the representation is correct and the
transferor is competent to transfer the property, i.e he does not know of the defect in the title
or lack of capacity thereof.

5. The transferor professes to transfer the property for a consideration.

6. The transferee acts on the representation and enters into the contract.

7. The transferor subsequently acquires competency to transfer the same property.

8. The contract is subsisting.

9. The property is still with the transferor, i.e he has not transferred it to a bonafide purchaser
who takes it without actual or constructive notice of this earlier contract between the
transferor and transferee.

10. The transferee exercises the option to signify his intention to go ahead with the contract.

The transfer shall become valid and enforceable in the court of law.

The rule of estoppel under the common law

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This rule is based on two common law doctrines, i.e the doctrine of equity and doctrines of
estoppel.

Following the doctrines of estoppel by deed, it prevents a person who

promises more than what he can

perform from claiming his incompetence as a legitimate excuse to avoid his liabilities in a situation
when he acquires competency to fulfill a promise, and following the equitable doctrines such a
person is compelled to make good of his promise when he becomes competent to perform it. In fact
without any further act of his, the transfer becomes good the moment he acquires competency to do
so. This competency feeds the estoppel immediately. Under the common law if a person
misrepresents to another that he is competent to convey a good title, professes to do so for
consideration and making the other act on this representation, enters into a contract with him, on
the transferor subsequently acquiring a good title to the property, the property instantaneously
passes to the transferee. Common law therefore does not require the transferee to exercise the
option, nor does it give any opportunity to the transferor to later mislead the transferee and
introduce into the scenario, a bona fide purchase for the consideration so as to defeat the rights of
the original transferee.

The only condition is that the contract should have been subsisting. In such cases, nothing else has to
be done by the transferee, the transfer in his favour will be perfected the moment the transferor
acquires competency. In India, the doctrine of feeding the grant by estoppel is only applicable where
the transferee has been misled by a representation by the transferor and not otherwise. Thus the
sine qua non for application of Section 43 is that at the initial stage the person should have
fraudulently or erroneously represented that he is authorised to transfer certain immovable
property for consideration. Only if the pre-condition is satisfied, the question of option of the
transferee arises in the case the transferor acquires any interest in the property at any time during
which the contract subsits.

Representation, Fraudulent or Erroneous

The representation under the Act may be fraudulent or even erroneous. Whether it is erroneousis a
question of fact. It may involve a case where the transferor genuinely believed that he has the
competency to transfer the property. Even in such cases, if due to his representation, for which he is
not maliciously responsible, the other party has been made to act on it, s. 43 would apply.

On the other hand, it can also involve cases where he deliberately and with full knowledge of his
incompetence and with a fraudulent motive, misleads the transferee and convinces him of his

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competency. What should be noted is that the original enactment applied only to erroneous
representation-based transfers, and the rule of feeding the grant by estoppel did not apply in case
the representation was fraudulent. In 1929, the term ‘fraudulent or’ were inserted by the Amending
Act, 1929 (20 of 1929) to extend the application of s. 43 to these cases as well.

Exceptions to the doctrine of ‘feeding the grant by estoppel’

No application of rule in absence of representation by the transferor

Equity requires an erroneous or fraudulent representation from the transferor that he is competent
to transfer the property. In absence of representation, the doctrine does not apply. However, that
does not mean that if the transferor is silent about his capacity, when there is a duty to speak, he can
escape the applicability of the rule of estoppel as against him. What is material is that the transferee
must be misled. If there is no representation by the transferee, it means that the transferee was not
misled but actually knew about the defect in the title. It is only when the transferee is led to believe of
absolute interest or title on part of the transferor and acts on that representation, that he is entitled
to take advantage of the fact that the transferor subsequently gets the full interest or becomes the
owner of the property.

It connotes that the transferee is not aware of the facts and acts on the representation as there
would be no estoppel if the truth is known to both the parties. Question of knowledge is very
material and the other party must be given the chance of raising its defence if and when the doctrine
is pleaded. Representation may be expressed or implied.

It can be by word of mouth or by a document. It is implied when the law makes it an implied term
of the transfer. Where a person sold the property as an agent of the widow, and later became her
heir, the doctrine did not apply, as there was no erroneous representation, but where the husband
transfers the property of his wife without taking her consent and she challenges its validity in the
Court but dies during its pendency and the husband inherits the same as her legal heir, the Apex
Court held that if a person pretends to be the owner of the property and subsequently becomes the
owner, the transfer by him conveys a good title.

Transfers in Absence of Representations

Though the Section speaks of erroneous or fraudulent representations, there may be a case where
there is a transfer by a person who is incompetent to transfer the same, but he does that without
making a representation, yet at the same time, the transferee is not aware of his incompetency. In
such cases also, the presumption is that when a person says ‘he will transfer the property’, it means
that what he is conveying to the other is that he is authorised to do so.

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Even in such cases, the rule of estoppel will operate against the transferor, and on attaining
competency, he will be stopped from denying his obligations under the contract.

In Viraya v. Hanumanta,three coparceners held the property jointly. One of them, A, sold the
property to B, an alienee, but failed to deliver it as the transfer was effected without the consent of
the other coparceners. B filed a suit against A for enforcement of the contract. During the pendency
of the litigation one of the other coparceners died, and A’s share in the property increased to one
half. The Court held that B was entitled to half of the property that was the share of A.

In Rustom Ali v. Abdul Jabbar, a Muslim transferred a field belonging to his sister, S, to his wife
in lieu of her dower. It was, therefore, a transfer by a person who neither had the title to the
property nor had the authorisation to transfer the same. S, who was the real owner of theproperty
sold it to another person, X. The husband however, acquired a good title to the property by
purchasing it back from X after some time. The Calcutta High Court held that the wife was entitled
to the field under the equity doctrine.

Knowledge may be Actual or even Constructive

Knowledge on part of the transferee with respect to the defect in title of the transferor need not be
actual knowledge. If the circumstances are such that as a reasonable, prudent person, the
transferee, to safeguard his own interests had made sufficient inquiries that he ought to have made,
or had been vigilant and upon doing so, he could have detected the lack of title, he would be deemed
to have constructive notice of the lack of title, and s. 43 would not apply.

As a prospective purchaser he ought to have made reasonable inquiries that a normal prudent
person would have made. If he fails to make such inquiries, he would be guilty of either gross
negligence or willful abstention from making an inquiry, and constructive knowledge with respect
to defect in title would be imputed on him. As the consequences of imputation of constructive notice
are identical to the consequences that emanate if a person actually knew about it, he would lose the
right to perfect the transfer once the transferor acquires the competency to do so.

The Supreme Court, in Kartar Singh’s case has overruled a plethora of Cases, including Lord
Halsbury’s famous statement, wherein it was held that s. 43 does not impose upon the transferee,
the duty to take care.

In Kartar Singh v. Harbans Kaur, a Hindu woman executed a sale deed of the lands belonging
to her minor son in 1961. The son on attaining majority in 1975, filed a suit to the

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effect that this sale was not binding on him, and was void. The Court passed a decree that this sale,
executed by the mother of the properties belonging/owned by her minor son was void, and directed
that the possession of these properties be restored to the son. Before the son could take the
possession of the property, he died, and the mother as a class I heir succeeded to the property. The
transferee, X, claimed the benefit of s. 43 and when the remedy was refused by the High Court went
to the Supreme Court in appeal. The Court held that for the application of s. 43, two conditions must
be satisfied. First, a fraudulent or erroneous representation made by the transferor to the transferee
that he is authorised to transfer certain immovable property and in the purported exercise of
authority professed to transfer such property for consideration.

Secondly, when it is discovered that the transferor acquired an interest in the transferred property,
at the option of the transferee he is entitled to get the restitution of interest in property got by the
transferor, provided the transferor acquires such interest in the property during which contract of
transfer must subsist. As the primary distinguishing factor between the application of s. 43 and s.
6(a) is knowledge of the lack of title or incompetency on part of the transferee, the Court here tried
to examine whether the transferee in the present case had knowledge of the fact whether, the mother
was competent to transfer the property of her son.

The Court said:

The material time at which the knowledge has to be proved is the time of the conclusion of the
contract. When we analyse the issue as to whether the transferee who is now seeking the beneficial
protection of Section 43, had knowledge or notice of the incompetency of transferor or not, we must
take note of the fact that even constructive notice on his part would bring the case under Section 6
(a). If by making some inquiries or verifying certain facts, as a normal reasonable prudent person,
the transferee could have detected the incompetency of the transferor to transfer the property, but
he failed to do that, law would impute constructive notice of the same on him, and as the
consequences of actual and constructive notice are identical, in case of imputation of constructive
notice also, the plea of misrepresentation, erroneous or fraudulent would not be accepted by the
Court. In such a case, Section 6 (a) would be applicable under which this transfer would be
considered void, and Section 43 will not apply.

Here, it is pertinent to note that when the mother transferred the property belonging to her son, the
marginal note on the sale deed mentioned that the land had been acquired by her and by her minor
son by exercising the right of pre-emption, and that she was executing the sale deed

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in respect of her own share and acting as the guardian of her minor son in so far as his share is
considered. Thus, the fact that she was acting as the guardian and the owner was in fact a minor,
was apparent from a bare reading of the sale deed. In law, a guardian is not competent to transfer
the properties of a minor, unless there is an authorisation from the Court.

The fact that she was a guardian and also acting as one, was the starting point of inquiry, and the
transferee should have probed further. As a reasonable prudent man, he was expected to enquire
whether on her own, the mother, as the guardian, was competent to alienate his share. The second
requirement is that the contract should be subsisting at the time of the claim but here, the Court held
that as right at the inception, the contract was void, because the transferee ought to have known
about the incompetency of the transferor this void contract cannot be deemed to be subsisting at the
time, when the mother due to inheritance acquired competency.

Thus, according to the Court, the transferee here knew the fact that the mother was not competent to
effect a valid transfer and s. 43 would have no application. The litigation, which took 33 years,
culminated later, with the Supreme Court pronouncing the verdict, that the transferee cannot
acquire a valid title to the property because he was deemed to have knowledge of the defect in title in
the first place.

Transfer must not be otherwise prohibited

For the validation of the transfer made by an unauthorised person under a representation, this
contract in the first place should not have been against any law in any form whatsoever, i.e., not
only the parties should be competent to contract, but the purpose of the contract should be Lawful,
and not opposed to public policy or to defeat the rights of creditors or a provision of Law, etc.

Thus if the transferor’s incompetency was owing to his minority or insanity, S. 43 would not confer
an option in favour of the transferee to validate the transfer on the minor’s attaining majority or
curing of insanity, as this is a statutory incompetency, that was appended to the minor or an insane
person, that prohibited him from transferring the property. Similarly, if a particular piece of land
has been declared by a statute to be specifically inalienable, such as Bhumidhari land, S. 43 cannot
apply to such a situation. However, where the property was requisitioned by the military, and a
lessee assigned his interest in this property conditional upon the property being de-requisitioned by
the military, the Court held that after the property was so derequisitioned and the transferee
acquired competency, he was required to perform his part of the contract under the assignment.

Transfer must be for Consideration

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An essential factor to be considered in transfers by unauthorised transferors on misrepresentations,
and the option available under s. 43 is, that these transfers should be for Consideration. Though it is
not necessary to show that some monetary consideration has already passed from the transferee to
the transferor, but the transfer in essence is one involving consideration, and there is a liability on
part of the transferee to pay it. Thus, s. 43 does not apply to gratuitous transfers like gifts, etc.

Subsequent Acquisition of Interest by the Transferor

The transferee is entitled to the benefit of this doctrine only when the transferor subsequently
acquires an interest in the property that he originally represented as his. If the transferor does not
acquire a further interest in the property transferred, or if such further interest is acquired not by
the transferor but by his successor in interest, or where the heirs of the transferor acquire property
in their own right and not as heirs of the transferor, this Section has no application.

For instance, A transferred property belonging to his wife, representing to X that he is competent to
transfer the same. His wife made a Will of her property in favour of her son S. A died and then his
wife died, and the son took the property under the Will. The transfer would not be valid at the option
of X, as the heir had acquired the property in his own right. Where a son fraudulently transferred
the property owned by his mother but never acquired any interest in it during his lifetime either by
inheritance, succession or otherwise , the doctrine of feeding of grant by estoppel would not be
applicable as against their heirs who succeeded stridhan properties of their grandmother. The
petitioner in such cases cannot claim any benefit of subsequent acquisition

Contract Subsisting
An essential condition for the application of s. 43, to the transfers by unauthorised transferors
brought about by misrepresentations is that for the validation of such transfers at the option of the
transferee the contract must be subsisting. It should not have been rescinded or otherwise brought
to an end by the act of the parties. For instance, A, erroneously makes a representation to B, that he
is competent to transfer a house X. The house originally belonged to his father F, but A did not know
that F had bequeathed the house to his mother M, and she was the sole owner. B pays consideration,
but later discovers that A was not the owner, and therefore not competent to transfer it. He rescinds
the contract and asks for his money back. A pays him the entire consideration as per the terms of the
contract. Two days later, M dies and A, as her sole heir, inherits the house. As the contract has
already been brought to an end, it is ‘not subsisting’ and B cannot exercise his option to validate the
transfer. On the other hand, in the same example, if after the transferee becomes aware of the defect
in title, he chooses to wait, i.e., does not rescind the contract or sue for damages, and the contract is
still subsisting when the mother dies, and A becomes the owner of the property, then B can exercise

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his option for validation of transfer. If he so wants, A would have to transfer the property in his
favour and he cannot take the plea that at the time he had entered into the contract with B, he did
not possess the title to the property.

Thus, for the application of the doctrine, the original contract must be subsisting in order for the
transferee to exercise the option. Where the transferee obtains a decree on the contract or if the
property has been sold, or the charge has been assigned, the doctrine would have no application.
However in case of mortgage, a decree alone will not put an end to the contract as the mortgagor is
entitled to redeem till the ultimate sale.

Application, Personal in Character

The application of this Section is personal in character with respect to the transferor and does not
apply as against any other person, who may acquire this property in his own right or against any
property that the transferor may acquire in future. The estoppel applies only against the transferor
and with respect to the very property that was initially the subject of the contract.

For example:

(i) Representing that he is competent to sell the property, A sells a house belonging to his father to B.
B discovers the defect in title but chooses to wait. A dies during his father’s lifetime. On the death of
the father, his house that was the subject matter of the contract was inherited by A’s son, in his
capacity as F’s heir. B cannot exercise his option to validate the transfer because this option can be
exercised only against the transferor, and not against the successor in interest.

(ii) In the above illustration, if instead of A dying during the lifetime of his father, suppose his father
sells the property to his friend X, B will have no remedy. But if later A purchases the same property
from X for a consideration, B would be empowered to exercise his option to validate the transfer in
his favour as against A. In short, if the transferor acquires the competency or interest, the option
can be exercised; if he does not, it cannot be exercised, and if his heirs get the property surpassing
him, such as under a will by the owner, or on his death, again the transferee would be without any
remedy.

(iii) A sells his father’s property to B representing that he is authorised to transfer it. When B
discovers the defect in title, he prefers to wait as the father was very old and sick. On the death of the
father, it was discovered that the house was bequeathed to A’s son S. B cannot exercise the option
against S.

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The option is not only to be exercised personally with respect to the transferor, it can also be
exercised only against that property that was the original subject of the contract.

For example:

(i) A coparcenary consists of father F and a son S, who together owned two fields, X and Y. In
addition, F also owned Z as his separate property. S contracts with C to sell Z, that belonged to F.
Later a partition took place, whereby the S got the property X. C cannot proceed against X, as this
was not the subject matter of transfer

(ii) A owns three properties X, Y and Z. His son, without his permission, contracts to sell X to B. X is
mortgaged during the lifetime of A, by A himself. As he was unable to repay the loan, X is sold
through a Court auction. Then A dies, and his son inherits all of his properties as his heir. The
transferee B cannot exercise his option against his other properties.

Option of the Transferee

The doctrine provides an additional remedy to the transferee besides a claim for damage, and
enables him to get the property itself. The transfer shall become valid only when the transferee
exercises the option to validate it and is capable to do the same. ‘At the option of the transferee’
means that the validation of the transfer depends purely on the transferee’s will and the transferor
cannot force a transfer on him, after he acquires competency. If the transferee so desires, he can
avoid this transfer which in the first place, was brought about by a misrepresentation. However,
there is no automatic validation of the transfer,86 as no rights are vested in the transferee from the
inception of this transfer.87 The option must be exercised by the transferee. There is no specific form
of exercise of option and any indication is sufficient. It can be done verbally, through sending a
notice to the transferor to execute a transfer deed in favour of the transferee or even by instituting a
suit in a court of law to that effect. It is not necessary that a demand should be made. In a nutshell,
the law does not provide any specific mode of exercising the option, but the intention should be
clear.

The Transferee

The transfer becomes valid when the transferee exercises the option and the title of the transferor
becomes perfect. Where the Official Receiver transfers property before it vests in him, the implied
covenant will be treated as erroneous representation, and the title of the purchaser would be
complete as soon as the property vests in him. Similarly, where a partner sells the property of a firm
in his right and subsequently on the dissolution of the firm is allotted the same property, the

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transferee gets the benefit of such allotment. When the holder of sir land transfers land representing
that he is authorised to transfer it, before he could obtain the certificate of bhumidari rights without
which he was incompetent to transfer the same, but had deposited money to obtain it, and acquired
the same later, the transfer is valid at the option of the transferee and the son of the transferor
cannot challenge the validity of the sale.

Similarly, where on the death of the father the land is inherited by two sisters, and one of them
having exclusive possession sells the same to the transferee, the transferee is entitled to get the
benefit of the doctrine on the death of the other sister. Where a Hindu widow sells the property of
her husband after five years of his disappearance and the transferee sues for possession after seven
yearsor where lease or sale of the property is effected by one of the two owners or two of the three
owners with their subsequent acquisition of full ownership, the transferee on the exercise of the
option would be entitled to the interest.

Property should be Available with the Transferee

The second condition for validation of such a transfer that is based on a misrepresentation is that
not only the contract should be subsisting, and the transferee willing to exercise the option, but the
property must be available with the transferor. If the property is transferred by the transferor to
another person, even before the transferee can exercise the option to validate the earlier transfer,
the remedy of validation of transfer will be lost to the transferee, provided that the second
transferee takes the property for consideration and has no notice, actual or constructive about the
existence of the first contract.

For instance, A represents to B that he is competent to transfer a land X, which in fact belongs to his
father. B acts on that representation and furnishes a consideration of Rs. 10 lakhs towards it. B later
comes to know about A’s lack of title, but prefers to wait. A became the owner of the property on his
father’s death. While B was contemplating the appropriate action to be taken, A sold the land to C,
who as a bona fide purchaser, bought it without any notice of B’s claim over it. The only remedy that
B has now is to claim compensation, damages or his money back. But he would lose all claims over
the property as before he could exercise his option to validate the transfer, the property had already
been transferred to a bona fide purchaser for value and without notice. The reason is that till the
option is exercised by the first transferee, the validation of the transfer will not take place. Till the
ownership of the transferor is not affected at all, he remains competent to transfer the same in
favour of anyone.

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However, once the transferee exercises the option, the transferor has to transfer the property to the
original transferee, and if after that, he sells it to somebody else, the new entrant in the scenario will
take the property subject to the rights of the transferee. It is only a bona fide transferee for
consideration who takes the transfer in his favour before the option can be exercised by the
transferee, who can defeat the rights of such transferee. Therefore, the option must be exercised
without any delay by the transferee in order to prevent the property from passing into the hands of
a bona fide transferee.

Bona Fide Transferee

As aforesaid, the validation of the transfer depends on the exercise of the option by the transferee
and in the situation when the property is available. If the property is transferred before the option
can be exercised by the transferee to another person, who takes it for consideration and without
actual or constructive notice of the rights of the earlier transferee over it, the rights of the earlier
transferee will be defeated. Thus, in order to defeat the right of the first transferee, it must be proved
that:

(i) first, that the second transfer was for consideration. If it was a gratuitous transfer, i.e., by way of
gift, the right of the second transferee would not be protected.

(ii) secondly, the subsequent transferee should not have actual or constructive notice of the first
contract. If actual or constructive notice on his part can be proved, then his rights over the property
would be subordinate to the first transferee and his interests in it will not be protected.

The doctrine therefore, does not impair the right of transferees in good faith for consideration,
without notice of the existence of the said option,1 as the transferee cannot exercise his option with
respect to the after acquired property against a bona fide purchaser without notice.2 However, if he
is aware of the first transaction, he would be deemed to have notice of the option.

Application of the doctrine

The doctrine of feeding grant by estoppel compels a man to perform when the performance becomes
possible. Transfer of non transferable holding and the subsequent removal of restriction , mortgage
of a ghatwal land by zuripeshgi lease and the subsequent grant of permanent lease of the land,
mortgage of restrictive tenure, the restriction later removed would require the transferor to make
good the original transfer.

The doctrines not only applies to sale but also applies to mortgage, lease, charge and exchange but
does not apply to a case where the sale was made through the court at the instance of an execution
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creditor and was therefore compulsory, or where the transfer is forbidden by law or was contrary
to public policy. Transfer by a minor or a lunatic or where the transfer could be effected only with
the prior permission of the collector and no such permission was obtained or where there is a
statutory prohibition on the transfer do not qualify for the application of this doctrine.

The doctrine applies when the transferor interest is enlarged by acquisition of a right of the pre-
emption or the removal of restriction on alienation or by discharge of an encumbrance or a prior
mortgage or when maufi tenure ripens into proprietary right

No application of the doctrine in absence of transfers

Where no grant or interest in immovable property is involved, the doctrines of feeding the grant
by estoppel would not apply Where the DDA auctioned a plot of land holding out to be a developed
plot, which was set aside by the High Court on ground that the plot was situated in a green area, the
acceptance of the bid and the deposit amount of 25% will not amount to transfer. Since the disability
attached to the plot of land ceased to exist on the date of petition, the DDA would not be compelled to
finalise the sale and delivery of the plot after 14 years of initial transaction will have no application
in this case . 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.

In P. Chellamuthu v. Abhinaya Muthusamy, the property owned by A was under a

notification to be acquired by the authorities. He challenged the said notification but lost. During the
period of challenge, he executed a power of attorney in favour of B, who sold the property on the
very same day to C. Next day A revoked the power of attorney issued in favour of B and instead sold
the property to D. B, on the other hand, petitioned the authorities to cancel the land acquisition and
accepting his case, the authorities reconveyed the land in favour of B, instead of A, the original
owner from whom they had acquired the land.

Meanwhile C had also sold the property to three different persons at whose instance the suit was
brought to the Court. On the issue of application of Section 43, the Court held that at the time when
A had sold the property to D, he did not have any interest as the property was acquired by the
government. On its re conveyance, the title in favour of C was perfected. B on the other hand had no
right to have the land re conveyed in his favour as he was merely the power of attorney holder that
was cancelled by the original owner.

The rule of feeding the grant by estoppel under S. 43 and spes successionis under S.
6(a)

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Section 6(a)

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. The chance of an heir-apparent succeeding to an estate, the chance of
a relation obtaining a legacy on the death of a kinsman, or any other mere possibility of a like
nature.

As a general rule, property and interests in it are transferable. Law favours alienation to
accumulation. However, it is important for the transferor to have a present and subsisting title in
the property.

Spes Successionis

It means expectation of succession i.e. a possibility of getting property in future through succession
i.e. through inheritance or will. Transfer of spes successionis is void ab initio. Except as otherwise
provided by the Transfer of Property Act property of any kind may be transferred, so
transferability of property is general rule and this rule obtains its enforcement from section 6.
Exception to this general rule is provided by the provisions of Section 6 itself. Section 6(a) of the
Transfer of Property Act restricts the transfer of a mere expectancy or chance of an heir-apparent
succeeding to an estate, the possibility of a relation obtaining a legacy on the death of a kinsman, or
any other mere possibility of alike nature.

So during the lifetime of a person his heir-apparent cannot transfer its mere expectancy of
succeeding because it is not his right it’s only an expectation of getting a share, after the death of the
principle, in future. A person having interest over a property which is spes successionis i.e. mere
possibility to succeed to the property in future is not a right and is not capable of being transferred.
Such a person cannot file a suit on the basis of such expectation of succession.

Section 6(a) of property made spes successionis an exception of rule of transferability as per the
provision of section 6 spes successionis includes:

1). chance of an heir-apparent succeeding to an estate.

2). chance of a relation obtaining legacy on the death of a kinsman.

3). any other mere possibility of a like nature.

Chance of Heir Apparent

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Heir Apparent-because there is no heir of a living person. It is a mere chance because if a person
hopes to succeed to property of an intestate what and how much of it would be available can only be
ascertained at the death of the intestate. This is so because no property may be left by the time

he dies, or he may have made a will with regard to it or that the heir apparent may die before
person whose property he hopes to succeed to.

Thus, there is only a hope, expectancy or chance to succeed.

Eg. A family consist of a father (f) and son (s). S hopes to succeed to the property of F his father. He
professes to transfer property X, with a conviction that he is the future owner of it and assures him
that on the death of F he would deliver the possession of property to X. The next day X dies and S
actually becomes the owner of those properties but refuses to deliver possession to X. X cannot press
for delivery as the transfer was void ab initio.

Chance of a relation obtaining legacy on the death of a kinsman

Chance of a legacy is a mere possibility of getting certain estate in future under a will. It is the
chance or expectation of any friend or relation to get property, under a will, after the death of the
testator. Chance of an heir-apparent and chance of a legacy is very much alike because both possess
no right in property and they are mere expectations. The chance of a relation or a friend receiving a
legacy is a possibility even more remote than the chance of the succession of an heir, and non-
transferable. A will only operates after the death of the testator and not on the date when it is
written and if there is more than one will the last one prevail. So, for obtaining the entitlement over
the property of the testator the person has to qualify two conditions (a) he has to survive the testator
and (b) he must be the person who was mentioned in the last will. If two or more wills have been
executed in favour of different persons, only the legatee under the last will is entitled to get the
property. Before a will operates i.e. before the death of the testator, the legatee has only a mere hope
of getting certain property under will, and is non-transferable.

Any other possibility of a nature

Any other possibility of the like nature would mean any other possible interest or property which is
as uncertain as the chance of an heir-apparent or of a legatee. The central aim of section 6(a) is to
prohibit the transfer of properties which are merely a future uncertain possible interest. Therefore,
clause (a) of section 6 exclude not only the chance of an heir-apparent or of a legatee but also any
other chance of getting future property which is not at present a fixed right of a transferor. The
words of a ‘like nature’ indicate that the possibility referred to herein must belong to the same

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category as the chance of an heir-apparent or the chance of a relation obtaining legacy. In this case,
the usual illustration of a possibility is the case of a fisherman’s net. There is no certainty that any
fish will be caught, and the fisherman has no interest in the fish until they are caught. An agreement
for the sale of Otkarnam lands is a possibility and therefore void.

The rule of feeding the grant by estoppel has to be compared and contrasted with the rule of specs
successionis provided under section 6 (a) of the Act. They appear to relate to similar kinds of
situations but with different consequences. In fact, not only do they relate to different situations,
they are also inherently different.

The illustration to S. 43 says: A, a Hindu who has separated from his father B, sells to C three
fields, X, Y and Z, representing that A is authorised to transfer the same. Of these fields Z does not
belong to A, it having been retained by B on the partition; but on B’s dying A as heir obtains Z. C,
not having rescinded the contract of sale, may require A to deliver Z to him.

This case to begin with, apparently resembles a transfer of spes successionis. When A sold Z to C, he
had only a spes successionis in it, i.e, a bare chance of inheritance. But he having subsequently
inherited it, C became entitled to it. Both sec 43 and 6(a) are fundamentally different, as the former
relates to a situation where a person transfers a hope and expectancy, and the fact that it is a hope
and expectancy is within the knowledge of the transferee as well. He has not been misled into
believing something else, he knows that the transferor does not have a present or subsisting title to
the property, but under s 43, there is a misrepresentation by the transferor to the transferee about
his competency to transfer the property. This representation may be erroneous or even fraudulent,
but the fact remains that there is not only misrepresentation but the transferee acts on it.

He is made to believe that the transferor is capable of conveying a good title. Further, as the
transfer is for consideration, it also means that this transferor who has misled the transferee has
taken a monetary benefit under this transfer. therefore , if during the subsistence of the contract this
transferor, who had initially misled the transferee into believing that he has a good title to the
property and he is capable to convey the same, infact acquires a competency to do the same, the
transfer shall be valid at the option of the transferee. The transferee therefore is given a chance to
either go ahead with the transfer by exercising the option to that effect or rescind the same. If he
chooses to go ahead with the transfer, he has to indicate his willingness to do so and the transfer
shall become valid and enforceable in a Court of law.

For example, in the above illustration when A becomes the owner of the property, C may indicate to
A about his willingness to go ahead with the transfer and if A refuses or fails to do so, C may file a

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suit for specific performance of the contract, and with the help of the Court require A to deliver Z to
him. But in the same illustration, If C knew that A is not competent to transfer Z in the first place,
then upon A’s refusal to perform the contract, he would have no remedy, as this transfer would have
been covered under S. 6 (a) and would have been void.

Distinction between spes succession and the rule of estoppel under S. 43

The primary difference between S. 6(a) and S. 43 are as follows:

1. Section 6(a) enacts a rule of substantive law, while S. 43 incorporated a rule of estoppel.

2. Section 43 applies only applies in those cases, where the transfer is for consideration, it does
not apply on gratuitous transfer. It applies in cases where despite a misrepresentation, the
transferor, either takes or seeks to take a monetary benefit from the transferee. It therefore
would not apply to cases where a person transfers the property by way of gift. On the other
hand, the prohibition under S. 6(a) applies to all kinds of transfers, irrespective of whether
they are for consideration or gratuitous transfer. A gift of property that a person hopes to
inherit is also void.

3. Under S. 6(a) the fact that it is a transfer of spec successions is within the knowledge of both
the transferee and transferor. There is no misrepresentation from the side of the transferor in
regards to his competency to pass a good title in present to the transferee. Under S. 43, due to
express representation, fraudulent or erroneous, the transferee, at the behest of the
transferor, is assured a good title. Section 43, is very clear of the fact that its application will
only cover those cases, where due to the making of a representation by the transferor, that he
is competent to transfer a piece of property, the transferee has been expressly misled. The
transferee had no knowledge about the defect or lack of title on part of the transferor, he is
made to believe in the competency of the transferor to transfer the property.

4. The status of a transfer under S. 6(a) is void in its inception, however under S. 43, the
transfer is voidable at the option of the transferee provided two conditions are satisfied. First
, that the contract should be subsisting at the time the transferor attains competency to
transfer the property, i.e it should not have been rescinded and Secondly, that the property
should be available with the transferor. It should not be in the hand of a bona fide transferee
for value.

Case laws
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Jamma Masjid Mercara v. Kodimanidra Deviah

A Hindu joint family consisted of three brothers, BR1, BR2, BR3. In the year 1900, they collectively
executed a usufructuary mortgage of the joint family property in favour of X. There was litigation
and a compromise was arrived at the respect to it, according to the terms which for a period of 20
years, i.e till August 1920, the mortgagee was entitled to retain its possessions and after that the
property was to revert back to the family. The family chart was as follows, out of the 3 brothers one
died unmarried and the other two died one after another, leaving behind their widows W2 & W3
but no children.

They had a sister who had three grandsons A, B and C, who were the reversioners to their property.
A was to get one half of the property and B and C, one fourth each, but on the death of two widows.
Till the death of two widows, the interest that they had in the property was mere spes successionis,
that according to S. 6(a) is non transferable. They represented to the transferee that this property
belonged to the joint family and after the death of W2, it devolved to them as reversioners, and
hence they were competent to transfer the same. They did not disclose the fact that W3 was still
alive, and her very presence prevented them from getting a title in the property. The transferee on
such representations of the reversioners gave them consideration, and filed a suit for possession of
property, when the same was not delivered to them. W3 resisted this suit on the ground that till she
was alive, no one else had the right to possess the property, as these were her husband’s self
acquisitions and she, as his legal heir, was the owner of it.

The subordinate courts, the district court and even the judicial commissioner accepted her
arguments. But before the second appeal at the level of the judicial commissioner could be
finally disposed of W3 died and the transferee applied before the revenue authorities for
transferring the patta for the property standing in the name of W3 to his name on the strength of
the sale deed executed by the reversioners. At the time, Jumma Masjid intervened and contented
that first the whole properties vested in them on the strength of a gift deed executed by W3 in their
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favour, and secondly they alleged that one of the reversioners, A, had relinquished his share in the
property in their favour for consideration of 300 rupees. The revenue authorities rejected the claim
of Jumma Masjid and the possession of the transferee was upheld. Jumma masjid filed a case for
recovery of possession that went to the Supreme Court. The decision that came in favour of
transferee was pronounced 42 years after the sale deed was executed in the favor of reversioners.

The primary issue before the Court was whether a transfer of property for consideration made by a
person who represents that he has a present and transferable interest therein, while he possesses in
fact only a spes successionis, is within the protection of Sec 43 of the Act. The contention of Jumma
Masjid was that S43 must be read as a subject to the provision of S. 6(a), that specifically prohibits
the transfer of spes successionis and therefore s. 43 should apply only in cases other than those
covered under S. 6(a). The Court rejected thi argument and drew a distinction between S. 6(a) and
S. 43 pointing that they do not relate to the same spheres but different ones, and that there is no
conflict between them. Section 43 clearly applies whenever a person transfers a property to which
he has no title on the representation that he has a present and transferable interest, and acting on
this the transferee takes transfer for consideration. When these conditions are satisfied the section
enacts that if the transferor subsequently acquires the property, the transferee becomes entitled to
it, if the transfer is subsisting.

There is an exception in the favour of the transferees for consideration in good faith and without
notice of the rights under the prior transfer. Apart from this, the section is absolute and
unqualified in its operation. It applies to all transfers which fulfill the conditions prescribed
therein, and it makes no difference in its application whether the defect of title in the transferor
arises by reason of his having no heir. Pointing out that there is no controversy on this issue
the Court said:

S. 6(a) and S. 43 relate to two different subjects, and there is no necessary conflict
between them.

S. 6(a) deals with certain kinds of interests in property mentioned therein and prohibits a transfer
simpliciter of those interests. S. 43 deals with representations as to title made by a transferor who
had no title at the time of transfer and provides that the transfer shall fasten itself on the title which
the transferor subsequently acquires. Section 6(a) enacts a rule of substantive law while S 43 enacts
a rule of estoppel, which is one of evidence. The two provisions operate on different fields and under
different conditions and there is no ground for reading a conflict between them or cutting down the
ambit of the one by reference to the other

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The Court said that in its opinion, both of them can be given full effect on their own terms in their
respective spheres, but to hold that transfers by person who have only a spes successionis at the date
of transfer are not within the protection of S. 43, as it would destroy its utility to a large extent. S. 43
enacts rule of estoppel, it virtually enacts a special provision for the protection of transferees for
consideration from the person that rules of estoppel cannot be resorted to for defeating or
circumventing prohibitions enacted by statutes on grounds of public policy, but here it is not a
ground of public policy alone by means of a specific provision in specific enactment. The Court
therefore held that the transferee here entered into a transaction acting on the representation
acquired title to the properties under S. 43 of the Act, when the reversioners that they were entitled
to the property in present. He therefore acquired the title to properties under S 43 of the Act, when
the reversioners become intitulo on the death of W3 and the subsequent dealing by the way of
release did not operate to vest any title in Jumma Masjid.

In Official Assignee, Madras v. Sampath Naidu

Person A executed two mortgages over the properties, that he hoped to succeed on the death of his
relatives, i.e in respect of which he had only spes successionis. On the death of the relative, he
succeeded to those properties as the heir and sold them to B. A mortgagee claiming under B filed a
suit for the a declaration that the initial mortgagee effected by A himself at the time when he had no
title in the property was void in the light of S. 6(a). The Court accepted this contention and held that
the initial mortgage was affected by A when he had only spes successionis, and this fact was within
the knowledge of the mortgagee, the same was void and S. 43 would not apply. Consequently, the
transfer in favour of B was valid.

In Alamanaya Kunigari Nabi Seb v. Murukuti Papiah

A son executed a mortgage of the properties belonging to his father. The mortgagee filed a suit to
enforce the mortgage. During the pendency of this suit, the father died and the son, as the heir,
inherited the property. The issue before the Court was whether the mortgagee could claim
protection of S. 43. The son contended that such an interpretation of S. 43, would nullify S. 6(a). The
Court rejected this argument and held:

This argument neglects the distinction between the purporting to transfer the chance of an
heir apparent and erroneously representing that the transferor is authorised to transfer certain
immovable properties. It is the latter course that was followed in the present case. It was
represented to the transferee that the transferor was in presenti entitled to and thus authorised to
transfer the property.

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The Court ruled in favour of the mortgagee as against the son.

In Shyam Narain v. Mangal Prasad

The property belonged to a person A. On his death it vested in his daughter D, as A had no son. D
had a son, DS, who sold these properties to X in 1910 when his mother D was alive. D died in 1926,
and DS became the wonder of the properties as her heir. In 1927 he sold the same properties to Y,
who claimed the estate on the ground of sale in 1910, conferred no title on X, as Ds had only a spes
successionis, and in contrast, the transfer in their favour had taken place when DS had vested
transferable title.

The Court rejected their argument and held that X had acquired good title, as they were entitled to
benefit of S. 43 and observed:

S. 6(a) would therefore apply to cases where professedly there is no transfer of a mere spes
successionis, the parties knowing that the transferor has no more right than that of a mere
expectant heir. The result of course would be the same where the parties knowing the full facts
fraudulently clothe the transaction in the garb of an out and out sale of the property and there is no
erroneous representation made by the transferor to the transferee as to his ownership. But where
an erroneous representation has been made by the transferor to the transferee that he is the full
owner of the property transferred and is authorised to transfer it and the transferee acts upon such
representation, then if the transferor happens later, before the contract of transfer comes to an end,
to acquire an interest in that property, no matter whether by private purchase, gift, legacy or by
inheritance or otherwise, the previous transfer can at the option of the transferee operate on the
interest which has been subsequently acquired although it did not exist at the time of the transfer.

In Mahadeo v. Har Baksh

The husband of a Hindu woman disappeared, After 5 years of his disappearance, she executed a
mortgage of his property as the owner of the same. Since the title was in the name of the husband,
whose whereabouts were not known, the presumption of death in such cases arises after a period of
7 years of unexplained absence under the Indian Evidence Act, 1872. It is only after 7 years that he
would be presumed dead and then only can the wife in the capacity of a widow, inherit his property.
The mortgagee filed a suit after she had acquired the estate as a limited owner, the Court ruled in
his favour.

Shehammal vs. Hasan Khani Rawther & Ors on 2 August, 2011

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Where it was held by Hon’ble Supreme Court of India that “There is little doubt that ordinarily there
cannot be a transfer of spes successionis, but in the exceptions pointed out by this Court in Gulam
Abbas’s case, the same can be avoided either by the execution of a family settlement or by accepting
consideration for a future share. It could then operate as estoppel against the expectant heir to claim
any share in the estate of the deceased on account of the doctrine of spes successionis. A
testamentary disposition by a Mohammedan is binding upon the heirs if the heirs consent to the
disposition of the entire property and such consent could either be expressed or implied.

Thus, a Mohammedan may also make a disposition of his entire property if all the heirs signified
their consent to the same. In other words, the general principle that a Mohammedan cannot by Will
dispose of more than a third of his estate after payment of funeral expenses and debts is capable of
being avoided by the consent of all the heirs. In effect, the same also amounts to a right of
relinquishment of future inheritance, which is on the one hand forbidden and on the other accepted
in the case of testamentary disposition. Having accepted the consideration for having relinquished a
future claim or share in the estate of the deceased, it would be against public policy if such a
claimant be allowed the benefit of the doctrine of spes successionis. In such cases, we have no doubt
in our mind that the principle of estoppel would be attractive.”

Shehammal v. Hassan Khani Rawther

There is no concept of jointness of ownership of the properties of a Muslim and his inheritors.
Islamic jurisprudence does not contain the norm of relinquishment of future share by an expected
heir. This principle has been recognized and reiterated by the judiciary on many occasions.
However, if an heir expectant receives reasonable consideration or price of his probable share and
relinquishes his right of probable inheritance, then he must not be allowed to claim the relinquished
share as and when the right of inheritance arises. This has been recognized by the Supreme
Court in Shehammal v. Hasan Khan Rawther:-

Naralava Rawther was the owner of some immovable properties. He helped all his children to settle
down in his lifetime. His youngest son, namely, Hasan Khani Rawther, respondent no. 1, was
staying with his father Maralavo Rawther even after his marriage, while all other children – two
sons and three daughters – had moved out of the family house, either at the time of their marriage
or soon thereafter. When each of his children left the family house, Meeralava Rawther used to get
them to execute deeds of relinquishment on the receipt of some consideration. Each of them
relinquished his/her respective claim to the properties belonging to Meeralava Rawther except
Hasan Khani Rawther who was living with his father in the family house and was not required to
execute the deed of relinquishment.

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After the death of Meeralava Rawther, three separate suits were filed in the lower court. One was
filed by respondent no. 1 for the declaration of title, possession and injunction in respect of the
property of the deceased, basing his claim on an oral gift made by his deceased father in his favour.
Second suit was instituted by Mohammad Rawther, one of the brothers, praying for injunction
against his brother, that is, respondent no.1. Third suit was instituted by Shehammal, the daughter
of the deceased and present petitioner claiming her 1/9th share in the estate of her father and
seeking partition of the properties under dispute. The lower court dismissed the suit of respondent
no. 1 claiming property on the basis of an oral gift for want of evidence. The suit of Shehammal was
decreed and the suit filed by Mohammad Rawther was also dismissed.

The matter went to the High Court of Kerala where the single judge held that the plaintiff Hasan
Khani Rawther could not be non-suited even if he had failed to prove the oral gift in his favour
because he alone was having the rights over the property of Meeralava Rawther in view of various
deeds of relinquishment executed by the other sons and daughters of Meeralava Rawther. So far as
the applicability of law relating to the doctrine of renunciation of an expectant heir in the property,
it was argued that the doctrine was based on the concept that the Muslim law did not contemplate
inheritance by way of expectancy during the life time of the owner and that inheritance opened to
the legal heirs descended in specific shares.

The Supreme Court was called upon to resolve three main controversies, namely (i) whether in view
of the doctrine of spes successionis, a deed of relinquishment executed by an expectant heir could
operate as estoppel to a claim that may be set up by the executor of such deed after inheritance
opens on the death of the owner of the property; (ii) whether an execution of a deed of
relinquishment after having received remuneration for such future share, the expectant heir could
be stopped from claiming a share in the inheritance; and (iii) whether a Muslim, by means of a
family settlement relinquishment, claim his right of spes successionis when he had still not acquired
a right in the property.

The Supreme Court analysed the arguments based on the opinion of various jurists like Amir Ali and
DF Mulla and the decisions in Gulam Abbas v. Haji Kayyum Al, Latafat Husain v. Hidayat Husain
and Mt. Khannum Jan v. Mt. Janbibi. The Court reiterated its earlier views on the point under
consideration and laid down:

(i) Rule of spes successionis has not been recognized by the Muslim Law since it entailed the giving
up of something which had not yet come into existence.

(ii) Ordinarily there cannot be a transfer of spes successionsis.

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(iii The binding force of the renunciation of a supposed right would depend upon the attendant
circumstances and the whole course of conduct of which it forced a part.

(iv) Mere relinquishment of a right to be vested in future cannot be covered by the equitable doctrine
of estoppel.

(v) Application of the rule embodies in the principle of spes successionis can be avoided either by the
execution of a family settlement or by accepting consideration for a future share. Such
circumstances attract the application of the rule of estoppels which is far from being opposed to any
principle of Mohammedan law, is really in complete harmony with it.

(vi) A family arrangement would necessarily mean a decision assured at jointly by the members of
a family and not between two individuals belonging to the family.

The Court ultimately held that the doctrine of estoppel was attracted so as to prevent a person
receiving an advantage for giving up of his/her rights and yet claiming the same right
subsequently. The Court enunciated that “being opposed to public policy, the heir expectant would be
stopped under the general law from claiming a share in the property of the deceased”.

The Apex Court in the above case was not inclined to accept the methodology resorted to obtain
relinquishment could not strictly be to be a family arrangement. The Court did not entertain the
special leave petitions and the same were dismissed.

Fraudulent Transfer

Introduction
 Section 53 of the Transfer of Property Act, 1882 (TPA), pertains to fraudulent transfers
and principally concerns the intentional transfer of property with the aim of defrauding
creditors.

 As outlined in Section 53, a property transfer is considered voidable, allowing any defrauded
creditor the option to void the transfer, unless the transferee acquired the property in good
faith and for valuable consideration.

 Additionally, the section outlines a procedure for nullifying such transfers.

 The section also provides a mechanism for setting aside the transfer.

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Section 53 of the Transfer of Property Act
 Every transfer of immovable property made with intent to defeat or delay the creditors of the
transferor shall be voidable at the option of any creditor so defeated or delayed. Nothing in
this sub-section shall impair the rights of a transferee in good faith and for consideration.

o For example:– When ‘A’ transfers his property to ‘B’ without giving him his
ownership of the property with the intention to keep his assets out of reach of his
creditor, such a transfer is called a fraudulent transfer.

 A fraudulent transfer of property gives rise to a civil cause of action. The court may set aside
a fraudulent transfer at the request of the defrauded creditor.

Essentials
 The transferor carries out the conveyance of immovable property without receiving
any consideration.

 The purpose behind the transfer is to deceive a future transferee and hinder or postpone
the rights of creditors.

 This type of transfer can be void which means it is voidable at the discretion of the
subsequent transferee.

Exceptions
 Good Faith under Section 53(a):

o If the person receiving the property (transferee) acted in good faith and had no notice
of the fraudulent intent of the transferor, the transfer is not voidable.

o Good faith here implies an honest belief and lack of knowledge about any fraudulent
intention on the part of the transferor.

o If the transferee can prove that they acquired the property without any knowledge of
the fraudulent intent, the transfer may be considered valid.

 Insolvency of the Creditor under Section 53(b):

o Another exception is when the transferor was not rendered insolvent by the transfer,
and the transfer was made for adequate consideration.

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o If the transferor remains solvent even after the transfer, and the transfer was made
for a legitimate purpose with adequate consideration, it may not be considered
fraudulent even if it prejudiced the creditor.

Framing of suit under fraudulent transfer

 Privity of contract is followed, which means that only the parties to the contract can sue.
Hence, no third party can sue on the creditor’s behalf who is not a party to the suit.

o The suit is instituted by the creditor on the ground that the transfer is made to defeat
or delay the creditors of the transferor.

 The suit is instituted in the representative category or for the benefit of all creditors.

o This is to avoid a multiplicity of suits against the same opposite party/parties on the
same subject. Dismissing a creditor’s lawsuit would be binding on all creditors.

The Burden of Proof

 Initial Burden on Creditors:

o Burden lies on creditors under Section 53 of TPA, 1882.

o They initiated legal action, attacking the debtor based on fraudulent transfer.

 Creditor's Assertion:

o The creditor must establish that the transfer was fraudulent.

o The aim is to show the transfer was intended to defeat or delay creditor's claims.

 Shift in Burden:

o Upon creditor's successful proof, burden shifts to the transferee.

 Transferee's Defense:

o A transferee must prove good faith in acquiring the property.

o Burden includes demonstrating bona fide purchase for value.

o Transferee must show non-involvement in the fraudulent transfer.

 Section as a Shield for Transferee:

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o Transferees can use Section 53 as a defense mechanism.

o Protection against allegations of fraudulent involvement.

 Creditor's Use as a Sword:

o Section 53 serves as a legal weapon for creditors.

o Allows them to challenge and attack the debtor in case of fraudulent transfers.

Case Laws
 Karim Dad v. Assistant Commissioner (1999):

o If the whole transaction is based on fraud and misrepresentation, then no valid title
can be passed to the transferee by using a forged and fabricated deed.

 Musahar Sahu v. Lala Hakim Lal (1951):

o It will not be fraud if the debtor chooses to pay one creditor and leave others unpaid
provided that he must not retain any benefit.

Doctrine of Fraudulent Transfer

Lord Keeper in the case of Partridge v Gopp[1]had enunciated certain words which are relevant
herein. He opined that no one has power over his property to such extent using which he, whilst
using his right of alienation of property, can delay, defraud or hinder his creditors. The only the
situation he can do is when it is bona fide and is done upon consideration considered good in the
eyes of law.

The Transfer of Property Act, 1882, in Section 53 which deals with the Doctrine of Fraudulent
Transfer, embodies this very principle wherein it says that every transfer of property, which is
immovable in accordance with the relevant section of The Transfer of Property Act, 1882, which is
done possessed with an intention aimed to delay or defeat the creditors [ or the people to whom the
transferor owes some kind of liability which is financial in nature ] of the transferor shall be
voidable.

Such option to consider the transaction void or not has been left in the hands of the aggrieved party
who, here, will be the delayed or defeated creditors. This means that even though such transfer is, in
the eyes of law, valid but it is left upon the creditor as to whether he wishes to avoid or not. The
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motive of the legislature behind such arrangement is to give the option to the party who has suffered
or whose interest has been affected.

Object behind the Doctrine of Fraudulent Transfers

Section 53 is attracted in cases wherein any transfer of property, which is immovable in accordance
with the relevant sections of The Transfer of Property Act, 1882, is done with the design or scheme to
fulfil the objective of defrauding his creditors in a manner that they are defeated or delayed.

It was such practice that compelled the legislature to enact this section. Their objective was to lend
protection to creditors who are those to whom the transferor owes some sort of liability which is
financial in nature. The basic objective is to lend a blanket to such people who suffer in the nature of
delay or defeat of their interest. Such people whose mere fault was to lend money to the ill-
intentioned transferor must be provided some kind of security- one which only the legislature
through legal policy can provide.

The doctrine of Fraudulent Transfer from the perspective of English Law

Whilst delving into the Doctrine of Fraudulent Transfer from the perspective of Indian Law, it is
interesting to see the perspective of the English Law – more so in the case of legislation which were
introduced in the colonial era, like The Transfer of Property Act, 1882.

The doctrine of Fraudulent Transfer, from the the perspective of English Law is dependent, to the
most extent, upon a the celebrated case of Twyne[2]. In this particular case law, Pierce owed certain
liability which was financial in nature to two parties – Twyne and C. Now, C i.e. the second person
to whom Pierce owed such liability [ financial in nature ] approached the court by filing a suit
seeking help in repayment of his debt by Pierce.

However, before the suit could come to any kind of fruition in the court, Pierce, being in the
possession of goods as well as the chattels, in hush-hush manner made a deed of gift which was
general in nature with the subject matter encompassing the totality of his belongings of chattels and
goods to Twyne, the first person to whom Pierce owed such liability [ financial in nature ]. Such a
gift was repayment of the debt that was owed to Twyne.

On a later instance, C secured judgment to procure goods and chattel in a manner that satisfies C’s

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debt. In execution of such judgment, the seizure was sought to be done – to which Twyne resisted.
Twynebrought forth the argument that he had been a purchaser for value,which cannot be deemed
to be inadequate, consideration which was also bona fide within the Fraudulent Conveyances Act,
1584.

At this juncture, question as to whether the gift made in favour of Twyne was done with the design
as to defraud C, came into being.

To such, the honorable The court opined that:

 The gift in question seemingly held marks and symbol that it was meant to defraud since the
gift is quite general, with no necessity, in a normal sense, for the donor to do such.

 Another indication was the unusual behaviour of the donor to continue to hold possession of
the gifts and what was even more so out of character was to keep using them as if they were
his own only. The court opined that this was a clear indication of his ill – intent in the whole
case in question.

 As the saying goes – gifts that are given in secret are always suspicious. In the present case
as well, the gift was given in secrecy which arouses suspicion of the court.

 The court questioned the need to gift the title of such substances which were lis pendens. It is a
strong symbol of ill – intent to have gifted such substances during the pendency of the suit.

 The trust which existed between the donor and donee made it apparent that the fraudulent
act was covered by the trust. The act of donee to allow the donor to not only keep the
possession of the goods gifted but to continue to make use of it as of they were his own is
certainly an act of trust.

In view of such and keeping note of the fact that the gift deed was indeed made on good
consideration but was, in no circumstances, bonafide - the celebrated Star Chamber [ comprising of
Sir Thomas Egerton, Chief Justice Popham, and Anderson ] held this particular gift, in question,
was indeed an attempt by Pierce to defraud one of his creditors under the Fraudulent Conveyances
Act, 1571.

In another celebrated case dealing with a similar issue, Edwards v. Harben[3], the judgment,
which was delivered by Buller, J., opined that if the possession is not done via a deed [ made before
or after ], it is deemed to have been carried out with an intent to defraud. In such a case, it is void.

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Essentials of the Doctrine of Fraudulent Transfer

The essential requirements of Section 53 of TPA are as mentioned below:
1. Transfer of property

2. The property must be immovable in nature

3. Transfer in question must have been done with the plan or scheme in mind to delay or defeat

4. Such delay or defeat must be suffered by the creditor(s)

5. The transfer would be voidable

6. Transfer must be for consideration

Transfer of Property
The very first essential is the application of The Transfer of Property Act, 1882 itself. If the
transaction does not fall within the ambit of such legislation, there is absolutely no question of
application of Section 53 of The Transfer of Property Act, 1882. According to the Act[4], transfer of
property means when any person transfers property to one or more people, or to himself and one or
more people.

Such a person may include a company, a body of individuals, an individual or association, and even
immovable property can be transferred – which would not, in any case, include growing crops,
standing timber, or grass[5]. Such transfer can be in present or even the future. However, there are
certain rights which cannot be, in any case, be transferred which have been stipulated in Section 6
of The Transfer of Property Act, 1882. This transfer, moreover, shall be valid ( in the eyes of law )
and additionally, should bestow a good title upon the transferee.

Following are some examples of transactions which do not transfer of property:-

o Surrender and relinquishments.

o Relinquishment of share by one co-parcener in favour of the other[6].

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o Partition and family settlements but in case such partition is done with the design or
scheme which is aimed towards affecting creditors in a manner that would delay or
defeat the interests of the creditors, this section will apply

o Where it is claimed that the transfer was a transaction that would be deemed to be
fictitious or sham ( in the eyes of law ) and there was no real transfer and was merely
used in such a manner that it acted as a shield for achieving a hidden agenda, Section
53 is not applicable.

The property must be Immovable in Nature

Section 53 of The Transfer of Property Act, 1882 attracts application to only those property which is
considered to be immovable in nature. At this juncture, we face the pertinent question as to what are
immovable properties:
While The Transfer of Property Act, 1882 does not define what is immovable property, according to
Section 3 of the Act, the immovable property does not, within its ambit, include:

o Grass [which refers to fodder]

o Standing Timber [which refers to trees which are fit to be used in repairs or buildings]

o Growing Crops [which includes all such vegetables, etc. which are grown with the sole
purpose of their produce]

Scholars consider this definition to be a negative one since instead of outrightly

providing definition of immovable property, The Transfer of Property Act, 1882,
merely gives us three things that are not immovable property.

We look towards the General Clauses Act, 1867, for a more comprehensive definition of
immovable property. The General Clauses Act, 1867 specifies the following as
immovable property:

 Land:
The term land includes within its ambit both - the lower as well as the upper

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surface area of earth. Any kind of interest which tends to vest in such would be
treated as it is of immovable property. It includes streams, well, etc.

 Benefits which are arising out of the land :Within such portion is includes every
thing which deals with interest and rights vested inland, as defined above. Right
of collect of rent is one prominent example.

 Things that are attached to Earth : Within this category, there are further three
subcategories that need to read into:

 Things which are rooted in the Earth:

like shrubs, trees but does not include grass, standing timber, and
growing crops. For example, mango trees are immovable property.

Note:
In the celebrated case of Marshall v. Green[7], the learned court opined
that if the sale was only of the right to cut and enjoy the trees as timber
then it does not qualify as an interest in an immovable property but
instead qualifies as an interest in movable property. It is only when such
right is extended over a number of years, it will qualify as an interest in
an immovable property.

 Things which are embedded in the Earth – like minerals, buildings, etc.
By the usage of the word ‘embedded’, it means to structures or things
which have laid their roots or foundations laid much below the surface
area of the Earth.

 Things which have been fastened, in a the manner which is permanent, to

anything which is embedded in the Earth – done for achieving one
purpose which is of enjoyment but in a permanent sense. However, if the
things which are attached are just temporary or transitory in nature and
do not go on to add up to the value as well as the purpose of the structure
or thing they have been attached to, they cannot be termed as immovable
in nature. An appropriate example here would be ceiling fans,doors, and

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windows.

In order to determine whether a fixture in question is of permanent

nature or is merely temporary, we must consider the following points:

 Mode of fixation – that is to say it is temporary, standing on its

own or has been dug in the Earth, etc.

 Objective or the purpose which the fixation is intended to fulfil

Transfer in question must have been done with the plan or scheme in mind to delay or
defeat
The third essential of Section 53 is that the intention behind the transfer must be to delay or defraud
creditors. This is to say that it is important to cull out the intention behind the transfer which is in
question. If such transfer has been with the scheme or design to result in delay or defeat of the
creditors – such transfer is voidable. Now the question arises as to how can this, seemingly, ill–
intention is proved? It must be proved by making use of evidence – which may be direct or
circumstantial in nature. Each case in question must be looked closely into and examined keeping in
mind the surrounding circumstances. Some situations which tend to give strong presumption that
the transfer,in question, was carried out with a scheme or design which is fraudulent in nature are:

o If the transfer was made under such circumstances that it was not widely known i.e. in
secrecy

o If the transfer was done in haste.

o If the transfer was carried out soon after a decree was passed against the judgment-
debtor. Such decree must be such to order the repayment of debt.

o If the transfer was such that the debtor, mysteriously, transferred the whole of his
property without any thought to himself – i.e. without keeping any part of the
property for himself.

o The consideration made for the transfer was such which was significantly small, when
it is compared to the real, original or actual value of the property transferred.

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o In accordance to the evidence discovered, it was proved that there is actually no
consideration payment, contrary to what was given in the sale deed.

There are many more such circumstances but what is pertinent is that each case is
read in a different light, dependent solely on its own facts and circumstances – there is
no straight – jacket formula.

Such delay or defeat must be suffered by creditor(s)

The fourth essential is that the delay or defeat must have been suffered by creditor(s). This is to say
the ill – intentioned transfer, in question must be such wherein the affected people is or are
creditor(s). Herein, it is pertinent to understand the term "creditor". It is said to be understood in a
wide sense for this section.

In the case of Ram Das v Debut[8], the term was interpreted to include such people to whom the
transferor owes some kind of liability which is financial in nature [ i.e. creditors ] which would
include not only those to whom he owes at the time of transfer in question as well as those to whom
he owes at a time which is after the transfer in question.

In order to effectuate application of The Transfer of Property Act, 1882, more specifically, the
Section 53 of the Act, it is necessary for the affected party to be a person to whom liability is owed to
by the transferor, a liability which is financial in nature. However, it is not necessary for the
creditor to be secured. On the contrary, such affected creditor could be an unsecured one as well.

Moreover, even a subsequent creditor i.e. a person to whom the liability which is financial in nature
is owed to at a later date than the transferor, can move to the court under this particular section.
This connotes to the fact that debt to exist at the time of effectuating the transfer is not mandatory.

If transfer of property is effectuated before the transaction of debt, possessed with the intention or
scheme that the transferor would undertake a liability [which would be financial in nature] upon his
head in future and for such purpose wanted to restrict his property from the reach or hold of future
creditors, it is deemed to be equally wrong or fraudulent in the eyes of law. Such transaction is also
liable to be set aside. Such setting aside, however, would be at the insistence of creditors only since
such transaction is deemed voidable.

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However, armed with the mere fact that the loan was undertaken right after the property was
transfer or that there were subsequent debtors, is not sufficient for establishing the fact that there
was a scheme or design to defraud, delay or defeat the subsequent creditors.

Furthermore, one must remember that by usage of ‘creditors’, the legislator does not mean that the
intention should be to delay or defeat all the people to whom the transferor owes some kind of
liability which is financial in nature. The intention or scheme or plan to delay or defeat some or even
just one of the people to whom the transferor owes some kind of liability which is financial in nature
is sufficient to ensure application of Section 53.

In the case of Kanchanbai v. Moti Chand[9], the term creditors used in Section 53 was
discussed. In such case, the transferor undertook a liability which was financial in nature
amounting to a value of Rs. 2600 i.e. two thousand and six hundred rupees. The creditor requested
repayment of the money which was owed to him.

However, even after doing so, he was not paid back. At such instance, such person to whom money
was owed warned that he would move to the court to seek payment of his money. On receipt of
notice of such filing of suit, the transferor, by executing a gift deed [ in favour of his daughter ],
gifted his property. At this point, fed up of the transferor’s antics, the creditor moved to the court
seeking respite under Section 53 of the Act.

The transferor put forth the argument that Section 53 requires more than one creditor and in the
present instance, there is only one creditor. Hence, Section 53 would not be applied.
The learned court, on the other hand, opined that the usage of word creditors cannot be construed
to mean that Section 53 would be applicable only in the occasion of presence of multiple creditors.
This section would attract application even if one single creditor is delayed or defeated or when
there was an intention to delay or defeat even a single creditor. Therefore, in the present case,
Section 53 was held to be applicable.

Transfer would be voidable

Every transfer of property, which is immovable in accordance to the relevant section of The
Transfer of Property Act, 1882, which is donepossessed with an intentionaimed to delay or defeatthe

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creditors [ or the people to whom the transferor owes some kind of liability which is financial in
nature ] of the transferor shall be voidable. Such option to consider the transaction void or not has
been left in the hands of the aggrieved party who, here, will be the delayed or defeated creditors.

This means that even though such transfer is,in the eyes of law, valid but it is left upon the creditor
as to whether he wishes to avoid or not. The motive of the legislature behind such arrangement is to
give the option to the party who has suffered or whose interest has been affected.

However, we must make note of the fact that only the particular part of transaction which was
effectuated with an ill – intention, would be regarded as one which is fraudulent in nature. The rest
of the transfer – which was not tainted with this scheme, would be effectuated normally i.e.
something akin to severability would be effectuated. The catch here is that in transfers wherein a
major part of the transaction in question is held to be one made possessed with an ill – intent to
delay or defeat the creditor(s) and fraudulent parts of the transaction cannot be severed from the
rest of the transaction, then whole of such transaction in question would be held to be voidable.

Transfer must be for consideration

The transfer must be such which is for consideration, one which is not such which was significantly
small, when it is compared to the real, original or actual value of the property transferred. This is to
say the consideration for the transaction, in question, must be adequate.

Exceptions to Doctrine of Fraudulent Transfer

The Transfer of Property Act, 1882, by way of Section 53 has recognized two exceptions in totem.
The doctrine of fraudulent transfer is not applicable to:

14. The person to whom the transfer is made does the whole deed in good faith and for
consideration.

15. Application of any law which relates to insolvency which is being enforced at such time.

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The person to whom the transfer is made does the whole deed in good faith and for
consideration.

The transferee i.e. the person to whom the transfer is made is protected by law if they took the
property, in question, in absolute good faith and gave due consideration for the same. When the
transferee i.e. the person to whom the transfer is made 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.

In the instance that the person to whom the transfer is made lacks any knowledge i.e. possessed no
constructive or actual notice of the ill – intent or intention which was fraudulent nature of the
transferor, the creditors [ i.e. the people to whom the transferor owes some kind of liability which is
financial in nature ] cannot try to stake claim over the property or to effectuate the transfer as void
under Section 53 of the Act. But if the transferee i.e. the person to whom the transfer is made was
keenly aware that the transferor was possessed of such foul intent and keeping such in mind aims to
keep mum about it, the transferee is not in good faith and would not be covered by the exception.

In the case of Vinayak v. Kaniram[10], it was discovered that the intention of the person making
the transfer was not one which could be termed as one which was good since the intention was to
sell off his property which was immovable in nature and procure cash for it in return so as to,
effectively, keep it out of the hands of the people to whom he owed any kind of liability which was
financial in nature. Now, to make matters more interesting, it was further discovered that the
purchaser of the property was well – aware of his ill – intention to defraud.

The learned court, herein, held that since the person who purchased the property was aware of the
transferor’s ill – intention, he also becomes party to the fraud because of his knowledge. The
transaction of sale was held to be voidable i.e. option to consider the transaction void or not has
been left in the hands of the aggrieved party who, here, will be the delayed or defeated creditors.
In the case of Kapini Goundan v. Sarangapani[11], a person belonging to the male population,
had taken a huge sum of money which was his liability which was financial in nature. The man,
being clever and thinking he was bigger than law, effectuated transfer of his property to children
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who were borne from his marriage to his first wife in order to to, effectively, keep it out of the hands
of the people to whom he owed any kind of liability which was financial in nature.

He did so considering [ more like claiming ] it as a reward for her allowance to him to wed the
second wife. In this case possessing interesting factual matrix, the learned Madras court, held that
the consideration the person belonging to the male population was good in law and the transfer
lacked any indication of malice which would be to keep the property away from the people to whom
he owed any kind of liability which was financial in nature. However, according to the author, the
learned court erred in its decision and it would be wise to consider this decision to be an exception
and not something of general nature.

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.

The main point of the laws on insolvency are that the properties owned by the person who has
become insolvent are distributed in an equal manner between such people to whom he owed any
kind of liability which was financial in nature. However, if any one person to whom he owed any
kind of liability which was financial in nature is preferred, in any manner, over the other then the
transfer is considered to be of fraudulent by nature under such section. Wherein the person who is
transferring the property, is declared to be insolvent and in such circumstances, he sells off his
property – the transaction cannot be, in any case, avoided by the people to whom he owed any kind
of liability which was financial in nature.

In case of multiple creditors

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In the case that there are a number of creditors i.e. there are more than one creditor, the transfer
which is made in favour of just one of the creditors is not considered to be made possessed with the
intentionaimed to delay or defeatthe creditors [ or the people to whom the transferor owes some
kind of liability which is financial in nature ].

The logic behind such is that, ultimately, it is upon the debtor i.e. it is his discretion as to decide his
own order of payment. He has that kind of power in his hands. To give an example – if T takes a
loan from Y, U and O and decides he will transfer his property to Y in order to pay off whatever debt
he owed to Y, it is upon his own discretion.

This transfer cannot, prima facie, be termed as one which is made possessed with the intention
aimed to delay or defeat the creditors [ or the people to whom the transferor owes some kind of
liability which is financial in nature ].

In the case of MinaKumari v. Bijoy Singh[12], the learned Privy Council, opined that in the
instance of existence of two or more people to whom the transferor owes some kind of liability which
is financial in nature, the debtor has the power to give preference to any of the creditors and clear
off his debts in any desired order.

Burden of Proof
Burden of proof with respect to showcasing whether the transfer was made possessed with the
intention aimed to delay or defeat the creditors [ or the people to whom the transferor owes some
kind of liability which is financial in nature ] lies on such people to whom the transferor owes some
kind of liability which is financial in nature i.e. the creditors. This is so since they are the ones who
can actually prove whatever delay, defraud or defeat they suffered at the hands of the ill –
intentioned transferor.

In the case of Chandradip v. Board of Revenue[13], the burden of proof with respect to prove
the fraud was held to lie on the person who alleged such fraud. However, in the humble opinion of
the author,it must be noted that the onus to prove the possession of ill – intention which would result
in delay, defraud or defeat of the creditors would be hugely dependent upon the facts and
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surrounding circumstances of each case. This is to say there is no straight – jacket formula whilst
proving the intention of the transferor.

Sham Transfers
Layman definition of sham transfer is one which is merely fictitious in nature. Such transfers are
made with the intention to not, in actuality, effectuate the transfer i.e. the intention of the transfer is
not that the property should go in the hands of the transferee.

Sham transfers are an umbrella term which include Benami transactions which are those
transactions where the intention of the transfer is not that the property should go in the hands of the
ostensible owner. In the celebrated case of Jangali Tewari v. Babban Tewari[14], the learned
court opined that a sham transfer cannot be termed as a real transfer, in any kind of sense, since in
actuality it is not one.

The real owner is not necessarily possessed of intention which is one which is fraudulent per so.
Hence, these types of transfers, in actuality, do not need to be avoided since the ‘real’ title already
rests with the transferor.

We must note that, the decision as to whether a transaction is real or fraudulent or sham, is wholly
and solely dependent on the factual matrix of the case in question. If it is clearly proved by the
creditors that the transfer of property, which is immovable in accordance to the relevant section of
The Transfer of Property Act, 1882, is done possessed with an intention aimed to delay or defeat the
creditors [ or the people to whom the transferor owes some kind of liability which is financial in
nature ] – then such a transaction can be, no doubt, avoided by the people to whom the transferor
owes some kind of liability which is financial in nature.

However, the present circumstances have changed. The Benami Transaction Act, 1988 stated that
those properties which are purchased under the name or identity of the ostensible owner [ who is
also called the benamidar ], the property will belong to such ostensible owner and the owner, who
claims to be the real owner, cannot, in any case, claim from him.

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This Act now considers such benami transfer as one which are real in nature under which the
ostensible owner is considered to be the real one as a matter of fact. However, Section 3 of the
Transfer of Property Act, 1882, states that the legal effect of Section 53 of the Act or any law which is
related to the transfer for illegal purposes are not effectuated.

Conclusion
Doctrine of Fraudulent Transfers is embodied in The Transfer of Property Act, 1882, in Section 53
wherein it is stated that all those transfers of property, which are considered to be immovable in
accordance to the relevant section of The Transfer of Property Act, 1882, which is effectuated
possessed with an intentionaimed to delay or defeatthe creditorsof the transferor shall be voidable.

Such option to consider the transaction void or not has been left in the hands of the aggrieved party
who, here, will be the delayed or defeated creditors.There are certain exceptions to this doctrine
with respect to the transfers which are effectuated towards the transferee with adequate
consideration and in good faith.

But if the transfer is merely a gift to a complete stranger, this question of good faith is completely
irrelevant.The motive of the legislature behind such arrangement is to give the option to the party
who has suffered or whose interest has been affected and to discourage ill – intentioned transfers

Unit:-3
doctrine of Lis Pendens

Introduction
The Transfer of Property Act, 1882, was promulgated embodying the principles of English Common
Law, namely equity, good conscience, and justice underscored by the provisions of the Indian
Contract Act, 1872, and came into force from July 1, 1882.

Property or ownership are synonymous with each other, and ownership interest is automatically
created when a right is vested.

Ownership has to be:

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1. Indefinite in point of the user – The owner may use the property subject to some restrictions
without injuring the rights of other persons, but at no point in time will it negate the
ownership in the property even if the rights may be curtailed.

2. Unrestricted in the point of disposition – The owner has an unfettered right to dispose of the
property. However, there are exceptions to this as minors (those below the age of 18) can be
owners but cannot alienate the property. Also, the Government may acquire the property for
specific purposes irrespective of the property owner’s consent.

3. Unlimited in the point of duration – As long as the property in question exists, the property
rights are heritable. Again, the Government can, at any point, acquire the property and
terminate the owner’s rights.

The Transfer of Property Act covers transfers inter vivos, i.e., between two living persons. A
transfer is defined as an act by which living persons convey the property to one or more living
persons.

The transferee can get the transferor’s rights and nothing more, where the owner is the transferor,
and the transferee is the person or persons to whom the rights are conveyed.

The first amendment to the Transfer of Property Act, 1882, was in 1929, whereby the definition of
living persons was amended to include companies, associations, and bodies of individuals, whether
incorporated or not.

Origin of the doctrine of Lis Pendens

The doctrine of Lis Pendens has its origin by Lord Justice Turner in Bellamy Vs. Sabine, 1857 Where
the Court observed the following:

“This is a doctrine common to law and equity courts, which I apprehend, on the grounds that, if
alienation pendente lite was allowed to prevail, it would simply not be possible for any action or suit
to be resolved successfully. In any case, the Plaintiff will be responsible for the Defendant who
alienated the property before the judgment or the decree and must be obliged, according to the same
course of action, to initiate these proceedings de novo.”

The facts of the above case were the following:

A person, Mr X, sold an immovable property to Mr A.

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Mr X’s son, Mr Z, who was the heir of Mr. X, sued Mr A in a competent court to declare the sale as
void.

However, while this litigation was pending, Mr. A sold the property to Mr. B, who did not take
notice of the suit.

The Court held that the son Mr. Z was entitled to the property and the sale was set
aside.

Mr. B who purchased the property from Mr. A does not get any title as he purchased the property
from someone who did not have the title and therefore cannot convey it.

Therefore, evolving the principles of common law and Section 52 of The Transfer of Property Act,
1882, was born and is as follows:

When there is an ongoing lawsuit in any Court having authority within the limits of India, a suit or
proceeding in which any right to immovable property is precisely in question, the property cannot
be conveyed by any party to the lawsuit which can influence the rights of any other party thereto
under any order which may be rendered therein, unless under the jurisdiction of the Court and on
such conditions as it may enforce.

Lis Pendens literally means ‘litigation pending’ or ‘pending suit’ and is drawn from the concept
based on the maxim “Pendente lite nihil innovature” which means that nothing new must be
introduced while a litigation or suit is pending.

This Doctrine states that the Transfer of property shall be restricted when there is a litigation
pending on the title or any rights that arise directly thereof involving an immovable property.

The suit commences the moment a complaint is presented or the day of commencement of
proceedings in the appropriate Court and shall be terminated by Order of the Court.

The Court may, however, permit any party to the suit to transfer the property on such terms which
it may think fit and proper to impose.

The sale of immovable property can take place through private negotiations, but the said Transfer
will be subservient to the verdict of the competent Court.

Now that the doctrine is clear, an inevitable question that may arise is – what is the objective or
purpose of this doctrine? Let us read on to find out.

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The purpose of the doctrine of Lis Pendens
This Doctrine is essential as it prevents Transfer of the title of any disputed property without the
Court’s consent, there can be endless litigation, and it will become impossible to bring a lawsuit to a
successful termination if alienations are permitted to prevail, and covenants are not imposed.

The ‘Transferee pendente lite’ is bound by the verdict just as if he were a party to the suit and the
transfer shall be subservient to the result of the pending lawsuit.

Let us understand the various conditions that need to be met for the doctrine to apply:-

Conditions for Applicability of the Doctrine as provided in Section 52

 A suit or proceeding is pending.

 The above suit is brought to a competent court within the jurisdiction.

 The right to the title of an immovable property is directly in question.

 There cannot be any collusion.

 The suit should directly affect the rights of the other party.

 The property in question is being transferred by either party.

Some examples for Non-Applicability:

 This does not apply to a private sale by a creditor who holds the right to dispose of the
property that is mortgaged to it even when the borrower has a redemption suit pending.

 The Doctrine also does not apply when the property is not described correctly, making it
unidentifiable.

 In a maintenance suit, where the property is mentioned only so that maintenance payments
can be determined transparently; the Doctrine does not apply when a right to the said
immovable property is not directly in question and alienations are thereby permitted.

 The Doctrine fails to apply when a Court orders restoration of immovable property under the
Civil Procedure Code, Order 21, Rule 63.

Understanding the jurisprudential evolution of this Doctrine

In Ayyaswami vs Jayaram Mudaliar AIR 1973 SC 569, the Court held that the purpose of
this provision is not to deprive the parties of every just or fair argument but rather to guarantee

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that the parties submit themselves to the jurisdiction and authority of the Court which shall
determine all claims that are placed before it to the satisfaction of the parties concerned.

In the case of Hardev Singh v. Gurmail Singh, Civil Appeal No. 6222 of 2000, the Court
ruled that Section 52 of the Transfer of Property Act, would not make void or unlawful any sale of
the contested properties, but only puts the purchaser beyond the binding limits of the judgment on
the disposition of the conflict.

In the case of Koyalee v. Rajasthan District, AIR 2009 Raj.28, the land in question was
originally registered in the name of the Plaintiff’s husband. After his death, his brother realised and
knowing well that the wife of his brother was alive and was the sole legal heir, filed a lawsuit
pursuing the Khatedari rights, and pursuant to this, the wife had to contest that she was the sole
legal heir of the recorded Khatedar. The brother further went on to transfer the land despite the
lawsuit that was pending, since this was done without seeking the Court’s permission the transfer
was struck down under Section 52 of the Transfer of Property Act as per the Doctrine of lis pendens.

In Vinod Seth v. Devinder Bajaj, 2010, though reiterating its power to exclude the suit property
from the limitations set out in Section 52 of the Act, it has allowed the Respondent to make a
pendente lite move. These exemptions under Section 52 are, however, subject to certain conditions
imposed by the Court. In the case at question, the Plaintiff was a contractor who wished to make a
profit by constructing a building on the suit-land, and the Defendant wanted to move it to a third
party. A total of three lakh rupees was to be deposited as a security by the Defendant to transfer the
property in question, The sum the claimant would have profited by. The Court had thus levied the
condition for the payment of that sum, which would make the pendente lite transfer legitimate.

The Court’s positions on this pendente lite-transfers issue are explained in Ashok Kumar v.
Govindammal and Anr, 2010. The Supreme Court of India has here reaffirmed that a pendente lite
cannot be transferred for a property whose title is the subject of litigation.

These transfer payments would limit the rights of the party to whom the Court would eventually
have agreed that the property would be given the title. Where the right of the pendente lite
transferor to the property is upheld under the decree of the Court, then the title of the transferee to
the property is disregarded. However, if the title of the pendente lite transferor is acknowledged
only for a smaller portion of the property, only for that portion of the property can a transferor
have the title. The Transfer of the title of the rest of the land, for which there is no right for the
pendente lite transferor, is invalid. This means that the transferee cannot claim the title or any other

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interest in the rest of the property. Finally, if the transferor was found to have no right in the first
place to the transferred land, then the transferor would also not have gained rights on this property.

The Supreme Court discussed and amended the law concerning the Doctrine of lis pendens in Har
Narain v Mam Chand, in compliance with Section 47(2) of The Registration Act, 1908. The lis
pendens doctrine states that no fixed property may be transferred when a lawsuit relating to it is
pending. Under Section 47, from the date of execution, a recorded sale deed of a fixed property is
considered to exist upon registration. The Court made it clear that the fiction produced pursuant to
Section 47 does not prohibit lis pendens from functioning. Thus, if the civil action starts and is
registered later, the Court held that land sales are still subject to the principle of lis pendens.

Suggestions
To digitize all property records, while the Doctrine is necessary to ensure that the property rights of
the parties involved are protected, it is also imperative that technology be employed so that the
property title in question does not get transferred while the case is pending. This can be achieved by
the complete digitalization of property records wherein all properties are accorded a property
identification number, this along with the fact that India has already created a Unique
Identification System for all its citizens via the Aadhaar card can be combined to ensure that the
integrity and sanctity of the data are never in question. This will also help in avoiding cases where
the property cannot be identified.

When an encumbrance certificate (EC) is issued, it mentions any encumbrance. This can be
improved, so as to list any pending litigation(s) to alert the registering authority and the parties
concerned.

Conclusion
The doctrine of Lis Pendens is strictly based on the theory of necessity rather than on the theory of
notice governed by the principles enshrined in common law, namely Justice, Equity and Good
Conscience. It is, therefore, pivotal in ensuring that justice is provided without injuring the rights of
either party.

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Doctrine of Part Performance

Introduction

The Doctrine of Part Performance is a significant aspect of property law under the Transfer of
Property Act, 1882 (TPA) which allows for the recognition of partially performed
agreements even if they do not meet the formal requirements stipulated by the Act.

What is the Concept of Doctrine of Part Performance?

 The Doctrine of Part Performance is embodied in Section 53A of TPA.

 This section protects transferees who have taken possession of the property or made
improvements based on an oral agreement or an agreement not registered as required by
law.

What are Elements of Doctrine of Part Performance?

 Existence of an Agreement:

o There must be a valid agreement between the parties for the transfer of property, even
if it is not in writing or registered.

 Payment of Consideration:

o The transferee must have paid or agreed to pay the consideration, either fully or in
part, as per the terms of the agreement.

 Taking Possession or Making Improvements:

o The transferee must have taken possession of the property or performed substantial
acts of improvement on it based on the agreement.

What is a Landmark Case on Doctrine of Part Performance?

 Saradamani Kandappan v. S. Rajalakshmi (2011):

o In the landmark case, the Supreme Court reaffirmed the principles of the Doctrine of
Part Performance as enshrined in Section 53A of the TPA, 1882.

o The case involved an oral agreement for the sale of immovable property between the
parties.

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o The SC held that the transferee was entitled to the protection afforded by Section 53A
of the TPA, 1882 despite the informality of the agreement and its non-registration.

o The Court emphasized the importance of equity and fairness in property transactions
and upheld the transferee's rights based on the principles of part performance.

What are Application and Implications of Doctrine of Part Performance?

 The Doctrine of Part Performance has significant implications for property transactions in
India.

 It provides protection to transferees who have acted in good faith and relied on
agreements, even if they do not meet the formal requirements of the law.

 This doctrine ensures that parties are not unfairly deprived of their rights due to
technicalities or formalities in agreements.

 Moreover, the Doctrine of Part Performance promotes certainty and stability in property
transactions by recognizing the practical realities of transactions where parties have already
taken steps towards performance based on their agreements.

Conclusion
The Doctrine of Part Performance, as enshrined in Section 53A of TPA plays an important role in
property law in India. It provides protection to transferees who have partially performed
agreements for the transfer of property, even if the agreements do not comply with formal legal
requirements.

The doctrine of part performance is based on the principle of equity, which means that equity looks
at the intention rather than form. It is incorporated to prevent fraud and from taking advantage of
non-registration of the document.

As per the law of contracts, no right can pass to another person till the sale is complete. But when a
person enters into a contract and performs his part or does any act in furtherance of the contract,
he is entitled to compensation or the performance by the other party – in case the other party has
not acted upon his part of the contract.

What Is the Doctrine of Part Performance?

Section 53A of the Transfer of Property Act of 1882 incorporates the doctrine of part
performance. According to this doctrine, if a person makes an agreement with another and lets

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the other person act in furtherance of the contract, he has created equity that cannot be resisted.
Since the person in the contract played his part, the absence of a formality like registration does not
affect the performance of the contract. As a result, neither the transferor nor anyone under him may
sue the transferee.

As a result of the doctrine, the transferor or any person claiming under him cannot enforce any
right in respect of property upon the transferor or the person claiming under him except to assert
the right expressly granted by the contract about the property of which they have taken or
continued possession.

However, it is to be noted that the contract should not be unsigned or unstamped. Since the contract
is signed by both parties and the transferee has acted his part, the transferor is bound to perform
his part; otherwise, he needs to pay compensation for the breach.

Please read the examples below to understand more.

Section 53A of the Transfer of Property Act

According to section 53A of TPA, when a person contracts with another person to transfer
immovable property, the contract must be signed by the parties or someone on behalf of the parties
so that the transfer can be ascertained with reasonable certainty. And when the transferee
has taken possession of the property as part performance of the contract or has done some other
activities as part performance of the contract and is willing to perform his part of the contract (e.g.,
paying the amount for the property), the transferor cannot go back on his words or perform breach
of the contract, even when the transfer has not been completed in the prescribed manner by the
law (i.e., registration of the property).

Nevertheless, nothing in this section shall affect a transferee for consideration who is unaware of
the contract or part performance.

Ingredients of Section 53A of TPA

The Bombay High Court, in the case of Kamalabai Laxman Pathak vs Onkar Parsharam
Patil (1994), has emphasised the ingredients of section 53A of TPA that are as follows:

 There must be a contract for the transfer of immovable property.

 The contract must be written.

 The contract must be valid.

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 The contract must be signed.

 The transfer must be for consideration.

 The transferee takes possession in furtherance of the contract.

 The transferee must do some act in furtherance of the contract.

 The transferee is willing to perform his part of the contract.

Examples of Part Performance

Example 1: A and B entered into a contract for the transfer of land. The contract was in writing,
signed by both parties and attested except for registration. Based on such a contract, B takes
possession of the land. Now, A sold the same land to C. Now C having the legal title of the land,
attempts to eject B. Here, although the law does not recognise any legal title of B on the said
property. Nonetheless, the equity of part performance may help him (B) from being dispossessed.

Example 2: P contracts to sell her house to Q for Rs. 120000. Q paid Rs. 70000 to P. Q took
possession and promised to pay the balance at the registration. After a few weeks, P sold the same
house to R for Rs. 150000 using a registered sale deed. R, thus, asked Q to vacate the house. Q,
therefore, can claim the benefit of section 53A of TPA.

Case Laws on Part Performance

Here are two important Indian cases.

Nathulal vs Phoolchand AIR 1969 SC

The court held that taking possession is not the only method of part performance. As long as the
transferee is already in possession of the property, after the contract of transfer, he must perform
some further action in part performance of the contract.

Sardar Govindrao Mahadik vs Devi Sahai Govind AIR 1981

According to the court, section 53A is based on equity. Equity says that one who is sick of equity
must do equity. Therefore, a person claiming possession of land under section 53A must conduct
himself in an equitable and just manner.

Conclusion
The doctrine of part performance applies to the written and valid contract and does not apply to
oral or void agreements. Transfers must be in writing and signed by the transferor. The transferee
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has taken possession of the immovable property as a part performance of a contract and must be
ready and willing to perform his part of the promise.

Thus, the doctrine of part performance is an equitable right. It is incorporated to prevent fraud by
any person in the contract merely on account of non-registration of the document.

Specific Transfers: Sale: Definition, Essentials, Rights and

Duties of Seller and Buyer, Difference between Sale and
Agreements to Sale, Difference between Sale and Exchange
Introduction
In common parlance, a “sale” is a transaction wherein one person purchases some article from
another in exchange for some consideration. However, when it comes to the law, a sale has several
facets. The law categorises the subject matter of the sale into moveable and immoveable properties.
At present, when it comes to property laws, there are no laws that exhaustively deal with them. For
instance, the Sale of Goods Act, 1930, generally covers the sale of moveable properties. However, it
excludes “money” and ”actionable claims” from its scope, even though they are considered moveable
properties, according to Section 2(7) of the Act. Similarly, in the Transfer of Property Act,
1882 (here-in-after also referred to as “TPA”), the general rules of transfer provided in Chapter
II and the modes of transfer under Chapters VI (exchanges), VII (gifts), and VIII (actionable claims)
of the Act apply to both moveable and immoveable properties. However, when it comes to the
specific modes of transfer, such as sale, mortgage, and lease, TPA only deals with immoveable
properties.

Before moving further, we must understand the kinds of transfers this Act deals with. Though it
encompasses many types of transfers, such as mortgage, lease, exchange, gift, and actionable
claims, it must be noted that the scope of this Act is not exhaustive. It applies only to certain kinds of
transfers.

 As provided under Section 2(d) of the TPA, it governs only those transfers which take place by
the ‘act of parties’ and not by the ‘operation of law’ except in cases of Section 57 (discharge of
encumbrances on sale) or Chapter IV (mortgage of immoveable property and charges). This
simply means that TPA is not applicable for transfers due to insolvency, forfeiture,
succession or execution.

 Section 5 of the TPA further explains that the transfer must be an act of ‘living parties’. Thus,
it can be said that this Act only deals with transfers inter vivos (between the living).
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Now that we have a clear understanding of the applicability of this Act, we can deduce that a sale
under TPA is also a transaction between living parties dealing with immoveable property. The
provisions of sale under TPA range from Sections 54 – 57 which deal with the definition, modes of
transfer, registration, rights and liabilities of buyer and seller, and other aspects relating to
marshalling and encumbrances.

Let’s take a look at the said provisions.

Definition of sale
Section 54 of the Transfer of Property Act, 1882, defines “sale” as the transfer of ownership in
exchange for a price. The term “price” is to be interpreted as a price in terms of money and not
otherwise. If the transfer involves any other kind of consideration, it is not a sale. Further, the
Section also provides that the price need not be paid simultaneously with the transfer. The price
may either be paid in full or partially, or partly paid and partly promised. The transfer will be
deemed complete in all three cases. Thus, what is relevant is not the immediate payment but the
reference as to when and how the payment is to be made.

The subject matter of the sale under the said Act is immoveable properties. Section 54 includes
immoveable properties, both tangible and intangible. The tangible properties are those that are
visible, such as lands, houses, etc. The intangible properties are those that do not have a physical
existence, such as copyrights, trade secrets, the right to ferries or fisheries, or a right to mortgage
debt, etc. This Section provides two specific methods for how a sale can be made and executed.
According to this Section, a sale can be completed by a “registered instrument” in cases of

 Transfer of tangible immoveable property of the value of Rs. 100 or upwards;

 Transfer due to reversion; or,

 Transfer of intangible immoveable property.

In other cases, such as the transfer of tangible immoveable property of a value less than Rs 100, a
sale can be made either by a “registered instrument” or by “delivery of property”. According to this
Section, when the seller hands over the possession to the buyer or the person he specifies, delivery of
the property is deemed to have occurred.

Contract for sale

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Section 54 further incorporates the concept of “contract for sale.” It is an agreement between the
parties that a sale will be effectuated in the future by executing a sale deed on mutually settled
terms.

In English law, such a contract transfers an equitable estate in favour of the purchaser. However,
under Indian law, a contract for sale does not transfer any title, nor does it create a charge or
interest on the property. It is merely a promise to create a right to obtain another document, i.e., a
deed of sale. Therefore, it does not require registration, as held in the case of Dave Ramshankar
Jivatram v. Bai Kailasgauri (1972). The Gujarat High Court in this case also held that it is not
enforceable in any court of law. For instance, A agreed to sell the property to B, but they did not
execute any documents. Later on, A sold the property to C. In this case, B cannot approach the court
to enforce his right to specific performance.

However, as the courts in India developed from the common law approach to equity courts in
contractual matters, this difference has become insignificant to a great extent. Various judgements
have laid down that if an overt act, such as payment of advance money, delivery of possession, or
any similar act, has been done in pursuance of the agreement, the transferee becomes entitled to
obtain relief from the courts. For instance, in Kodapalli Satyanarayan v. Kondapalli
Mavullu (1998), the Andhra High Court observed that if a property has been transferred to
someone other than the prior agreement holder and the subsequent transferee has notice of the
earlier transaction, then he will be deemed to hold that property in trust for the former party.

Similarly, in Ramesh Chand Ardawatiya v. Anil Panjwani (2003), the defendant agreed to
sell his piece of land to the plaintiff. He also puts the plaintiff in possession of the property for an
advance payment. The plaintiff constructed a boundary wall on that property. A trespasser tries to
encroach upon the land at the behest of the defendant. The plaintiff sought a declaration from the
Court that he was rightfully in peaceful possession of the property and sought a permanent
injunction to restrain the trespassers from interfering with his possession. The Court granted the
relief and held that the plaintiff is entitled to protect his possession and that A should refrain from
taking the law into his hands and instead assert his title through due process of law.

The Court also observed, “if a person who entered into possession under a contract for sale and is in
peaceful and settled possession of the property with the consent of the owner, he is entitled to protect
his possession against the whole world, except the true owner.” However, if he is in possession of the
property in part performance of the contract for sale and the requirements of Section 53A are satisfied,
he may protect his possession even against the true owner.”

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Parties to sale
In every sale, there are always two parties. The person who transfers the property is known as the
“seller,” and the person who receives such property in exchange for monetary consideration paid by
him is known as the “buyer.” They both must be competent in the eyes of the law to effectuate a valid
sale deed.

Competency of a seller
Section 7 of the Act deals with the persons who are competent to transfer. According to this Section,
a transfer will be valid only if the transferor (the person who is transferring the property) fulfils the
following conditions:

 He must be competent to enter into a contract.

This part of the Section is pari materia (on the same subject matter) with Section 11 of the Indian
Contract Act, 1872, which deals with competency to enter into a contract. It states that to make a
valid contract, a person must have reached the age of majority, must be of sound mind and must not
be disqualified by any law from contracting

 He must be entitled to the transferable property at the time of the sale i.e., he holds the legal
title to dispose of the property; or,

 He must be legally authorised to dispose of such property.

For instance, a Karta is empowered to sell the property of a Hindu Undivided Family (HUF) only in
cases of legal necessity, pious purpose, or in favour of the female members of the family. Likewise, a
guardian of a minor is authorised to sell the property of the minor only with the permission of the
court and not otherwise. Similar observations have been made by the Supreme Court in the case
of Lakhwinder Singh v. Miss Paramjit Kaur (2003), wherein it observed that if a sale deed has been
executed by a person having a general power of attorney over the property without the permission
of the Court, such a sale deed will not be valid in the eyes of the law. The case of Smt M Bhagyamma
v. Bangalore Development Authority (2012) further extended the scope and held that if a power of
attorney authorises the agent to transfer the property, then he will be deemed to be a competent
seller.

Competency of a buyer
Generally, every person is competent to be a buyer, provided they are not disqualified from
purchasing any property under any law that is in force in India. Besides that fact, even a minor can
be a buyer, provided that the transfer is made by his guardian. It is based on the principle that a

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minor is entitled to retain assets and be exempt from liabilities. It was observed by the Allahabad
High Court, in the case of Ulfat Rai v. Gauri Shankar (1911), that a sale to a minor by the guardian,
which has been duly executed in exchange for a duly paid consideration, is valid.

In a nutshell, the essentials of a sale can be summarised in the following points:

 The sale must be between living persons. “Living persons” includes a company or associations
or body of individuals, whether incorporated or not;

 The subject matter of sale must be an immoveable property;

 There should be at least two parties to a sale i.e., a seller and a buyer;

 They must be competent to enter into a contract;

 They must hold a legal title to the transferable property at the time of the sale or must be
legally authorised to dispose of the property;

 There should be an absolute transfer of ownership in favour of the buyer;

 The consideration must be in the form of money/price. It can be either paid at the time of the
transfer or as per the time or conditions mutually settled by the parties;

 The sale deed must be registered if it is a tangible immoveable property valuing one hundred
rupees or more;

 A sale deed must be registered if the sale involves a transfer of intangible immoveable
property or a transfer due to reversion;

 In cases of a tangible immoveable property valuing less than Rs 100, the sale can be made
either by a registered instrument or delivery of property.

Rights and liabilities of buyer and seller

Every property transaction create certain rights and liabilities for the contracting parties. In the
case of a sale, the contracting parties, a buyer and a seller, are also vested with some rights and
liabilities. Generally, the parties themselves expressly agree as to which rights and liabilities they
will subject themselves to. These are mostly mentioned in a sale deed. However, the Act does not
leave it entirely up to the parties. Section 55 lays down a detailed description of every right and
liability in the absence of a contract to the contrary. For convenience, the rights and liabilities of the

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buyer and seller can be categorised into the rights and liabilities before and after the completion of
the sale.

Liabilities and rights of the seller and the buyer before completion of sale

Liabilities of a seller
 Disclosure of material defects (Section 55(1)(a)): A seller is bound to disclose any latent
material defect in the property or his title in his knowledge. A material defect is of such a
nature that if it was known to the buyer, his intention to enter into a sale might deviate
[Flight v Booth (1834)]. It is a latent defect because it cannot be discovered by the buyer even
after ordinary care and inquiry.

 Production of title deeds for inspection (Section 55(1)(b)): A seller is bound to produce
all the title documents relating to the property at the request of the buyer for his inspection.

 Answer relevant questions regarding his title or the property (Section 55(1)(c)):
The seller must answer every relevant question put to him by the buyer relating to his title or
the property. The answer must be to the best of his information.

 Execute a proper conveyance of the property (Section 55(1)(d)): Conveyance means an

act of transferring a property. It can be done by signing or affixing a thumb impression on
the sale deed by the seller. A seller is bound to execute a proper conveyance only on the
payment of the consideration by the buyer. This clause imposes reciprocal duties on both the
buyer and the seller. The clause also provides that the execution must be at a proper time and
place.

 Take reasonable care of the property and title deed (Section 55(1)(e)): The seller is
bound to take care of the property and title deed in the same manner as an owner of ordinary
prudence would do. This duty is to be exercised till the delivery of the property to the buyer.

 Pay all the charges (Section 55(1)(g)): A seller is bound to pay all the rent and public
charges of the property, with interest if any, due till the completion of the sale except if the
buyer purchased the property with all the encumbrances.

Rights of a seller
 Right to take rents and profits (Section 55(4)(a)): A seller is entitled to collect rents and
profits from the property until the ownership is transferred to the buyer.

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Liabilities of a buyer
 Disclosure of all the facts known to the buyer that materially increase the value
of the property (Section 55(5)(a)): The buyer is under obligation to confide to the seller any
fact to which he has reason to believe is not known to the seller relating to the increase in the
property’s value. If he fails to do so, it will be considered fraud, and the seller can avoid the
sale if it is proven.

In the English case of Summers v. Griffiths (1866), an old lady contracted to sell a property at a
much lower price, believing that her rights in the property were not absolute. The buyer was aware
that the lady’s interest in the property was perfect and absolute, but he did not disclose it to the lady.
He was held liable for fraud, and the sale was set aside.

 Pay the price in accordance with the contract (Section 55(5)(b)): The buyer must pay
the purchase money at the time of completion of the sale to the seller or any person as
directed by the seller. If there are any encumbrances existing on the property at the time of
sale, the buyer is free to deduce such amount from the consideration he has to pay. It is in
correspondence with the duty of the seller to execute a proper conveyance.

Right of a buyer
 Refund of money paid on proper denial to accept delivery (Section 55(6)(b)): The
buyer is entitled to receive the amount of any purchase money with interest properly paid by
him to the seller in anticipation of delivery. The buyer is also entitled to get a refund of any
earnest money paid by him or the cost awarded to him in a suit to compel the specific
performance of a contract or to obtain a decree for its rescission.

Liabilities and rights of the seller and the buyer after completion of the sale

Liabilities of a seller
 To give possession (Section 55(1)(f)): The seller is bound to put the buyer or person as
directed by the buyer in possession of the property on being so required. This clause uses the
words- “…such possession of the property as its nature admits.” It refers to the nature of
possession. For instance, in the case of tangible immoveable property, physical control is to
be given over property. In the case of intangible immoveable property, the possession is
symbolic.

 Implied liability (Section 55(2)) – The seller must undertake impliedly that he holds the
perfect title to the property and is transferring the same free from any encumbrance. The

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rights or interest created by the sale shall vest with the transferee and may be enforced by
every person in whom that right or interest is for the whole or any part thereof from time to
time is vested.

 To deliver title deeds on receipt of price (Section 55(3)): The seller is bound to hand
over all the documents relating to the title of the property to the buyer on payment of the
whole of the purchase money. Proviso (a) to Section 55(3) states that if a seller retains any
part of the property comprised in the documents, he is entitled to keep the documents as well.
Proviso (b) also imposes the same duty on the buyer of the greatest value when the property
is sold to different buyers. However, in both cases, such a person must furnish such
documents and their true copies to other buyers at their request. They are also under an
obligation to keep the documents safe unless prevented from doing so by fire or other
inevitable accidents.

Right of a seller
 Charges upon the property for the unpaid price (Section 55(4)(b)): Where the
ownership has been transferred to the buyer before payment of the whole consideration
amount, the seller becomes entitled to a charge upon the property which is in the hands of the
buyer or any transferee without consideration or any transferee with notice of non-payment.
The charge will be for the amount of the purchase money or the part remaining unpaid or for
the interest on such amount or part from the date on which possession has been delivered.

Liabilities of a buyer
 To bear loss to the property (Section 55(5)(c)): After the completion of the sale, the
ownership is completely transferred to the buyer. From that date, if any damage, destruction
or decrease in value occurs in the property, the buyer will be bound to bear such losses.

 To pay the outgoings. (Section 55(5)(d)): The buyer is liable to pay all the public charges
or rent accruing after the completion of the sale or as agreed by the terms settled in the sale
deed.

Rights of a buyer
 Benefit of the increment. (Section 55(6)(a)): Any benefit arising from improvement or
increase in value of the property or the rents and profits after completion of the sale shall vest
with the buyer.

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Marshalling by subsequent purchaser
Section 56 of the Act deals with marshalling. The situation of marshalling arises when a debt has
to be satisfied and two or more properties are available. The rule of marshalling suggests that
where the owner of two or more properties mortgages them to one person and sells one or more
of the properties to another person, the buyer of the property is entitled to make an arrangement
with the mortgagee to satisfy his debt out of those properties that are not sold to him.

This Section is based on the principles of equity. It insists that when a buyer purchases some
property, its absolute interest must be protected. In Brahm Parkash v. Manbir Singh (1963), the
Supreme Court held that under Section 56, a subsequent purchaser has a right to claim
marshalling. This Section also provides that such marshalling shall not affect the rights of the
mortgagee, persons claiming under him, or any other person who has acquired any interest in
the property for consideration.

Encumbrances and court sale

Generally, a sale needs to be free of any kind of lien, charge, or obligation. However, there may
be instances in which a property with encumbrances has been sold. Section 57 of the Act caters to
such a situation. This Section covers both the sales made by the court or in the execution of a
decree and those made outside the court. It offers a legal procedure to obtain a declaration from
the court that the property is free from any kind of encumbrance.

Section 57(a) provides that any party to the sale may apply to the Court to obtain this relief. If
the court thinks fit, it may direct or allow the applicant to deposit in court, for the encumbrancer
(who has the charge over the property), a capitalised value of the periodic charge or a capital
sum charged on the property, together with incidental charges, sufficient to satisfy the charges
or any interest thereon. The court shall also order the deposit of any additional amount that it
considers sufficient for meeting any further costs, expenses, interest, or any other contingency,
but it shall not exceed one-tenth of the original amount unless otherwise directed by the court.

Section 57(b) states that the court may serve notice on the encumbrancer after the payment has
been made. The court can also dispense with such notice after recording its reasons. In addition
to that, the court may also declare the property to be free from any encumbrances and proceed
to issue an order of conveyance, or vesting order, proper for giving effect to the sale.
Further, Section 57(c) deals with the order of transfer and distribution of the deposit to the
encumbrancer.

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It is also provided that an appeal is allowed from any declaration, order, or direction made in
accordance with this Section, just as if it were a decree. (Section 57(d)).

Under this Section, the jurisdiction is vested in either of the following Courts, as provided
in Section 57(e):

1. A High Court in the exercise of its ordinary or extraordinary original civil jurisdiction;

2. A District Court within the local limits of whose jurisdiction the property or any part thereof
is situated; or,

3. Any other Court notified by the State Government in the official gazette from time to time.

Recently, the Kerala High Court, in M.P. Varghese v. Annamma Yacob (2020), elaborated in
great depth on Section 57. The Court discussed the aims and objectives of this Section as well as
thoroughly explained its procedural mechanism. In this case, the property was divided among
the siblings through a partition deed with a clause stating that the brothers must pay Rs. 500
each to their sister within a year. If they fail to do so, the sister will acquire a charge over the
property. The brother, who is the appellant in this case, entered into a contract of sale with
someone. He contends that the respondent, in this case, the sister, is refusing to accept the
payment because of which the property is burdened with the charge, and consequently he is not
able to execute the sale deed. The respondent failed to show any reasonable cause for refusal of
payment apart from personal reasons. The Court noted that the amount of Rs. 500 alone stands
charged on the property as a capital sum, and the appellant has no further obligation
whatsoever. Thus, it was held that the appellant is entitled to a declaration under Section 57.

Rescission of a contract of sale

To rescind a contract means to do away with it. Rescission is an equitable remedy that allows
the contracting parties to cancel the contract and return to the position they would have had if
the contract had not been made. A sale transaction is similar to a contract. It can also be
rescinded by the parties in the same manner as other contracts.

Rescission of a contract is governed under Sections 27-30 of the Specific Relief Act, 1963. Section
27(1) of this Act provides the ground of rescission, which can be claimed by any person interested
in the contract. These grounds are mentioned as follows:

1. Where the contract is voidable or terminable by the plaintiff;

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The contract becomes voidable when the plaintiff’s consent to enter into a contract has been
obtained through coercion, fraud, misrepresentation, or undue influence. This has been provided
under Section 19 and Section 19A of the Indian Contract Act, 1872. Section 55 of the TPA also
contemplates a similar situation. It states that when the buyer or seller, as the case may be,
omits to disclose any material fact to the detriment of the other, such omission will be considered
fraudulent. Thus, rescission in such cases can also be claimed by the aggrieved party.

2. Where the contract is unlawful for causes not apparent but the defendant is to be blamed
more

The Specific Relief Act, 1963, also contemplates one other ground for rescission under Section
28(1) of the Act. This rescission is a result of non-compliance with the court’s order to pay the
purchase amount within a stipulated time in a suit of specific performance. It states that when
the order of specific performance has been decreed against the seller and the purchaser is
directed to pay the amount within a time fixed by the court and he fails to do so, the seller may
apply in the same suit to have the contract rescinded.

Apart from the aforementioned grounds, the Indian Contract Act, 1872, also provided some more
grounds on which the rescission of a contract can be claimed. These provisions are mentioned in
the following points:

 Under Section 39, if a party to a contract refuses to perform the promise or disables himself
from performing the promise in its entirety, the other party is at liberty to put an end to such
a contract.

 Section 53 states that if a party to a contract prevents another party from performing his
part of the promise, the contract becomes voidable at the option of the party so prevented.

 Section 55 mentions that time is the essence of the contract and if the party fails to perform
his promise in a specified time, the aggrieved party can claim to put an end to such contract.

Effects of rescission
The rescission renders the contract null and void and aims to put the parties back to their status
quo ante, i.e., the previously existing state of affairs. If the parties cannot be restored to the same
position, they will not be able to go for rescission. Thus, restoration of benefit is one of the
essential elements for the rescission of a contract. The provisions for the restoration of benefits
and compensations are mentioned in the points listed below:

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 Section 64 of the Indian Contract Act, 1872, provides that if the party who is claiming
rescission had received any benefit from the other party then he must restore such benefit to
the person from whom he has received it.

 Section 75 of the Indian Contract Act, 1872, deals with the compensation for the loss sustained
by the aggrieved party because of the non-performance of the contract by the party in
default.

 Section 28(2) of the Specific Relief Act, 1963, states that if the vendee was in possession of the
property and the contract was rescinded because of the non-payment of the purchase
amount, he must make payment of all the rent and profits to the vendor that has accrued
from the date of his receiving possession until the date of restoration. Similarly, the vendor, if
received any earnest money from the vendee, must refund the same.

Important case laws

Essential elements of sale

The courts have interpreted Section 54 now and again. A thorough interpretation of this Section
has helped the Courts decipher the essential ingredients of sale. Following is a list of cases that
helps in understanding the nature of some of the important ingredients:

 In Vidhyadhar v. Manikrao (1999), the Supreme Court held that to constitute a ‘sale’ the
parties must intend to transfer the ownership of the property. The intention is to be gathered
from the recitals in the sale deed, the conduct of the parties, and the evidence on record.

 In the case of Commissioner of Income Tax v. M/s. Motor and General Stores (1967), the Apex
Court opined that the price, in the ordinary sense connotes monetary consideration for the
sale of the property. It also observed that if some other valuable consideration is kept, the
transaction is not a sale but can be an exchange or barter.

 The Allahabad High Court in Hakim Singh v. Ram Sanehi (2001), observed that inadequacy
of consideration is not a relevant factor in a sale. Even when the price or the consideration is
found by the Court to be less than the market value of the property, the sale is valid.

Effect of an unregistered sale deed

 The Gauhati High Court in Saniram Kachari and Anr. v. Gauri Ram Koch and Ors.
(1951) held that though an unregistered sale deed is valid under the Registration Act, it
cannot confer a title on the purchaser under Section 54. However, when an unregistered sale
deed is followed by delivery of possession in compliance with Section 54, then such a sale will
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be considered effective. It also observed that the registered sale deed might be regarded as a
surplusage when the delivery of possession is sufficient to confer title under Section 54.

 In a landmark case of Suraj Lamp and Industries Pvt. Ltd. v. State of Haryana and Anr.
(2011), the Supreme Court affirmed that a sale of the immovable property could be made only
by a registered instrument and an agreement of sale does not create any interest or charge
on its subject matter.

 The Karnataka High Court, in the recent case of Gangappa v. Lingareddy (2022), resolved
the issue of whether an unregistered sale deed can discard the title which has been acquired
by delivery of possession of a tangible immoveable property whose value was less than
rupees one- hundred.

In this case, the appellant contended that the property belonged to her mother, who inherited it
from her father, and the respondent was trying to interfere with the property by creating a
bogus document of title in his favour. However, the respondent claimed that he received the
property through the will of his father, who acquired the property through a sale deed from the
appellant’s maternal grandfather. Since the value of the property was less than one hundred
rupees, they did not register the sale deed.

The court held that Section 54 of the Transfer of Property Act, 1882, allows two alternative
modes for the execution of the sale in the case of tangible immoveable property valued at less
than Rs. 100, namely, by way of either a registered instrument or simple delivery of the
property. Since the latter criteria have been fulfilled by the respondent, the appellant’s claim
stands to be dismissed.

Conclusion
In light of the above discussion, we can conclude that the Transfer of Property Act, 1882 deals
with the sale of immovable property by the act of living parties lucidly and comprehensively. It
does provide not only the definition but also the modes of execution and registration. It also
provides a framework of rights and liabilities to which the seller and buyer will be subjected, but
at the same time, it is also flexible enough to allow the parties to settle on other terms at their
discretion. In my view, there is one matter that needs some clarification. It can be seen that the
bare text of Section 54 lacks clarity regarding the ramifications of an unregistered sale deed. It
plainly states that it does not create any title or interest in the property. Though various courts
have ruled that the answer depends on the facts and circumstances of each case and the

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applicability of principles of equity in those cases, the language of the Section remains rigid. To
eliminate any confusion, it should be more

What is the difference between a sale and a contract for sale?

Sale Contract for sale

A contract for sale is merely an agreement to

In a sale, ownership is transferred.
sell. There is no transfer of ownership.

The sale creates certain rights and

interests for the parties over the
property. Ownership refers to a It does not create any charge, interest, or lien
bundle of rights such as possession, over the property.
interest, title, authority to dispose of,
etc.

Sale creates a right in rem i.e. A contract for sale creates a right in
against the whole world. The buyer personam, i.e., against a particular person.
in whose favour the sale has been The buyer can only compel the seller to execute
made can defend his title against a sale deed if any ingredients of part
anyone. performance have been fulfilled by the buyer.

Registration of the sale deed is As a contract of sale does not create any right
required if the value of the property or interest, no registration is required for such
is Rs 100 or more. contracts.

What is the difference between sale and exchange?

The only thing that differs between a sale and an exchange is the nature of the consideration
involved. As per Section 54 of the TPA, the consideration for the sale of immovable property must be
in terms of money (price). Whereas Section 118 of the TPA, which governs exchange, specifies that
money can be a consideration for the exchange of money only and not any other property.
Ownership of any immovable thing can be exchanged only by transferring ownership of another
immovable thing and not otherwise.

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Unit 4
Mortgage: Definition, Kinds, Difference between Mortgage and
Charge, Redemption, Foreclosure
Introduction
The Transfer of Property Act (“TOPA”) drafted in 1870 and passed in 1882 provides for basic
principles to facilitate the transfer of movable as well as immovable properties. As provided in
the TOPA, there are various instruments to transfer the property viz sale, lease, gift, mortgage,
charge etc. through which a property can be transferred by its owner to another person.
Transfer of immovable property by each of the aforementioned modes has its own significance,
advantages, and disadvantages.

The act of borrowing and lending from time immemorial has been part and parcel of human life.
Nowadays the act of borrowing depends on the credit score of the borrower. If the person has a
good credit score then he can get loans easily but if his credit score is low then the lender asks for
security to secure the loan. This paper deals with two significant facets of property law that is
mortgage and charge, which help in securing the interests of the creditors.

Section 58 of the TOPA provides for a mortgage and Section 100 of TOPA provides for a charge
as an instrument utilised for transfer of property. Around 40 sections of TOPA have been
devoted to both of these instruments. Although both of these concepts may appear to be of similar
nature, they are substantially different, highlighting which is the objective of this paper. But
before understanding the difference between the two it’s necessary to understand both of these
concepts.

Thus, this paper in the next part (part II) discusses the mortgage as an instrument to effectuate
the transfer of property and discusses its essentials and types of mortgage. The paper part III
will discuss the charge, its features and types of charges. This paper in part IV will draw a
detailed comparison between charge and Mortgage by analysing various case laws and finally,
part V of the paper sums up with the concluding thoughts.

Mortgage
A mortgage has been defined as an instrument in which transfer of an interest in particular
immovable property takes place with the aim to secure the payment of a future or existing debt,
loan money either to be advanced or advanced or performance of an engagement which may
result in a pecuniary liability. TOPA provides for substantive law on a mortgage while Chapter

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34 of CPC deals with the procedural part dealing with “suits relating to the mortgage of
immovable property”.

Lord Lindley in Stanley v. Wilde has described mortgage in following words “a mortgage is a
conveyance of land or an assignment of chattels as a security for the payment of a debt, or the
discharge of some other obligation for which it is given.” Thus, a mortgage is a type of security
formed by contract conferring an interest in the property but not ownership, which is defeasible
upon the performance of the condition of returning the loan amount with or without interest or
performance of some other act or condition.

For example, if a person X furnishes his bungalow as a security to secure a loan from Y, this
transaction would be called a mortgage. The transferor X in this arrangement is called
mortgagor and Y, the transferee is called the mortgagee. The bungalow in this transaction is the
mortgage. The principal money and interest thereon whose payment is to be made is called
mortgage money and the instrument used to effectuate the transfer of interest is called mortgage
deed.

Upon the return of the loan the interest in the property of the transferee or mortgagee ceases to
exist or if the mortgage money is not returned then the ownership of mortgage i.e. in this case,
the bungalow gets transferred to the mortgagee. Thus, a mortgage is one of the best ways to
secure a loan.

Types of mortgage
Diagram representing various types of mortgages

Essentials of mortgage
The following are the essentials of a valid mortgage:

Transfer of an interest
In the instrument of mortgage, an interest in a particular immovable property gets transferred.
This interest is the right to recovery of loan/debt from the mortgaged property which was
transferred by a mortgagor to mortgagee. Thus only this interest gets transferred, the
remainder of interests in the property still vests with the owner of the property or mortgagor as
held in Ali Hussain v. Nilla Kanden. The Supreme Court has also held that without the transfer of
interest, there is no mortgage.

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Specific Immovable Property
Specific immovable property means that the property to be mortgaged should be sufficiently
identified and there should not be any ambiguity in character and general description of the
property. For example, if X takes a loan from Y and the contract of the loan says that Y can sell
any of his properties and X owns three properties A, B, C. This transaction cannot be called
mortgage as security has not been identified specifically.

Debt or Loan
Every mortgage presumes the presence of debt, existing, future or contingent for securing the
repayment of which mortgage of immovable property is made. The consideration of mortgage is
to secure debt or loan. Thus, without the existence of debt whether existing or future or actual or
contingent or performance of an engagement giving way to monetary liability, there can be no
mortgage.

Charge
The charge provided in Section 100 of TOPA is an encumbrance on the property which provides
that where immovable property or asset of a person is either by operation of law or act of the
parties is made security for the purpose of payment of money to another person and this
transaction is not mortgage, a charge is said to be created on the property in the favour of the
latter person.

All the provisions that apply to a simple mortgage apply to charge as well. Thus, making the
charge security to secure payment. If the person liable to pay does not pay then the amount can
be satisfied with the property that was charged.

For example, certain property is owned by a person named X. He has a son S and daughter D.
He gives away this property to S along with the condition that S would have to pay 10000 out of
the property, every year, to DO for her maintenance. This transaction would be known as a
charge in favour of D.

Exceptions
There are two exceptions provided by section 100 of TOPA i.e. Charges, where there is no
application of this section thus the charge holder does not have the right to sell the property or
properties as in the case of a simple mortgage. The first one is in charge of a trustee on the trust
property if he makes any expenditure for the execution of his trust. The second exception applies
when a person with bona fide intention purchases any property without notice of the charge.

Types of Charge provided in section

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Charges created by the act of parties.

A charge does not require some particular form of words for creation, it is enough if the document
depicts an intention to make the property as security for the payment of the amount provided
therein. The charge created by the act of parties has the possibility of arising in several situations.
For example, B inherits some property from his grandmother and agrees to pay a certain amount of
money out of the rents from the property to his sister, S. Now this arrangement will result in the
creation of charge in favour of S.

Charges arising by the operation of law.

A Charge created by law arises without any agreement between the parties but by the operation of
law. For example, charge arises by operation of law in the TOPA under section 55(4) (b), when the
seller of a property is left unpaid a charge is created in his favour or under section 55(6)(b) for
paying purchase money in advance and not getting the property a charge is created in his favour
etc.

Charge and mortgage – A comparative analysis

More often than not charge is understood to be similar to a mortgage, but both of these instruments
are conceptually different. Justice Das of Patna High Court has stated the distinction in the
following words:

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

Thus, the main distinction between charge and mortgage is that there is some sort of transfer of an
interest in the property in case of mortgage which makes the ownership of the property limited. But
there is no transfer of an interest in the case of charge but there is the only creation of the right to
payment from a specific immovable property without transfer of any interest in property or
property. The only way he can acquire an interest in the property he can pass over to the charge
holder is by virtue of a decree of sale.

Another factor that differentiates the two concepts is the nature of personal liability. A charge does
not lead to the creation of right in rem but a right which is jus ad rem, sort of more than a personal
obligation as the charge is only effective if there is a notice to the subsequent transferee as discussed
above but same is not the case with a mortgage as whether the transferee had notice or not has no
effect.

Another distinction that distinguishes both of them is that a mortgage is always created by the act of
parties, but charge, in addition, to be created by the act of the parties is also created by the
operation of law. Furthermore, to mortgage to subsist there must be a presence of debt as discussed
above but the same is not the case with charge as seen in the above-mentioned example of the
brother and sister.

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There also exist some technical differences between the two such as that the mortgage needs to be a
specific time period but the charge may be for perpetuity, registration of mortgage is compulsory
whereas for charge created by operation of law is not compulsory. Thus it is clear there are
substantial differences between both of these facets of property law.

Conclusion
A layman may easily confuse charge with a mortgage. The Transfer of Property Act does not clearly
lay down the difference between both of these concepts, it just states that charge is not a mortgage
and provides that all the provision of simple mortgage applies to charge, which leads to the
confusion. The companies act 2013 even goes to the extent of saying that charge includes mortgage
which further adds to the confusion.

Therefore, the failure to understand the difference between both of these concepts is understandable
as some of the incidents in both of them are common such as the presence of immovable property as
a security, giving a right to the creditor to right to sell the property if the debtor is unable to fulfil
the terms of charge and mortgage. But still, there are a lot of incidents that differentiate both of
these facets of property law as discussed above such as no transfer of an interest in case of charge
and others, right in rem vs right ad jus etc. Thus, both of these are conceptually different concepts.

Introduction
A mortgage conforms to the ‘Hypotheca’ of Roman Law, upon the debtor’s failure to pay the debt,
the creditor could get the property of the debtor for sale and recover himself. The concept of
mortgage has also been recognised under Hindu and Muslim Laws where the property was pledged
to the creditor, the debtor was debarred from the possession till the repayment of debt was made,
and the profits in the lieu of interest were taken by the creditor.

In other words, a mortgage is to be understood as a transfer of interest explicitly in immovable

property as security for a loan. Let’s say that Mr. X lends some money to Mr. Z, he may do so
without asking for any security or he may demand some security for the payment of money. If Mr.
X does not demand any security and Mr. Z fails to pay the same, the former will have a right to sue
the latter for the money lent but if Mr. Z becomes insolvent, Mr. X may lose all of his money.
However, in a situation where some security of adequate value is given for the loan, the lender (Mr.
X) will be safeguarded if the borrower (Mr. Z) becomes insolvent since precedence is given to
security over the claims of other creditors.

The essential element of a mortgage is that it is a transfer of a legal interest in the property with a
provision for redemption i.e. upon repayment of the loan, the transfer shall become void or the
interest shall be re-conveyed. The provisions pertaining to a mortgage are contained in Section
58 of the Transfer of Property Act, 1882 (hereinafter “TPA”)

Definitions

Loans may be of two types, secured debt or unsecured debt. Where the loan is secured against any
movable property it is called a pledge while where the loan is secured against some immovable
property of the debtor it is called a mortgage. A mortgage is a transfer of an interest in specific
immovable property as a security for the repayment of debt.

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Justice Mahmud observed: “Mortgage, as understood in this country, cannot be defined better than
by the definition adopted by the legislature in section 58, TPA.”

The Supreme Court in Kedar Lal v. Hari Lal observed that the whole law of mortgage in India is
embodied in the TPA read with Order 34 Rules 1 to 15 of CPC which deals with suits relating to
mortgages of immovable property. It is important to note that the court cannot travel beyond these
statutory provisions.

Section 58(a) of TPA defines the terms ‘mortgage’, ‘mortgagor’, ‘mortgagee’, ‘mortgage-money’, and
‘mortgage-deed’.

Clause (a) of Section 58 reads:

A mortgage is the transfer of an interest in 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 that 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.

Now, as we know, a ‘mortgage’ is a transfer of an interest in immovable property in order to secure

a loan, which may or may not give rise to any personal liability. The person who needs a loan and
gives his property as security is a ‘mortgagor’ while the person giving loan is a ‘mortgagee’. The
principal amount and the interest to be paid for the time being is called the mortgage money, and
the instrument through which the transfer of property takes place is called the mortgage deed.

Kinds of mortgage

Simple Mortgage [Section 58(b)]

Clause (b) of Section 58 reads:

Simple mortgage.—Where, without delivering possession of the mortgaged property, the mortgagor
binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the
event of his failure to pay according to his contract, the mortgagee shall have a right to cause the
mortgaged property to be sold and the proceeds of sale to be applied, so far as may be necessary, in
payment of the mortgage money, the transaction is called a simple mortgage and the mortgagee a
simple mortgagee.

The basic elements of a simple mortgage are:-

1. The mortgagor must have bound himself personally to repay the loan;
2. The possession of the property is not given to the mortgagee; and
3. To secure the loan he has transferred to the mortgage the right to have the specific
immovable property sold in the event of his failure to repay.

Mortgagor’s Personal Obligation

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The fundamental element of a simple mortgage is the personal obligation to pay on the part of the
mortgagor. Such personal liability or obligation to pay may be expressed or implied from the terms
of a transaction since a promise to pay arises from the acceptance of the loan.

The promise to pay is implicit in the borrowing transaction itself but it may be displaced by the
terms of the mortgage transaction for instance in the case of a usufructuary mortgage.

No Delivery of Possession

Possession remains with the mortgagor in the case of a simple mortgage. The security which is
obtained by the mortgagee is of the mortgaged property, not of the rents and profits accruing from
it. As per Section 68, if a simple mortgagee sues for enforcement of his security, a decree for
possession would be illegal. It would also not operate as foreclosure rather it would convert a simple
mortgagee into a mortgagee having possession.

Right to cause the Property Sold

The mortgagee is empowered to sell the property in the case of non-payment of the mortgaged
money. However, the power of sale is not to be exercised without the intervention of the court. This
implies that the mortgagee needs to get a decree from the court to execute the sale. Upon the sale of
property by the intervention of the court, the mortgagee shall get the money advanced by him with
interest and the remaining portion of proceeds of sale shall be given to the mortgagor whose
property was sold.

Registration

A simple mortgage can be created only through a registered document. According to Section 59,
even when the sum of money secured is less than rupees 100, a simple mortgage needs to be effected
by a registered instrument.

Mortgagee’s Remedy

In case the mortgagor fails to repay the loan within the stipulated date, the following two remedies
are available to the mortgagee:

1. Since in a simple mortgage the mortgagor holds a personal obligation to repay the loan, the
mortgagee may sue the mortgagor personally for the recovery of the money. In such a case,
he shall get a simple money decree.
2. The mortgagee may also move to the court for the sale of mortgaged property in order to
recover his money. In such a case, he obtains a decree for the sale of the property.

However, the mortgagee may put both the cause of actions in one suit. He may sue the mortgagor
personally and may also request the court for a decree in his favour for the sale of the property but
in both cases, the suit must be filed within 12 years from the date on which the loan i.e. the mortgage
money becomes due.

Mortgage by Conditional Sale [Section 58(c)]

Clause (c) of Section 58 reads:

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Mortgage by conditional sale.—Where, the mortgagor ostensibly sells the mortgaged property— on
condition that on default of payment of the mortgage money on a certain date the sale shall become
absolute, or on condition that on such payment being made the sale shall become void, or on
condition that on such payment being made the buyer shall transfer the property to the seller, the
transaction is called mortgage by conditional sale and the mortgagee a mortgagee by conditional
sale: Provided that no such transaction shall be deemed to be a mortgage unless the condition is
embodied in the document which affects or purports to affect the sale.

The concept of a mortgage by conditional sale (known as ‘bye-bil-wafa in Islam) was introduced by
the Muslims due to the prohibition in their religion to not take interest on the money which is lent by
way of loan. This type of mortgage enabled them to realize their principal amount as well as
interest, at the same time keeping their conscience clear.

Basic elements of a mortgage by conditional sale are:

1. The mortgagor must ostensibly sell the property to the mortgagee.

2. There must be a condition on such sale that either,

 on the repayment of the debt on a certain date,

 the sale shall become void or the buyer shall transfer the property to the seller, or in default of
payment on the agreed date, the sale shall become absolute.
 The condition must be contained in the same document.

In other words, when the mortgagor ostensibly sells the mortgaged property to the mortgagee with
a certain condition such as:

1. If the mortgagee makes any default on repayment of the debt (if the loan is not repaid), the
sale would become absolute and binding, or
2. If the mortgagee does not make any default in the payment (repayment of the debt has been
made), the sale would become void, or
3. If the mortgagee makes the payment, the buyer shall transfer the mortgaged property to the
seller (the mortgagor shall transfer the property back to the mortgagee), such a transaction
is called a mortgage by conditional sale.

However, it is to be noted that no such transaction will be considered to be a mortgage where no

condition is mentioned in the same document which shall affect the sale.

Condition in the Same Deed

The Proviso provided under clause (c) of Section 58 brought about a significant change. Section 19
of the Transfer of Property (Amendment) Act, 1929 led to the inclusion of the proviso:

Provided that no such transaction shall be deemed to be a mortgage unless the condition is
embodied in the document which affects or purports to affect the sale.

It states that any deed which intends to effect sale would be termed a mortgage by conditional sale
only when it fulfills the above-mentioned elements. This amendment is not retrospective in nature.
After this proviso, for a transaction to be treated as mortgage by conditional sale and not a sale
itself the condition of repurchase must be included in the same document that provides for ostensible
sale.

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With the amendment in the clause, great emphasis is placed on inculcating the provision of
repurchase in the original sale deed itself rather than the transaction being carried out through two
documents (one being the sale deed, other being the document containing conditions of
reconveyance). Where they are in separate documents the mortgagor then the nature of transaction
would not be a mortgage by conditional sale even if they are executed simultaneously.

The intention of the Parties

It must be kept in mind that documents containing reconveyance conditions would not in any way
claim to be mortgaged. The intention of the parties is one of the crucial factors to determine the
nature of the transaction and evidence needs to be produced before the court if one’s claim is in
contrast to the written words of the deed in question. (Pandit Chunchun Jha v. Sheikh Ebadat)

Personal Liability

In a mortgage by conditional sale, there is no personal liability on the part of the mortgagor to pay
the debt and consequently, the mortgagee is not permitted to make other of his properties a part of
this transaction. It is an exception to the rule of No Debt No Mortgage.

Absolute Ownership

The Privy Council in the case of Thumbuswamy v. Hossain Rowthen observed that the essential
characteristic of a mortgage is that on breach of condition, the sale deed would be executed itself
and the transaction would become an absolute sale without any kind of accountability between the
parties.

The mortgagee does not have possession of the property in this type of mortgage i.e. it gets only
qualified ownership which may lead to absolute ownership in case of default by the mortgagee.

Remedy Available

The remedy with the mortgagee is by way of foreclosure and not sale, which is possible only through
a decree of the court. The mortgagee can file a decree for foreclosure according to Section 67 of TPA,
Rules 2 & 3 of Order 34, CPC only when the mortgagor does not pay the amount on time and the
sale becomes absolute.

Usufructuary Mortgage [Section 58(d)]

Clause (d) of Section 58 reads:

Usufructuary mortgage.—Where the mortgagor delivers possession or expressly or by implication

binds himself to deliver possession of the mortgaged property to the mortgagee and authorises him
to retain such possession until payment of the mortgage-money, and to receive the rents and profits
accruing from the property or any part of such rents and profits and to appropriate the same in lieu
of interest, or payment of the mortgage-money, or partly in lieu of interest partly in payment of the
mortgage money, the transaction is called a usufructuary mortgage and the mortgagee a
usufructuary mortgagee.

The basic elements of usufructuary mortgage are:

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1. The mortgagor either delivers possession or expressly or impliedly binds himself to deliver
possession of the mortgaged property to the mortgagee.
2. The mortgagor authorises the mortgagee till the payment of the mortgage money is satisfied:

 to retain such possession;

 to receive the rents and profits or any part of such rents and profits arising from the
property; and
 to appropriate such rents and profits in lieu of interest, or payment of the mortgage money,
or partly in payment of the mortgage money.

Delivery of Possession

The possession of the mortgaged property is delivered to the mortgagee by the mortgagor as a
security for the payment of mortgage money. The mortgagee is entitled to retain the ownership of
the property till the debt remains unsatisfied. The physical delivery of possession is not necessary to
be made at the time of execution of the deed and express or implied undertaking may be given by the
mortgagor to deliver possession.

Rent and Profits

The mortgagee is entitled to receive rent and profits accruing from the mortgaged property till the
money is repaid. The method by which the rents and profits are to be appropriated depends on the
terms of the mortgage deed. Such rents and profits or part of the rents and profits may be
appropriated:

1. in lieu of interest,
2. in lieu of principal, or
3. in lieu of principal and interest.

In the first case, the mortgagor recovers possession at the time of the payment of the principal
amount. In the second case, the mortgagor continues to pay interest and becomes entitled to recover
possession once the rents and profits obtained by the mortgagee become equal to the principal
amount. In the last case, the mortgagor does not recover possession until the principal and interest
are paid from the rents and profits.

No Personal Liability of the Mortgagor

The mortgagor does not take any personal responsibility for the payment of mortgage money in the
case of a usufructuary mortgage. The mortgagee is required to utilise rents and profits from the
property for the satisfaction of his mortgage money. There is no time limit whatsoever for the
mortgage to subsist since it is difficult to predict the time within which the debt will be satisfied.

Mortgagee’s Remedies

The mortgagee can sue for possession or recovery of advanced money if the mortgagor fails to
deliver possession of the property but if he has been given possession, his only remedy is to retain
property till his debts are satisfied. The right of foreclosure or sale is not available for the
usufructuary mortgagee. The mortgagee enjoys the advantage of repaying himself.

Rights of Usufructuary Mortgagor

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A usufructuary mortgagor has been given a right under Section 62 to recover possession of the
mortgaged property from the mortgagee in the cases where:

1. The mortgagee was authorised to pay himself the amount of mortgage money from the rents
and profits of the property and the mortgage money is paid,
2. The mortgagee is authorized to pay himself from the rents and profits and the terms
stipulated for the payment of the mortgage money have expired and the mortgagor pays the
mortgage money or balance of the same to the mortgagee or deposits it in the court.

English Mortgage [Section 58(e)]

Clause (e) of Section 58 reads:

English mortgage.—Where the mortgagor binds himself to repay the mortgage money on a certain
date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso
that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the
transaction is called an English mortgage.

Basic elements of an English mortgage are:

1. There is a consensus to pay the amount on the due date. The mortgagor has to repay the
mortgage money on the due date.
2. There is an absolute transfer of property to the mortgagee.
3. Such absolute transfer needs to be subject to a proviso that the mortgagee will transfer the
property to the mortgagor upon payment of mortgage money on the agreed date.

In the case of English Mortgage, the mortgagor transfers the ownership of the mortgaged property
absolutely to the mortgagee as security. The mortgagee shall return or re-transfer the property once
the mortgagor repays the amount as agreed on a particular date.

Personal Liability

In an English mortgage, there is a personal liability of the mortgagor to repay the amount of
mortgage debt on a certain date as agreed. An agreement to pay is an important part of such a
mortgage.

Remedy Available

In case of default by the mortgagor, the remedy available with the mortgagee is to sell off the
mortgaged property and recover himself.

No Absolute Interest

The property is transferred absolutely but it is subject to the provision of re-transfer of that
property if the mortgagor repays the amount. Therefore, interest is transferred which is subject to
the right of redemption.

Where the mortgagor absolutely transfers the property to the mortgagee and the mortgagor is
committed to repaying the money to the mortgagee on a fixed date. Two circumstances are
prevalent in this scenario:

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1. Mortgagor repays the amount: If the mortgagor repays the agreed upon to the mortgagee on
the date specified, the property which was absolutely transferred by him shall be reconveyed
to the mortgagor.
2. Mortgagor makes default in payment: If the mortgagor does not repay the amount on the
mentioned date, then the remedy with the mortgagee is to sell off the property and recover its
debt. However, there is a personal liability on the mortgagor to pay the debt.

Right of the Mortgagee

The mortgagee in this form of mortgage gets the right of possession whether the right of entry is
expressed or not, and can retain the same till the said amount is not paid to him. But when the
mortgagor is in possession he is entitled to profit but is not accountable to the mortgagee. However,
where the mortgagee is in possession and is enjoying the profits from such property, it shall apply
them in reduction to mortgagees dues.

For instance, B, a mortgagor absolutely sells the property to A through a sale deed. Here if B makes
any default, A has to do nothing except registration of the sale deed, as an absolute right has been
given to A.

Mortgage by deposit of title deeds (Equitable Mortgage) [Section 58(f)]

Clause (f) of Section 58 reads :

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

In English Law, this type of mortgage is called an ‘equitable mortgage’ as opposed to a ‘legal
mortgage’ because there is just a deposit of a document of the title without writing or without any
other additional formalities. The intention of the legislature in providing such a mortgage is to give
facilities to the mercantile community in situations where it may be necessary to raise money all of
a sudden before any opportunity of preparing a mortgage deed can be afforded. Thus, this type of
mortgage does not require any writing, and being an oral transaction is not affected by the Law of
Registration.

The basic elements of this type of mortgage are:

1. There must be a debt.

2. There must be a deposit/delivery of the title deeds.
3. There is an intention that the deeds shall be security for the debt; and
4. Territorial restrictions

It is important to note that such a mortgage can be made only in certain areas and not everywhere
in India. The said restriction to certain areas means the place where the deeds are to be delivered
and not the situation of the property mortgaged. Also, a deposit of deeds beyond that area will
neither create a mortgage nor an exchange.

Existence of Debt

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A debt may be existing or future in nature. A transfer of an interest in any property to secure the
payment of money advanced or to be advanced, or an existing or future debt, or the performance of
any engagement which results in a pecuniary obligation is said to be a mortgage and clause (f)
containing equitable mortgage gives just one of the modes of creating mortgage.

Deposit of Title-Deeds

It is not necessary to make physical delivery of documents, a constructive delivery of documents is

sufficient. A valid equitable mortgage does not require all the documents of title to be deposited or
the documents deposited to show a complete title. It is sufficient if the deposited deeds are bona fide,
relate to the property, and are material evidence of title. If any title of deed is not shown at all in the
deposited document and there are documents in existence showing his title to the property but they
are not deposited then an equitable mortgage is not created.

Intention to Create Security

The gist of the transaction lies in the intention that the title deeds shall be security for the money
borrowed (debt). Merely handing over the title deeds to Mr. X by Mr. Z does not create a mortgage.
The deeds need to be delivered in the performance of that agreement that they are security for the
debt.

The intention for creating security is a question of fact, not of law, which needs to be determined in
all cases just like any other fact-based on presumptions and oral, documentary, or circumstantial
evidence.

Anomalous Mortgage [Section 58(g)]

Clause (g) of Section 58 reads:

Anomalous mortgage.—A mortgage that is not a simple mortgage, a mortgage by conditional sale,
a usufructuary mortgage, an English mortgage, or a mortgage by deposit of title deeds within the
meaning of this section is called an anomalous mortgage.

In order to protect various customary mortgages prevailing in different parts of the country, clause
(g) was enacted by the legislation. An anomalous mortgage is said to be a combination of two or
more mortgages.

This section shall be read with Section 98 of the TPA which reads :

Rights and liabilities of parties to anomalous mortgages.—In the case of an anomalous mortgage
the rights and liabilities of the parties shall be determined by their contract as evidenced in the
mortgage deed, and, so far as such contract does not extend, by local usage.

Such agreement which is made between the mortgagor and the mortgagee according to their terms
and conditions is called an anomalous mortgage. Where it is not a simple, usufructuary, mortgage
by conditional sale, etc. is termed as an anomalous mortgage.

For instance, a usufructuary mortgage may also have the right of sale (as stated above, a
usufructuary mortgage only possession is given to the mortgagee and it does not have the right of
sale). Here, possession of the property is given to the mortgagee for a certain period with a
condition that on non-repayment of debt the mortgage shall be deemed as mortgage by conditional

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sale. Thus, making it a usufructuary mortgage as well as a mortgage by conditional sale, making
such mortgage an anomalous mortgage.

Remedy Available

In this case, the mortgage has the right of ‘foreclosure’ as well as ‘sale’ if the agreement of mortgage
permits the same; and if the debt is not repaid, the mortgagee would become the owner of the
property.

Mortgagor’s Right of Redemption

The right of redemption can be exercised by the mortgagor through mortgage deed and can be
exhausted only if there is an agreement between the parties, or by way of a decree of the court, or
through any statutory provision which prohibits the mortgagor from redeeming the mortgage. The
redemption right of mortgagor comes into existence when payment is made to the mortgagee, it is
only when this right can not be exercised is due to the act of parties.

There are two other terms as well which are used in relation to mortgage, which the reader must
know. These are:

Sub mortgage

Where a mortgaged property is mortgaged again is termed as sub mortgage, or where the
mortgagee mortgages its interest in the said property.

For instance, where Mr. X mortgages his house to Mr. Z for ₹15,000 and Mr. Z further mortgages
its mortgagee rights( it can be the right to sue the mortgagor in case of default or possession, rents,
etc) on the property to Ms. B for ₹5,000. Here Mr. Z created a Sub Mortgage.

Puisne mortgage (also called pari pasu mortgage)

When the mortgagor mortgage a property to one person and mortgages the same property to
another person in order to secure another loan, the second mortgage is termed as Puisne Mortgage.

For instance, the property value of ‘Z’ is ₹1,00,00,000 (1 crore) has been given as security to the
‘Bank of Baroda’ for the loan of ₹10,00,000 (10 lakh). If an additional loan is required, the same can
be taken from another bank due to the difference in interest rate. So here the same property can be
used as security for securing another loan from ‘Syndicate Bank’ of ₹5,00,000 (5 lakh). This
transaction of taking a loan from ‘Bank of Baroda’ would be referred to as the first mortgage while
the loan from ‘Syndicate Bank’ would be referred to as the second or puisne mortgage. Here
syndicate bank becomes puisne mortgagee and can recover its debt once the first mortgagee i.e.
Bank of Baroda claims its money.

A puisne mortgage is allowed only after the 1st mortgagee permits to use the same property as
security for another loan, by the valuation of the mortgaged property.

Conclusion

Hence, a mortgage is defined as an express transfer of an interest in immovable property as

collateral for a loan. The most important feature of a mortgage is that it is a transfer of a legal

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interest in the property with a provision for redemption, which means that the transfer will become
void or the interest will be re-conveyed upon repayment of the debt.

Lease: Definition, Essentials, Termination of Lease,

Relief against Forfeiture

In India, transfer of property is not possible for every individual because of financial issues. The
permanent or absolute transfer is a luxury for some people, but a temporary transfer is something
that has given every citizen the right of enjoying any property. One of the modes of transferring
property for a particular period of time is Lease. Lease is a transfer of an interest in the property for
a stipulated period of time without transferring the ownership of that property. In a lease, right of
possession is transferred instead of the right of ownership. Transferor here is called the lessor and
the transferee i.e. the one enjoying the property for a period is called lessee. Lease is governed by
the Transfer of Property Act, 1882 and it is given from Sections 105 to 117.

Definition of Lease

Section 105 states the definition of a lease which states that it is a transfer of immovable property
for a particular time period for a consideration of which the transferee has accepted the terms
surrounding the agreement.

What are the essentials of a lease?


o Parties must be competent: The parties in a lease agreement should be competent to
enter into a contract. Lesser should be entitled to a property and have absolute rights
over that property.
o Right of possession: Ownership rights are not transferred in a lease, only the
possession of the property is transferred.
o Rent: Consideration for a lease can be taken in the form of a rent or premium.
o Acceptance: Lessee, who is to get the interest in the property after lease, has to accept
the lease agreement along with the time period and terms & conditions imposed on the
transfer.
o Time Period: Lease always takes place for a particular time period which is to be
specified in the lease agreement. It can be relaxed at the option of the lessor.

What happens when the lease agreement does not prescribe the time period of the lease?

Section 106 provides for the duration of the lease in the absence of the lease agreement.
It lays down that in the absence of a contract, lease can be ended by both parties to the lease by
issuing a notice to quit. The prescribed time period always commences from the date of receiving the
notice to quit. Following are the circumstances:

Term Prescribed
Purpose Notice End
(Deemed)
Agricultural or manufacturing Year to Year 6 1 year

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purpose. month
Any other purpose. Month to Month 15 days 1 month

In this table, there is a distinction of two purposes in regard to Section 106 i.e. Agricultural or
manufacturing and other purposes. Hence, two things can be derived from this table:

1. When a lease for Agricultural or manufacturing purpose is deemed to be of year to year, then
it will attract a 6-month notice that the lease will end on the expiry of 1 year from the date of
the commencement of the lease.
2. When a lease for any other purpose is deemed to be of the month to month, then it will attract
a 15-day notice that the lease will end on the expiry of 1 month from the commencement of
the lease.

There is proviso to this section which states that the notice to quit in this section should be written
and conveyed to the party who is required to abide by it. If this is not possible then it should be
attached to a conspicuous place in that property.

How is a lease executed?

Section 107 states about lease how made. This section covers three aspects:

1. When there is a lease of Immovable property for a term of 1 year or more – This can only
be made by a registered deed.
2. All other leases of Immovable property – Can be either made by a registered deed or an oral
agreement or settlement along with the transfer of possession of that property.
3. When the lease is of multiple properties that require multiple deeds, it will be made by both
the parties of the lease.

In the case of Punjab National Bank v. Ganga Narain Kapur (1.), Court held that if the lease
is done through an oral agreement, then the provisions of Section 106 will apply.

Rights and liabilities of Lessor and lessee

Rights of the lessor are

1. A lessor has a right to recover the rent from the lease which was mentioned in the lease
agreement.
2. Lessor has a right to take back the possession of his property from the lessee if the lessee
commits any breach of condition.
3. Lessor has a right to recover the amount of damages from the lessee if there is any
damage done to the property.
4. Lessor has a right to take back the possession of his property from the lessee on
the termination of the lease term prescribed in the agreement.

Liabilities of the lessor

1. The lessor has to disclose any material defect relating to the property which the lessee
does not know and cannot with ordinary supervision find out.

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2. Lessor is bound by the request of the lessee to give him the right of possession over his
property.
3. Lessor can enter into a contract with the lessee if he agrees to abide by all terms and
conditions prescribed in the agreement, he can enjoy the property for the rest of the time
period without any interference with an obligation to pay the rent later on.

Rights of the lessee

1. During the period lease is in effect if any alteration is made (alluvion for the time being in
force) then that alteration will come under that same lease.
2. If a significant part of the property that has been leased is destroyed wholly or partly by fire,
by flood, by war, by the violent acts of the mob or by any other means resulting in its
inefficiency of being a benefit for the lessee. If this happens, the lease is voidable at his option.

There is a proviso to this section that states if the damage is done due to any act of the lessee
himself, this remedy will not be available for him.

1. Lessee has the right to deduct any expenses he has made for repairs in the property from the
rent if the lessor has failed to in reasonable time.
2. Lessee has a right to recover any such payment which a lessor is bound to make by can
deducting it from the interest of the rent or directly from the lessor. He has this right when
the lessor has neglected to make that required payment.
3. Lessee has a right to detach all things that he may have attached in the property or earth. His
only obligation is that he has to leave the property in the same condition as he received it.
4. When a lease is of unspecified duration in the lease agreement, lessee or his legal
representative have a right to collect all the profits or benefits from the crops which were
sown by the lessee at that property. They also have a right of free ingress and egress from
such property even if the lease ends.
5. Lessee has a right to transfer absolutely the property or any part of his interest in that
property by sub-leasing or through mortgaging. Lessee is not independent of the terms and
conditions mentioned in the lease agreement.

Liabilities of the lessee

1. Lessee is under an obligation to disclose all related material facts which are likely to increase
the value of the property for which the lessee has an interest in and the lessor is not aware of.
2. Lessee is under an obligation to pay the rent or premium which is settled upon in the
agreement to the lessor or his agent within the prescribed time.
3. Lessee is under an obligation to maintain the property in the condition that he initially got
the property on commencement of the lease and he has to return it in the same condition.
4. If lessee gets to know about any proceedings relating to the property or any encroachment or
any interference, then lessee is under an obligation to give notice to the lessor.
5. Lessee has a right to use all the assets and goods which are on the property as an owner
would use which is preserving it to the best of its nature. He is although under obligation to
prevent any other person from using that asset or good for any other purpose from what was
prescribed in the lease agreement.
6. The lessee cannot attach any permanent structure without the consent of the lessor except for
the purpose of agriculture.

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7. Lessee is under an obligation to give the possession of the property back to the lessor after the
expiry of the prescribed term of the lease.

How does a Lease end?

Determination of lease

Section 111 states about the determination of the lease, which lays down the ways in which lease is
terminated:

1. Lapse of time – When the prescribed time of the lease expires, the lease is terminated.
2. Specified event – When there is a condition on time of lease depending upon a happening
of an event.
3. Interest – Lessor’s interest to lease the property may cease, hence resulting in the
termination of the lease.
4. Same owner – When the interest of both lessor and lessee are transferred or vested in the
same person.
5. Express Surrender – This happens when the lessee ceases to have an interest in the
property and comes into a mutual agreement with the lessor.
6. Implied Surrender – When the lessee enters into a contract with another for the lease of
property, this is an implied surrender of the existing lease.
7. Forfeiture – There are three ways by which a lease can be terminated:

 When there is a breach of an express condition by the lessee. The lessor may get the
possession of the property back.
 When lessee renounces his character or gives the title of the property to a third person.
 When the lessee is termed as insolvent by the banks, and if the conditions provide for it, the
lease will stand terminated.

8. Expiry of Notice to Quit – When the notice to quit by the lessor to the lessee expires, the lease
will also expire.

What is notice to quit and what happens after it?

Notice to quit is a formal written statement that is issued to the lessee if the lessor desires to end the
lease agreement, whether on the expiry of the duration as stated under Section 106 or on grounds
specified in Section 111.

Any lease can be forfeited as mentioned in the sub-clause (g) of Section 111, by acceptance of the
notice to quit.

But Section 112, states that if the lessor after initiating the process of termination of the lease on
the grounds of forfeiture accepts any rent from the lessee, it will be understood that the lease will
still exist and the termination and notice to quit has been waived.

Section 113 provides two ways in which the notice can be waived, that is expressly or impliedly.

1.
1. Express Waiver of notice to quit – When a lessor accepts the rent from the lessee
after the notice to quit has been served, this is called express waiver of notice to quit.

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2. Implied Waiver of notice to quit – When a lessor issues notice to quit to the lessee,
and upon expiry of that notice, lesser issues another notice to quit to the lessee. The
first notice to quit is impliedly waived.

Waiver of notice also shows the intention to continue the existing lease.

Effect of Holding over

Section 116 states about the effect of holding overlays down that if there has been a waiver of
notice to quit, it will not be called a new lease instead it will be called as a lease on sufferance or
tolerance without objecting against it. The term ‘Holding over’ stands for retained possession of a
property which has been leased. After this, the lease is renewable as any normal lease and in the
way prescribed in Section 106.

This section provides that if the lessor agrees to the holding over of the property by the lessee, it will
be renewed. But if the lessor does not entertain the retained possession by the lessee, he can initiate
suit proceedings against him on grounds of trespass or tenant at sufferance.

Conclusion

Lease is a very important aspect of real life. Every person has witnessed a lease deal involving
renting of a house, car or etc. Therefore it is important for the general public to know about the
rights of every individual in a lease, and to know about the provisions that govern lease. The lease is
mentioned from Sections 105 to Section 117, out of which Sections which may help the general public,
law students and the legal fraternity have been discussed in this article to give clarification and a
basic idea about the lease.

Gift: Definition, Essentials Revocation and suspension of gift,

Onerous Gift, Universal Donee
Introduction
A Gift is generally regarded as a transfer of ownership of a property where the sender willingly
brings into effect such transfer without any compensation or consideration in monetary value. It
may be in the form of moveable or immoveable property and the parties may be two living persons
or the transfer may take place only after the death of the transferor. When the transfer takes place
between two living people it is called inter vivos, and when it takes place after the death of the
transferor it is known as testamentary. Testamentary transfers do not fall under the scope
of Section 5 of the Transfer of Property Act, and thus, only inter vivos transfers are referred to as
gifts under this Act.

If the essential elements of the gift are not implemented properly it may become revoked or void by
law. There are many provisions pertaining to the gifts. All such provisions, for example, types of
property which may be gifted, modes of making such gift, competent transferor, suspension and
revocation of gift, etc. are discussed in this article.

What may be referred to as a gift

Gift

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Section 122 of Transfer of Property Act defines a gift as the transfer of an existing moveable or
immovable property. Such transfers must be made voluntarily and without consideration. The
transferor is known as the donor and the transferee is called the donee. The gift must be accepted by
the donee. This Section defines a gift as a gratuitous transfer of ownership in some property that is
already existing. The definition includes the transfer of both immovable and moveable property.

Mt. Brij Devi v. Shiva Nanda Prasad & Ors (1939) : an analysis

One of the few essentials of a Gift is, that in event of a transfer, there must be a transference of all
the rights in the property by the donor to the donee; however, it is also permissible to make
conditional gifts. Such a clause is governed by Section 126 of the Act.

To delve into the issue, we must refer to the first important pre-independence judgment of the
Allahabad High Court, where the subject matter of dispute is the same as our concern. In the case
of Mt. Brij Devi v. Shiva Nanda Prasad & Ors (1939) Brij Devi had claimed possession of a land
which had formed the focus of a gift deed executed by her ancestors on 11th December 1914, in favor
of one Jain Bulaqi Shankar. The gift deed was executed with some conditions attached to it which
read as, “The material terms of the gift-deed are as follows: I have made a gift to Pt. Jain Bulaqi
Shankar for construction of the temple of Bhaironji, and residence, and removing my possession
from the property gifted, I have put the donee in proprietary possession and he will have the right to
construct a temple and a quarter… The donee or his successors will have no right to transfer or
mortgage it; if he does, the transfer will be invalid, and I and my successors will have a right to get
the gift revoked.” As per the gift deed, Jain Bulaqi did not succeed in building the temple or a
residential quarter for his own occupation, but subsequently he made a waqf of the property in
favour of one Shiva Nanda Prasad in 1927, which means, he transferred the property which had
been gifted to him by the plaintiffs’ ancestor. This action of the done was alleged to be in
contravention of the conditions of the gift deed itself. They alleged that in circumstances of property
being alienated, by virtue of the revocation clause mentioned in the gift deed, they were entitled to
declare the transfer done to the defendant as invalid and further have the right to take back the
possession of the land as per the gift deed.

The defendants argued that the transfer made by way of gift deed, was an absolute transfer of the
land to Jain Bulaqi, and that that transfer in the gift deed had been subject to a condition absolutely
restraining the transferee and his successors from parting with or disposing of his interest in the
property which is repugnant to the Transfer of Property Act itself. Section 10 of the Transfer of
Property act states that, absolute restraint on the transferee by the transferor is void, that is, the
condition restraining the alienation is void while the transfer of the property itself is valid. The
defendants’ argument was essentially based on the foundation of Section 10 of TPA, they argued
that such a restraint on the land was void and the contract must be allowed as if an unequivocal
transfer of the land was made to the donee.

Moreover, because the condition was void, the transfers in favor of Shiva Nanda Prasad were valid
and could not be set aside, nor were the plaintiffs entitled to revoke the gift deed. The plaintiffs then
took the defense of Section 126 of the Transfer of Property Act and contested that the transfer was
not void as per the mentioned section. The section essentially means that the donor and donee can
agree upon happening of certain conditions, when the condition is not fulfilled, the gift can be
revoked. The plaintiffs argued that the right to revoke the gift was contingent upon the alienation by
the donee of the land gifted and not upon the will of the donor.

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The plaintiffs supported this claim by citing the case of Makund Prasad v. Rajrup Singh (1907), in
which the court held that a gift of property made on the condition that the land would be liable to be
taken back in the event of its Alienation, was valid and the power of revocation was not repugnant
to the original transfer under Section 10.

The court in this case rightfully upheld the defendants claim and ruled that the gift deed cannot be
revoked by the successors of the ancestor who had made the gift deed in favour of Jain Bulaqi as the
transfer was uncosniable in the first place as it restricted the donee completely to alienate such
property. This was the first major judgment which rightfully upheld the donee’s claim and rightfully
interpreted the law relating to sections 10 and 126, however the thing to note in this judgment was
the lower appellant court had ruled in favour of the plaintiffs and the high court had overturned the
decision which is a usual trend which we see in cases relating to the issue of our paper. Even after
such a judgment, we see cases relating to the same issue where the lower and high court’s decision is
overturned in the Supreme Court. In the case of Sridhar vs N. Revanna (2000), which is a case of
February, 2020, out of the many issues in the suit, the same issue, that is, whether a gift deed can be
revoked by virtue of Section 126 if such property is alienated had been raised in the Supreme Court
once again for which the court had to adjudicate the matter. In this case one Shri Muniswamappa,
great grandfather of the plaintiffs and grandfather of defendant No.1, was the absolute owner of the
suit schedule property who executed gift deeds in favour of the defendants with the same condition
that the property should not be alienated and if such property was to be alienated, then the gift deed
stands invalid. The defendants on the other hand had sold the property which they had received as a
gift to which the plaintiffs’ alleged that such a transfer was invalid as the gift deed specifically stated
that the mentioned property is not to be alienated and the plaintiffs demanded the property to be
transferred to them back.

The High Court in this case too decided that the condition of the gift deed was not fulfilled and thus
ruled that the sale made by the donee was invalid and the property is to be returned, but the
Supreme court in this too cited the ruling held in the case of Mt. Brij Devi v. Shiva Nanda Prasad
& Ors (1939) and overturned the High court’s decision and ruled that the gift deed cannot be
revoked as at the very inception of the gift deed, the donee was completely restricted to alienate such
property which is prohibited by Transfer of Property Act by virtue of section 10.

For an issue that has been a settled law as per the 1939 judgment of the Allahabad High Court, it is
important to analyze what is making the courts interpret such laws in different manners and why
are the higher courts being time and again invoked to settle such disputes. Firstly we would look at
the way Section 126 is drafted in the Transfer of Property Act and also the placement of such a
section would be beneficial for an in-depth analysis. Section 126 reads as: “donor and donee may
agree that on the happening of any specified event which does not depend on the will of the donor, a
gift shall be suspended or revoked; but a gift which the parties agree shall be revocable wholly or in
part, at the mere will of the donor, is void wholly or in part, as the case may be.”

The section as it appears has a highly generic wording and allows the donor to make some condition
while gifting it to the donee and if such condition is not fulfilled or abided by, the donor can revoke
the gift deed not on the basis of his will but subject to the condition that remained unfulfilled or
which has not been abided by. This section is type of a conditional clause as the gifts chapter starts
from Section 122 of the Transfer of Property Act. Chapter 2 of the Act is a general chapter which
puts some restrictions on the property while the gifts form a part of separate chapter, that is, ‘of
Gifts’ in the Act. Moreover if we look at the illustrations present in the section, it appears that the
law is silent upon such matters, that is, what if there is a complete restriction on the alienation of the
property. The courts while adjudicating the matter look at the placement of these conditional
clauses, where the presence of section 126, that is, the conditional clause is already present in the

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chapter, the courts tend to think that the gifts are to be governed only by the set conditions that have
been made in the gift deed. Moreover, the courts also interpret that if such conditional clause is
present in the chapter ‘of gifts’ hwere parties can make own conditions in the gift deed, there must
be a legislative intent behind this structuring and the chapter ‘of gifts’ must be looked at aloof of
other chapters, specifically Section 10 (to which our analysis is limited). The illustrations (Section
126), being silent on such conditions, also add to this mis-interpretation of the court. The first
illustration provided in the section is contingent upon the death of B and his descendants but in the
first place, the donee is not restricted from alienation of the property.

The second illustration provided also does not talk about the alienation issue rather it clarifies that if
an amount of 100 is gifted to someone by the donor and with both the donor and donee’s assent,
they agree that Rs 10 can be asked back at any time, this shows that the actual gift was of Rs 90
only as the donee has to return back the Rs 10 to the donor back, that is, that amount of Rs 10 is
inalienable. The second illustration is somewhat related to the issue at hand but because it is talking
about a movable gift, that is, in cash, the courts tend to think that this may be applicable to only
movable gifts as we cannot gift land in such a way. Thus, due to the absence of such clarity in the
issue, the court thinks that the act is silent in the issue at hand and they tend to give different
rationale and rule that the property which forms center of a gift deed can be revoked if the condition
of alienation is not abided by the donee.

This interpretation or perception of the courts is wrong as section 10 of the act is part of the chapter
2, that is, ‘of transfers of property by act of Parties’ which is a general section and must apply to all
the chapters of the Act as it defines the ‘action’ of the parties per se which is void in the eyes of law.
Needless to mention, Parties of any transaction are an essential element for a transaction to take
place, thus a specific chapter has been created by the Act which gives some clarity of what all
actions of the parties entering into the transaction are good or bad in law. If there was a legislative
intent for a gift to be governed only by the conditions of the gift deed, that is, section 126 of the
Transfer of Property Act and section 10 would not apple to such conditions, then such an exception
would be specifically mentioned in the section 10 of the Act just like mortgage, which has been
specifically excluded in the section 10 of the Act. Thus, reading into the issues where the act appears
to be silent as section 126 and section 10 are a part of different chapters is the wrong approach that
is often followed by the court which leads to wrong judgments time and again. The same logic of
free market that is used to defend the creation of section 10 of the Act can also be extended to this
issue as well. The main reason for which such a section, that is, section 10 was created was to not
allow accumulation of the property. People in India hold a lot of sentimental value towers the land
and property they own and subsequently the ancestors do not want their future generations to
alienate such property.

To counter such problem, that is, a property does not start limiting to one family lineage; such a
section was created and is still needed as exclusion of such a section would pull us back to
the zamindari system as was prevalent in India as few years back. Moreover when a gift deed is
revoked the government too is not benefitted from this transfer in terms of taxes. A gift deed in the
first place when is executed, it does not attract any tax but there is a change in ownership as there is
a change in title of the property and when such a gift deed will be revoked, there will be again a
change in the title and ownership which would not attract any tax as the property which was owned
by the donor at some time is being handed back to him by way of revocation, thus two transfers of
title are made and the taxable amount is none on the property which is something not beneficial for
a new democracy to progress. Moreover the legal maxim, “alienation rei praefertur juri
accrescendi” meaning that Law favours Alienation instead of Accumulation can be extended to the
issue at hand and by way of alienation of the gifted property, even the government could benefit

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from the amount of taxes that would be charged by way of transfer of such property to a third
person.

Parties to a gift transfer

Donor

The donor must be a competent person, i.e., he must have the capacity as well as the right to make
the gift. If the donor has the capacity to contract then he is deemed to have the capacity to make the
gift. This implies that at the time of making a gift, the donor must be of the age of majority and must
have a sound mind. Registered societies, firms, and institutions are referred to as juristic persons,
and they are also competent to make gifts. Gift by a minor or insane person is void. Besides
capacity, the donor must also have the right to make a gift. The right of the donor is determined by
his ownership rights in the property at the time of the transfer because gift means the transfer of the
ownership.

Donee

Donee does not need to be competent to contract. He may be any person in existence at the date of
making the gift. A gift made to an insane person, or a minor, or even to a child existing in the
mother’s womb is valid subject to its lawful acceptance by a competent person on his/her behalf.
Juristic persons such as firms, institutions, or companies are deemed as competent donee and gift
made to them is valid. However, the donee must be an ascertainable person. The gift made to the
general public is void. If ascertainable, the donee may be two or more persons.

Essential elements

There are the following five essentials of a valid gift:

1. Transfer of ownership
2. Existing property
3. Transfer without consideration
4. Voluntary transfer with free consent
5. Acceptance of the gift

Transfer of ownership

The transferor, i.e., the donor must divest himself of absolute interest in the property and vest it in
the transferee, i.e., the donee. Transfer of absolute interests implies the transfer of all the rights and
liabilities in respect of the property. To be able to effect such a transfer, the donor must have the
right to ownership of the said property. Nothing less than ownership may be transferred by way of
gift. However, like other transfers, the gift may also be made subject to certain conditions.

Existing property

The property, which is the subject matter of the gift may be of any kind, movable, immovable,
tangible, or intangible, but it must be in existence at the time of making a gift, and it must be
transferable within the meaning of Section 5 of the Transfer of Property Act.

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Gift of any kind of future property is deemed void. And the gift of spes successionis (expectation of
succession) or mere chance of inheriting property or mere right to sue, is also void.

Transfer without consideration

A gift must be gratuitous, i.e., the ownership in the property must be transferred without any
consideration. Even a negligible property or a very small sum of money given by the transferee in
consideration for the transfer of a very big property would make the transaction either a sale or an
exchange. Consideration, for the purpose of this section, shall have the same meaning as given
in Section 2(d) of the Indian Contract Act. The consideration is pecuniary in nature, i.e., in
monetary terms. Mutual love and affection is not pecuniary consideration and thus, property
transferred in consideration of love and affection is a transfer without consideration and hence a
gift. A transfer of property made in consideration for the ‘services’ rendered by the donee is a gift.
But, a property transferred in consideration of donee undertaking the liability of the donor is not
gratuitous, therefore, it is not a gift because liabilities evolve pecuniary obligations.

Voluntary transfer with free consent

The donor must make the gift voluntarily, i.e., in the exercise of his own free will and his consent as
is a free consent. Free consent is when the donor has the complete freedom to make the gift without
any force, fraud coercion, and undue influence. Donor’s will in executing the deed of the gift must be
free and independent. Voluntary act on a donor’s part also means that he/she has executed the gift
deed in full knowledge of the circumstances and nature of the transaction. The burden of proving
that the gift was made voluntarily with the free consent of the donor lies on the donee.

Acceptance of gift

The donee must accept the gift. Property cannot be given to a person, even in gift, against his/her
consent. The donee may refuse the gift as in cases of non-beneficial property or onerous gift.
Onerous gifts are such where the burden or liability exceeds the actual market value of the subject
matter. Thus, acceptance of the gift is necessary. Such acceptance may be either express or implied.
Implied acceptance may be inferred from the conduct of the donee and the surrounding
circumstances. When the donee takes possession of the property or of the title deeds, there is
acceptance of the gift. Where the property is on lease, acceptance may be inferred upon the
acceptance of the right to collect rents. However, when the property is jointly enjoyed by the donor
and donee, mere possession cannot be treated as evidence of acceptance. When the gift is not
onerous, even minimal evidence is sufficient to prove that the gift has been accepted by donee. Mere
silence of the donee is indicative of the acceptance provided it can be established that the donee had
knowledge of the gift being made in his favour.

Where the deed of gift categorically stated that the property had been handed over to the donee and
he had accepted the same and the document is registered, a presumption arises that the executants
are aware of what was stated in the deed and also of its correctness. When such presumption is
coupled with the recital in the deed that the donee had been put in possession of the property, the
onus of disproving the presumption would be on the donor and not the donee.

Where the donee is incompetent to contract, e.g., minor or insane, the gift must be accepted on his
behalf by a competent person. The gift may be accepted by a guardian on behalf of his ward or by a
parent on behalf of their child. In such a case, the minor, on attaining majority, may reject the gift.

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Where the donee is a juristic person, the gift must be accepted by a competent authority
representing such legal person. Where the gift is made to a deity, it may be accepted by its agent,
i.e., the priest or manager of the temple.

Section 122 provides that the acceptance must be made during the lifetime of the donor and while he
is still capable of giving. The acceptance that comes after the death or incompetence of the donor is
no acceptance. If the gift is accepted during the life of the donor but the donor dies before the
registration and other formalities, the gift is deemed to have been accepted and the gift is valid.

Modes of making a gift

Section 123 of the Transfer of Property Act deals with the formalities necessary for the completion of
a gift. The gift is enforceable by law only when these formalities are observed. This Section lays
down two modes for effecting a gift depending upon the nature of the property. For the gift of
immovable property, registration is necessary. In case the property is movable, it may be
transferred by the delivery of possession. Mode of transfer of various types of properties are
discussed below:

Immovable properties

In the case of immovable property, registration of the transfer is necessary irrespective of the value
of the property. Registration of a document including gift-deed implies that the transaction is in
writing, signed by the executant (donor), attested by two competent persons and duly stamped
before the registration formalities are officially completed. In the case of Gomtibai v. Mattulal, it
was held by the Supreme Court that in the absence of written instrument executed by the donor,
attestation by two witnesses, registration of the instrument and acceptance thereof by the donee, the
gift of immovable property is incomplete.

The doctrine of part performance is not applicable to gifts, therefore all the conditions must be
complied with. A donee who takes possession of the land under unregistered gift-deed cannot defend
his possession on being evicted. The following must be kept in mind regarding the requirement of
registration:

 Registration of the gift of immovable property is must, however, the gift is not suspended till
registration. A gift may be registered and made enforceable by law even after the death of the
donor, provided that the essential elements of the gift are all present.
 In case the essential elements of a valid gift are not present, the registration shall not validate
the gift.

It has been observed by the courts that under the provisions of the Transfer of Property Act, Section
123, there is no requirement for delivery of possession in case of an immovable gift. The same has
been held in the case of Renikuntla Rajamma v. K. Sarwanamma that the mere fact that the donor
retained the right to use the property during her lifetime did not affect the transfer of ownership of
the property from herself to the donee as the gift was registered and accepted by the donee.

Movable properties

In the case of movable properties, it may be completed by the delivery of possession. Registration in
such cases is optional. The gift of a movable property effected by delivery of possession is valid,
irrespective of the valuation of the property. The mode of delivering the property depends upon the

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nature of the property. The only things necessary are the transfer of the title and possession in
favour of the donee. Anything which the parties agree to consider as delivery may be done to deliver
the goods or which has the effect of putting the property in the possession of the transferee may be
considered as a delivery.

Actionable claims

Actionable claims are defined under Section 3 of the Transfer of Property Act. It may be unsecured
money debts or right to claim movables not in possession of the claimant. Actionable claims are
beneficial interests in movable. They are thus intangible movable properties. Transfer of actionable
claims comes under the purview of Section 130 of the Act. Actionable claims may be transferred as
gift by an instrument in writing signed by the transferor or his duly authorised agent. Registration
and delivery of possession are not necessary.

A gift of future property

Gift of future property is merely a promise which is unenforceable by law. Thus, Section 124 of the
Transfer of Property Act renders the gift of future property void. If a gift is made which consists of
both present as well as future property, i.e., one of the properties is in existence at the time of
making the gift and the other is not, the whole gift is not considered void. Only the part relating to
the future property is considered void. Gift of future income of a property before it had accrued
would also be void under Section 124.

A gift made to more than one donee

Section 125 of the Act says that in case a property is gifted to more than one donee, one of whom
does not accept it, the gift, to the extent of the interest which he would have taken becomes void.
Such interest reverts to the transferor and does not go to the other donee.

A gift made to two donees jointly with the right of survivorship is valid, and upon the death of one,
the surviving donee takes the whole.

Provisions relating to onerous gifts

Onerous gifts refer to the gifts which are a liability rather than an asset. The word ‘onerous’ means
burdened. Thus, where the liabilities on a property exceed the benefits of such property it is known
as an onerous property. When the gift of such a property is made it is known as an onerous gift, i.e.,
a non-beneficial gift. The donee has the right to reject such gifts.

Section 127 provides that if a single gift consisting several properties, one of which is an onerous
property, is made to a person then that person does not have the liberty to reject the onerous part
and accept the other property. This rule is based upon the principle of “qui sentit commodum sentire
debet et onus” which implies that the one who accepts the benefit of a transaction must also accept
the burden of it. Thus, when two properties, one onerous and other prosperous, are given in gift to a
donee in the same transaction, the donee is put under the duty to elect. He may accept the gift
together with the onerous property or reject it totally. If he elects to accept the beneficial part of the
gift, he is bound to accept the other which is burdensome. However, an essential element of this
Section is a single transfer. Both the onerous and prosperous properties must be transferred in one
single transaction only then they require the obligation to be accepted or rejected in a joint manner.

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In case the onerous gift is made to a minor and such donee accepts the gift, he retains the right to
repudiate the gift on attaining the age of majority. He may accept or reject the gift on attaining
majority and the donor cannot reclaim the gift unless the donee rejects it on becoming a major.

Universal donee

The concept of universal donee is not recognised under English law, although universal succession,
according to English law is possible in the event of the death or bankruptcy of a person. Hindu law
recognises this concept in the form of ‘sanyasi’, a way of life where people renounce all their worldly
possessions and take up spiritual life. A universal donee is a person who gets all the properties of the
donor under a gift. Such properties include movables as well as immovables. Section 128 lays down
in this regard that the donee is liable for all the debts and liabilities of the donor due at the time of
the gift. This section incorporates an equitable principle that one who gets certain benefits under a
transaction must also bear the burden therein. However, the donee’s liabilities are limited to the
extent of the property received by him as a gift. If the liabilities and debts exceed the market value of
the whole property, the universal donee is not liable for the excess part of it. This provision protects
the interests of the creditor and makes sure that they are able to chase the property of the donor if he
owes them.

Suspension or revocation of gifts

Section 126 of the Act provides the legal provisions which must be followed in case of a conditional
gift. The donor may make a gift subject to certain conditions of it being suspended or revoked and
these conditions must adhere to the provisions of Section 126. This Section lays down two modes of
revocation of gifts and a gift may only be revoked on these grounds.

Revocation by mutual agreement

Where the donor and the donee mutually agree that the gift shall be suspended or revoked upon the
happening of an event not dependent on the will of the donor, it is called a gift subject to a condition
laid down by mutual agreement. It must consist of the following essentials:

 The condition must be expressly laid down

 The condition must be a part of the same transaction, it may be laid down either in the gift-
deed itself or in a separate document being a part of the same transaction.
 The condition upon which a gift is to be revoked must not depend solely on the will of the
donor.
 Such condition must be valid under the provisions of law given for conditional transfers. For
eg. a condition totally prohibiting the alienation of a property is void under Section 10 of the
Transfer of Property Act.
 The condition must be mutually agreed upon by the donor and the donee.
 Gift revocable at the will of the donor is void even if such condition is mutually agreed upon.

Revocation by the rescission of the contract

Gift is a transfer, it is thus preceded by a contract for such transfer. This contract may either be
express or implied. If the preceding contract is rescinded then there is no question of the subsequent
transfer to take place. Thus, under Section 126, a gift can be revoked on any grounds on which its
contract may be rescinded. For example, Section 19 of the Indian Contract Act makes a contract
voidable at the option of the party whose consent has been obtained forcefully, by coercion, undue
influence, misrepresentation, or fraud. Thus, if a gift is not made voluntarily, i.e., the consent of the
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donor is obtained by fraud, misrepresentation, undue influence, or force, the gift may be rescinded
by the donor.

The option of such revocation lies with the donor and cannot be transferred, but the legal heirs of the
donor may sue for revocation of such contract after the death of the donor.

The limitation for revoking a gift on the grounds of fraud, misrepresentation, etc, is three years
from the date on which such facts come to the knowledge of the plaintiff (donor).

The right to revoke the gift on the abovementioned grounds is lost when the donor ratifies the gift
either expressly or by his conduct.

Bonafide purchaser

The last paragraph of Section 126 of the Act protects the right of a bonafide purchaser. A bonafide
purchaser is a person who has purchased the gifted property in good faith and with consideration.
When such a purchaser is unfamiliar with the condition attached to the property which was a
subject of a conditional gift then no provision of revocation or suspension of such gift shall apply.

Exceptions

Section 129 of the Act provides the gifts which are treated as exceptions to the whole chapter of gifts
under the Act. These are:

Donations mortis causa

These are gifts made in contemplation of death.

Muslim-gifts (Hiba)

These are governed by the rules of Muslim Personal Law. The only essential requirements are
declaration, acceptance and delivery of possession. Registration is not necessary irrespective of the
value of the gift. In case of a gift of immovable property worth more than Rupees 100, Registration
under Section 17 of the Indian Registration Act is must, as it is applicable to Muslims as well. For a
gift to be Hiba only the donor is required to be Muslim, the religion of the donee is irrelevant.

Conclusion

To constitute a transfer as a gift it must follow the provisions of the Transfer of Property Act. This
Act extensively defines the gift itself and the circumstances of the transfer of such a gift. The gift,
being a transfer of the ownership rights, must be in possession and ownership of the transferee and
must be existing at the time of making the transfer. The transferor must be competent to make such
transfer but the transferee may be any person. In case the transferee is incompetent to contract, the
acceptance of gift must be ratified by a competent person on his/her behalf. Gift of future property is
void. Partial acceptance of prosperous gifts and rejection of onerous gifts is not valid either. The
acceptance of a gift entails the acceptance of the benefits as well as the liabilities coupled with such a
gift. A gift may be revoked only by a mutual agreement on a condition by the donor and the donee,
or by rescinding the contract pertaining to such gift. The Donations mortis causa and Hiba are the
only two kinds of gifts which do not follow the provisions of the Transfer of Property Act.

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