Transfer of Property ActFrequently Asked Questions on Transfer of Property Act
(1) Doctrine of Part performance was given statutory recognition and embodied in Section 53-A.
(2) Legal proposition of `Lis-pendens' was clarified even more.
(3) Section 63-A recognized the right of mortgagee to compensation for the money spent by him by bringing improvement in Hypotheca.
(4) The law of merger in relation to mortgages has been simplified.
(5) Registration of compulsorily registerable document operate as considerable notice.
(6) Mortgagee has to bring single suit inconsolidation of all mortgagees held by him in respect of which mortgage money has become due and in respect of which he has right to obtain same kind of decree.
(7) Section 65-A has defined the mortgagor's right to lease the for operty and has provided statutory criteria for judging the validity of such leases.Objects -- The following have been the objects of the Transfer of Property Act --
(1) One of the object of the Act was to render the system of transfer of immovable property a system of public transfer. Registration is therefore generally insisted upon for completing a transfer except in cases of transactions of small value.
(2) Another object of the Act was to render more simple and efficient the law relating to mortgages; section 60 of the Act recognises the mortgagers right to redeem and his right has not been made subject to a contract to the contrary; full effect being thus given to the equitable maxim "once a mortgage always a mortgage."
(3) Another and even more important object of act was to bring the rules which regulate the transmission of property between living persons into harmony with the rules affecting its disposition by testaments and thus to provide the necessary complement to the Indian Succession Act. With this view the rules of the Succession Act as to contingent and conditional bequest, have been applied mutatis mutandis to transfers inter-vivos.Most of the provisions of the Act were based on the decisions of the courts of Equity in England before 1881 which had largely been followed by the Indian Courts. Scope of the Act : The scope of the Act is limited to transfer of property between parties inter vivos i.e. living persons by their own acts as distinguished from a transfer by operation of law as in case of insolvency or perfection of sale in execution of a decree. The Act has no application to disposal of property by will. It also does not deal with the case of succession. The scope and main objects of the Act shall be clear from the following words :--
"First, to bring the rules which regulate the transmission of property between living persons into harmony with the rules affecting its devolution upon death and thus to furnish the complement of the work commenced in framing the law of intestate and testamentary succession, and secondly, to complete the code of law of contract, so far as relates to immovable property. In aiming at these objects, the legislature has striven to avoid technicalities and refinements, to discard all rules whereby the parties to a transaction were made liable to unexpected consequences, and provisions indeed which were found in practice to lead to embarrassment and litigation. Like the Contract Act it is not and does not purport to be, an exhaustive measure."Thus Act covers transfer by act of parties inter vivos. The preamble of the Act lays down that "whereas it is expedient to define and amend certain parts of the law relating to the transfer of property by act of parties, it is hereby enacted as follows."
"Immoveable property does not include standing timber, growing crops or grass."So defination of `Immoveable property' u/s 3 of the Act does not clearly and positively indicate the real nature of the term. According to Section 3(26) of General Clause Act "Immoveable property shall include land benefits to arise out of land and things attached to earth or permanently fastened to anything attached to the earth." So definition of the term `Immoveable property' as given in General clause Act 1897 is also not comprehensive, However after having read the definitions of the term as given in both the above said Acts, term may be said to include the following :-
(b) Benefits to arise out of land
(c) Things attached to the earth, except standing timber growing crops and grass.Land - Land means determinate portion of earth's surface (e.g. - lake, mountains etc.) and objects beneath the surface like Mines etc. or all other objects placed by human agency on or under the surface with intention of permanent annexation, so as to become part of the land. Benefits To Arise Out of Land :- Apart from the property being immoveable from the physical point of view very benefit arising out of it and every interest in such property is also regarded as immoveable property. (Adebt secured by a Mortgage of immoveable property is an interest arising out of land and is thus regarded as "Immoveable property"). Similarly Right to receive future rent, Right to take minerals, Right collect lac from Jungle, fish from pond are examples of benefits arising out of land. Things Attached To Earth : Things attached to earth includes
1. Thing rooted in the earth
2. Things embedded in the earth
3. Things attached to what is so embedded and
4. Chattels attaches to earth or Building.Things rooted in the earth, includes - all the trees or shrubs. But except standing Timber, Growing Crop or Gross, (standing Timber, Growing Crop or Gross these are movable properties). Trees which bear fruits are not standing timber but are considered as immoveable property. There are however certain trees lime Mango gives Fruits as well as Timber whether they are movable or immovable property depends upon circumstances of case. It also depends upon intention to use them as Timber (moveable) or Fruits (Immovable). Where the intention in to cut them for the purpose of utilising wood, they would be regarded as movable property. Things embedded in the earth includes all the building and other constructions. Things embedded in earth includes all windows; doors in a house are attached to the house for the permanent beneficial enjoyment, which includes, electric Ceiling fan. Whether fan is Immovable property or not depends upon the intention of fixation. If it is permanent beneficial enjoyment of property then it is immovable property. Chattels attached or fixed to building are immovable property. Following properties are judicially recognised as Immovable properties
1. Right to collect rent of Immovable property
2. Right to collect Ferry
3. A right of way, light, fishery.
4. Debt secured by Mortgage.
5. Hereditary offices of worship.
6. Equity on Redemption.
7. Right to collect lac from trees.Following properties are not immovable properties :
1. Right of worship, a royalty (a payment made to the writer of a book by publisher).
2. A decree for arrears of rent.
3. Right to recover maintenance.
4. Machinery which is not permanently attached to the earth.
5. Government promissory notes.
6. Standing Timber, Growing Crop, Gross(B) Actionable Claim. - Section 3 of T.P. Act defines actionable claim. Formerly, any claim which could be recognized by the Courts affording grounds for relief was an actionable claim. Now the term in restricted to claim to debts and to claims to any beneficial interest in movable property not in possession either actual or constructive of the claimant. A debt secured by a mortgage is excluded from the category of "actionable claim". Section 3 defines the term as follows : "Actionable claim" means (1) a claim to any debt other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property; or (2) to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant which the civil courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent." Actionable claim therefore means (1) a claim to any debt (other than a mortgage debt) and (2) a claim to any `beneficiary interest' in movable property. (1) `A' owes Rs. 1000 to `B'. `B's claim is an actionable claim. (2) A promise to deliver 100 bags of rice on a certain day. He fails to deliver on the day promised. B has a right to sue for damages, but `B's claim for damages is not an actionable claim. (3) Claim for arrears of rent is actionable claim. (4) A claim to rent to fall due in future is an actionable claim for it is an `accruing' debt within the meaning of the definition. (5) A share in partnership is an actionable claim. The expression "beneficial interest in movable property" includes the right to claim the benefit of a contract for the purchase of goods.
Provided that -
(1) the instrument has been registered and its registration completed in the manner prescribed by the Indian Registration Act, 1908 (16 of 1908), and the rules made thereunder,
(2) the instrument or memorandum has been duly entered or filed, as the case may be, in books kept under section 51 of that Act, and
(3) the particulars regarding the transaction to which the instrument relates have been correctly entered in the indexes kept under section 55 of that Act.Explanation II. - Any person acquiring any immovable property or any share or interest in any such property shall be deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof. Explanation III. - A person shall be deemed to have had notice of any fact if his agent acquires notice thereof whilst acting on his behalf in the course of business to which that fact is material :
Provided that if the agent fraudulently conceals the fact, the principal shall not be charged with notice thereof as against any person who was a party to or otherwise cognizant of the fraud."So from the definition it is clear, that `Notice' may be actual or construction, according to circumstances. It was observed that `The definition in Section 3 includes both an actual and constructive notice. Legal presumption of knowledge of Notice arises from (a) willful abstention from enquiry or search (b) Gross negligence, (c) omission to search registration in Register kept under Registration Act (d) Actual possession and (e) Notice to agent (1998 All.L.J. 1288 (1295) Actual and Express Notice. An Actual notice is one by which one gets direct and express knowledge of a fact. Actual notice must be definite information given by a person interested in thing in respect of which the notice is issued. Actual notice can not be established by proof of casual conversation. Constructive Notice. Construction notice of fact is one which a person is presumed, in law to have received the knowledge of that fact. Constructive notice is knowledge which the courts impute to a party upon a presumption so strong that it cannot be allowed to be rebutted that the knowledge must have been communicated. The question of constructive notice is question of fact which falls to be determined on evidence and circumstances of each case. In Murlidhar Bhapuji Valve v. Yallapa.L. Chaugle, AIR 1994 Bom. 358 defendant failed to make necessary inquiry in respect of possession of suit land by going to the site or from neighbouring land owners. It was held that constructive notice of suit agreement shall have to be imputed to defendant in view of actual possession of the suit land being with the plaintiffs. Presumption as contemplated in constructive notice can be taken -
(1) In relation to a fact --
(i) When but for wilful abstention from an enquiry which a person ought to have made, he would have known the fact; or
(ii) When but for gross negligence be would have known it,
(2) In relation to document compulsorily registerable.
(3) In relation to actual possession.
(4) In relation to a notice to an agent.
"......transfer of property" means an act by which a living person conveys property, in present or in future, to one or more living persons or to himself or to himself and one or more other living persons and "to transfer property" is to perform such act."So "Transfer of Property" is a process whereby a "Property" is made over by one living person or persons to other living person or persons and for that purpose to perform such act. Section 5 makes it clear that Act deals with only "transfer inter vivos" i.e. transfer between living persons. In Kempraj v. Buston Son and Co., AIR 1970 SC 1872 Supreme Court observed that essence of word "Transfer" is `to convey' and therefore a transfer of property would include not only the five specific categories of transfer, dealt within the Act namely sale, mortgage, lease, gift and exchange but any transaction which has the effect of `conveying' any property or any interest therein from one living person to another. In Sunil Siddharthbhai v. Commissioner of Income-tax, Ahmedabad, Gujarat, AIR 1986 SC 368 (372) it was observed by Supreme Court that it is not necessary that transfer should be of entire bundle of rights from transferor to transferee. Transfer may consist of one of the estate only out of all estates comprising the totality of rights of owner into a joint or shared interest with other person. An exclusive interest is a larger interest than share in property, to the extent exclusive interest is reduced there is transfer. The word `property' As used in Section 5 of Act may be used in the objective sense of a concrete thing which is the subject of ownership or other rights or it may be used in the sense of the rights and the interests of the owner or other person in the property. It is in the latter sense that the term `property' is used in the Act. A transfer of property may take place in present or in future that is to say the actual conveyance of the property may take place in present or in future. But the property itself must be in existence as the property of the transferor. On the other hand, a transfer of property not in existence operates only as a contract to be performed in the future as soon as the property comes into existence and such a contract can be specifically enforced if the transferor fails to transfer the property to the transferee after the property comes into existence. A transfer pre-supposes two distinct persons i.e. transferor and the transferee and thus there can be transfer by one to himself but that is possible when the person exercise dual personality e.g.; A as an individual and A as a partner in a firm or a company when there is a contract between A and the firm or a company. Section 6 of Transfer of Property Act provides as to which properties are capable of transfer. Section 6 says :-
"Property of any bind may be transferred, except as otherwise provided by this Act or by any other law for the time being in force-
(a) The chance of an heir-apparent succeeding to an estate, the chance of a relation obtaining a legacy on the death of kinsman or any other mere possibility of a like nature, cannot be transferred.
(b) A mere right of re-entry for breach of a condition subsequent cannot be transferred to any one except the owner of the property affected thereby.
(c) An easement cannot be transferred apart from the dominant heritage.
(d) All interest in property restricted in its enjoyment to the owner personally cannot be transferred by him.
(dd) A right to future maintenance, in whatsoever manner arising, secured or determined, cannot be transferred.
(e) A mere right to sue cannot be transferred.
(f) A public office cannot be transferred, nor can the salary of a public officer, whether before or after it has become payable.
(g) Stipends allowed to military naval, air-force and civil pensioners of the Government and political pensions cannot be transferred.
(h) No transfer can be made (1) in so far as it is opposed to the nature of the interest affected thereby, or (2) for an unlawful object or consideration within the meaning of section 23 of the Indian Contract Act, 1872 (9 of 1872), or (3) to a person legally disqualified to be transferee.
(i) Nothing in this section shall be deemed to authorise a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate, under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee.So the rights and properties as described in clause (a) to (i) are exceptions to general rule and cannot be transferred. Transferability of property is general rule its non-tranferability, an exception and burden of proof that particular property is not transferable lies on person alleging it.
1. Of Land.
Easements, rents and profits and all things attached to the earth.
2. Of House :
Easements, the rent accruing after the transfer, locks, keys bars, doors and other things provided for permanent use.
3. Of machinery attached to the earth :
Movable parts of the machinery.
4. Of debt :
Securities (right to resort to some property for the satisfaction of the debt).
5. Of money or other property yielding income :
Interest or income accruing after the transfer takes effect.
(a) the relevant portion of the document as a whole, and
(b) the circumstances under which the particular words were used; and
(c) the status and the intention of the parties using the wordsWhere it is stated in the deed of settlement that the widow conveyed the property which passed to her through a will executed by her husband and the will was invalid as executed by a Hindu who had a son living at the time, it was held by the High Court of Andhra Pradesh in the case of Kodun Venkata Subbaiah v. Abburi Rangaiah, AIR 1972 Andh. Pra. 246, that it cannot be argued that she conveyed also her interest in the property as heir of the son. It is seen from the recitals that the intention was not to transfer all the interest whatever she was capable of passing but only the interest which she acquired under the will of her husband. Section 8 of the Transfer of Property Act starts will the words "unless a different intention is expressed or necessarily implied" and so the section does not apply so to operate as a transfer of all her interest (including the rights acquired as the heir of the deceased son).
(1) The act relaxes the rules against perpetuity in respect of transfers of property for the benefit of the public or for the advancement of religion or knowledge or for any other object beneficial to mankind and the vesting of such transfer inter vivos may be delayed beyond the period of perpetuity.
(2) Personal agreements i.e. agreements which do not create any interest in property do not offend the rule against perpetuities. For instance the She- bait of a Temple agree to appoint the family of C as Pujaries from generation to generation to perform the services of the temple and make provisions for the expense and remuneration of the office. The agreement is valid and is not hit by the rule against perpetuity.
(3) The third exception is "provisions for payment of debts of the transferor." A direction that the income of the property shall be accumulated for payment of debts does not tie up the property absolutely because the person indebted can discharge the debt at any time.
(4) The fourth exception is that covenants of redemption in a mortgage do not offend the rule.An agreement for pre-emption gives a first opinion to purchase land. Since an agreement for the purchase of lands does not create any interest in the property the rule against perpetuities does not apply to an agreement for pre-emption. This has been held also by Full Bench of the Allahabad High Court in Aulad Ali v. Khans 49 All. 527 F.B..
"Where, by reason of any of the rules contained in Section 13 and 14, an interest created for the benefit of a person or of a class of persons fails in regard to such person or the whole of such class, any interest created in the same transaction and intended to take effect or upon failure of such prior interest also fails."The rule embodied in this section is a rule of English law that a limitation following upon a limitation void for remoteness, is itself void, even though it may not itself trangress the rule against perpetuity. Thus, if a gift is made to A's grandson, and then to B. The first gift is void, so subsequent gift to B failed. So where an interest is intended to take effect after a prior interest and prior intrest is void for any reason, the subsequent interest also fails. In Girijesh Dutt v. Datta Din (1934) 147 IC 991, A made a gift of her properties to B who was her nephew's daughter. The gift by A was made for the life of B and then to B's male descendants absolutely if she should have any. But if she (B) had no male descendants then to B's daughter without power of alienation and if there was no descendants of B, male or female, then to her (A's) nephew. B died without having any issue. It was held that the gift in favour of urborn daughters was invalid under Section 13 because the gift was of a limited interest and subject to the prior interest in favour of B. The gift in favour of the nephew also fails under Section 16 which provides that if in a transfer of property the prior interest fails, the subsequent interest also fails.
(1) the life of the transferor; or
(2) a period of 18 years from the date of the transfer - whichever is longer.Illustration. - A transfers property to B in 1920 with a direction for accumulation for 30 years. A dies in 1940. The direction will be valid till 1940 and void thereafter. If, however, the transferor dies in 1930 the direction will be valid till 1938 (18 years from the date of transfer) and void thereafter. Exceptions. - The section recognizes three exceptions to the rule against accumulation : (1) Payment of debts. - A direction for accumulation for the purposes of the payment of the debts of either of the transferor or the transferee is valid. A makes a gift of the house to B. The income arising from the house is Rs. 200 per month. A gives a direction that the rent of the house, Rs. 200, should be applied in the payment of debt of amounting to Rs. 50,000. The direction is valid. (2) Accumulation for raising portions. - The second exception relates to direction for accumulation of income for the purposes of providing portions for children or remoter issue of the transferor or any other person taking any interest under the transfer. Edwards v. Tuck. (37 Digest 142). Lord Cranworth explained the meaning of "portion" by saying :
"a direction to accumulate all the person's property to be handed over to some child or children when they attain 21, can never be said to be a direction for raising a portion for the child or children; it is not raising a portion at all, it is giving everything. "Portion" ordinarily means apart or share.......which points to the arising of something out of something else for the benefit of some children of some children or class of children."(3) Accumulation for Preservation of property. - The third exception is with regard to direction for accumulation for the purpose of the preservation or maintenance of the property transferred.
"Where on a transfer of property an interest therein is created in favour of a person to take effect only on the happening of a specified uncertain even, or if a specified uncertain event shall not happen, such person thereby acquires a contingent interest in the property. Such interest becomes a vested interest in the former case on the happening of the event, in the latter, when the happening of the event becomes impossible."Exception - Where, under a transfer of property, a person becomes entitled to an interest therein upon attaining a particular age, and the transferor also gives to him absolutely the income to arise from such interest before he reaches that age, or directs the income or so much thereof as may be necessary to be applied for his benefit, such interest is not contingent. An interest created on a transfer of property in favour of a person is said to be contingent when it is expressed to take effect (1) on the happening of a specified uncertain event or (2) if a specified uncertain event shall not happen. Such interest becomes a vested interest, in the former case on the happening of the event and in the latter case when the happening of the event becomes impossible. (1) A property is transferred to D in case, A, B and C shall all die under the age of 18. D has contingent interest in the property until A, B and C all die under 18. (2) An estate is transferred to A for life and after his death to B if B shall then be living; but if B shall not then be living to C, B and C each take a contingent interest in the estate until the event which is to vest it in one or the other has happened. (3) An estate is transferred to A when she shall attain the age of 18 or shall marry under that age with the consent of B, with a proviso that if she neither attains 18 nor marries under that age with B's consent, the estate shall go to C. A and C each take a contingent interest in the estate. A attains the age of 18. A becomes absolutely entitled to the estate although she may have married under 18 without the consent of B. Distinction between vested and contingent interest
(1) A vested interest is created in favour of a person - without specifying the time when it is to take effect, or specifying that it is to take effect forthwith, or on the happening of a certain event.
(1) A contingent interest is created in favour of a person - to take effect only on the happening or not happening of a specified uncertain even, which may or may not happen.
(2) It is ownership.
(2) It is only a chance of becoming an owner; however, it is different from spes successions.
Fulfilment of condition
(3) It does not depend upon the fulfilment of any condition; it creates an immediate right, though the enjoyment may be postponed to a future date. Thus the owner's title is already perfect.
(3) It is solely dependent upon the fulfilment of the condition (after which it becomes a vested interest), so that if the condition is not fulfilled, the interest may fall through. Thus, the owner's title is as yet imperfect, but is capable of becoming perfect.
Effect of transferee's death
(4) It is not defeated by death of transferee before he obtains possession.
(4) Whether it passes on the death of the transferee or not depends on the nature of the contingency.
Whether transferable and heritable
(5) It is both transferable as well as heritable. If the transferee of a vested interest dies before actual enjoyment, it passes on to his heirs.
(5) It is transferable. Whether it is heritable or not depends upon contingency. If transferee dies before obtaining possession contingent interest fails and does not pass on to his heirs.
Present right of Enjoyment
(6) In a vested interest there is a present and immidiate right even when its enjoyment is postponed.
(6) There is no present right of enjoyment, there is mere promise for giving such right and such promise may be nullified by the failure of the condition.
Q. 15 Discuss following :-
(a) "The rule of acceleration of subsequent interest on failure of prior disposition."
(b) "A conditional limitation is a condition subsequent as regards the prior interest and condition precedent as regards the ulterior interest."
(c) "The effect of an interest created on transfer of property and dependent upon a condition on which a condition is attached :-
(i) If a condition precedent is void.
(ii) If a condition subsequent is void.
"On a transfer of property an interest therein may be created to accrue to any person with the condition superadded that in case a specified uncertain even shall happen such interest shall pass to another person or that in case a specified uncertain event shall not happen such interest shall pass to another person. In each case the dispositions are subject to the rules contained in Sections 10, 12, 21, 22, 23, 24, 25 and 27."Illustrations. - (i) A sum of money is bequeathed to A to be paid to him at the age of 18, if he shall die before he attains that age, to B. A takes a vested interest in the legacy, subject to being divested and to go to B, in case A shall die under 18. (ii) A sum of money is bequeathed to A for life, and after his death to B, but if B shall then be dead leaving a son, such son is to stand in the place of B. B takes a vested interest in legacy subject to being divested if he dies leaving a son during A's life-time. (c) (i) Effect of interest created on transfer dependent upon condition precedent. - Section 25 lays down the principle that an interest created on a transfer of property and dependent upon a condition (precedent) fails if the condition is void. It says "An interest created on a transfer of property and dependent upon a condition fails if the fulfilment of the condition is impossible, or is forbidden by law, or is of such nature that, if permitted would defeat the provisions of any law; or is fraudulent, or involves or implies injury to the person or property of another, or the court regards it as immoral or opposed to public policy." The fulfilment of a condition may become impossible either at the time interest is created or subsequently, but in either case the transfer will fail. When the fulfilment of a condition becomes impossible by act of God, the condition becomes void and the transfer fails. But if the performance of the condition becomes impossible by the fraud of a person interested in non- fulfilment of the condition, the condition shall as against him be deemed to have been fulfilled. Such conditions precedents have been declared void simply because Section 60(b) of T.P. Act does not permit any transfer to be made whose object is illegal within the meaning of Section 23 of Indian Contract Act. Thus, where a donor made a gift of his property to a man and his wife on condition that he should have physical enjoyment of the woman, it was held in Ghumna v. Ram Chandra 47 All. 619 void. Section 26 of Act says where the terms of transfer of property impose a condition to be fulfilled before a person can take an interest in property, the condition shall be deemed to have fulfilled if it has been substantially complied with. (ii) Condition Subsequent - In the case of condition subsequent, the estate will be or becomes absolute and the condition be ignored. Thus if a gift was made with a condition superadded that donee should marry a certain person on or before she attained the age of 21 years and the person named died before she attained that age it was held that fulfillment of condition subsequent, having become impossible, the estate became absolute. Section 28 of the Act says - "On a transfer of property an interest therein may be created to accrue to any person with the condition superadded that in case a specified uncertain event shall happen such interest shall pass to another person or that in case a specified uncertain event shall not happen such interest shall pass to another person. In each case the dispositions are subject to the rules contained in Sections 10, 12, 21, 22, 23, 24, 25 and 27".
"Election when necessary. - Where a person professes to transfer property which he has no right to transfer, and as part of the same transaction confers any benefit on the owner of the property, such owner must elect either to confirm such transfer or to dissent from it; and in the latter case he shall relinquish the benefit so conferred, and the benefit so relinquished shall revert to the transferor or his representative as if it had not been disposed of,
where the transfer is gratuitous, and the transferor has, before the election, died or otherwise become incapable of making a fresh transfer,
and in all cases where the transfer is for consideration,to the charge of making good to the disappointed transferee the amount or value of the property attempted to be transferred to him. The farm of Sultanpur is the property of C and worth Rs. 800. A by an instrument of gift professes to transfer it to B, giving by the same instrument Rs. 1,000 to C.C. elects to retain the farm. He forfeits the gift of Rs. 1,000. In the same case, A dies before the election. His represntative must out of the Rs. 1,000 pay Rs. 800 to B. The rule in the first paragraph of this section applies whether the transferor does or does not believe that which he professes to transfer to be his own. A person taking no benefit directly under a transaction, but deriving a benefit under it indirectly, need not elect. A person who in his one capacity takes a benefit under the transaction may in anoother dissent therefrom. Exception to the last preceding four rules. - Where a particular benefit is expressed to be conferred on the owner of the property which the transferor professes to transfer, and such benefit is expressed to be in lieu of that property, if such owner claims the property, he must relinquish the particular benefit, but he is not bound to relinquish any other benefit conferred upon him by the same transaction. Acceptance of the benefit by the person on whom it is conferred constitutes an election by him to confirm the transfer, if he is aware of his duty to elect and of those circumstances which would influence the judgment of reasonable man in making an election, or if he waives enquiry into the circumstances. Such knowledge or waiver shall, in the absence of evidence to the contrary, be presumed, if the person on whom the benefits has been conferred has enjoyed it for two years without doing any act to express dissent. Such knowledge or waiver may be inferred from any act of his which renders it impossible to place the persons interested in the property professed to be transferred in the same condition as if such act had not been done. A transfers to B an estate to which C is entitled, and as part of the same transaction gives C a coal-mine. C takes possession of the mine and exhausts. He has thereby confirmed the transfer of the estate to B. If he does not within one year after the date of the transfer signify to the transferor or his representatives his intention to confirm or to dissent from the transfer, the transferor or his representatives may, upon the expiration of that period, require him to make his election; and, if he does not comply with such requisition within a reasonable time after he has received it, he shall be deemed to have elected to confirm the transfer. In case of disability, the election shall be postponed until the disability ceases, or until the election is made by some competent authority. So doctrine of election is that where a deed or a will professes to make a general disposition of property for the benefit of person named in it, such person cannot accept the benefit under the instrument without, at the same time, conforming to all its provisions and renouncing every right inconsistent with them. The principle of election enables the court to secure a just distribution of property in substantial accordance with the terms of instrument. The doctrine of election proceeds from the principle of equity. In C. Beepathuma and others v. Velasari Shankaranarayan Kadambolithanya and others, AIR 1965 SC 241 it was observed that "The doctrine of election may be stated thus : he who accepts, a benefit under a deed or will or other instrument must adopt the whole contents of that instrument, must conform to all its provisions and renounce all rights that are inconsistent with it. This principle is often put in another form that a person cannot approbate and reprobate the same transaction. In Valliammai v. Nagappa, AIR 1967 SC 1153 it was observed that a case of election arises only when the transferee takes a benefit under a transaction. When the transferred derives any benefit indirectly, no question of election arises as he, in that case can not be said to `take' under the deed. Section 35 sets forth the conditions whereby a person is put to election or act of choosing between two alternatives or inconsistent rights. The conditions are -
(1) The transfer must profess to transfer a property which he has no right to transfer, it is immaterial whether in doing so he knows or does not know it to be not his property.
(2) He must confer a benefit on the owner of the property transferred.
(3) The transfer and the conferring of the benefit must form parts of the same transaction.
(4) The benefit must be directly conferred on him.
(5) The benefit must be conferred on him in the same capacity in which he is the owner of property.Where the owner dissents from the transfer :
(1) He must relinquish the benefit conferred upon him.
(2) The benefit intended for him would then revert to the transferor.Illustration :- The farm of Sultanpur is the property of `C' and worth Rs. 800. `A' by an instrument of gift professes to transfer it to `B', giving by the same instrument Rs. 1,000/- to `C'. `C' elects to retain the farm. He forfeits the gift of Rs. 1,000/-. Similarly Section 127 of T.P. Act lays down that where a gift is in form of a single transfer to the same person of several things of which one is, and others are not, burdened by an obligation the donee can take nothing by the gift unless he accepts it fully.' In other words the donee must take all or none. This is based on equitable doctrine of election namely that a person `who accepts a benefit under an instrument must adopt the whole of it, conforming to all its provisions, and relinquishing every right inconsistent with it.'
(1) The transfer is for consideration.
(2) The transferor is authorised to transfer under certain circumstances.
(3) The transferee has used reasonable care to ascertain the existence of such circumstances.
(4) Transferee has acted in good faith.Distinction between Sections 38 and 41. - Section 38 comes into operation where the transforor has a power to transfer in movable property, under the particular circumstances and a transfer under the circumstances would be binding on all persons interested in the property. Section 41 applies to cases where the transferor has no power to transfer the property, but the transfer is nevertheless binding on the real owner on the principle of estoppel. This section is not applicable to transfer by ostensible owner (under Section 41 of this Act) and transfers made by trustees (under Section 64 of the Trust Act) whose own authority of transfer is also limited. (B) Transfer where third person is entitled to maintenance In a case of transfer where third person has a right to receive maintenance section 39 of the T.P. Act provides as follows :
"Where third person has a right to receive maintenance, or a provision for advancement of marriage, from the profits of immovable property, and such property is transferred, the right may be enforced against the transferee, if he has notice thereof or if the transfer is gratuitous : but not against a transferee for consideration and without notice of the right against such property in his hands."This section is intended to protect persons who are entitled to receive maintenance or for whom provision is made for advancement or marriage from the profits of any immovable property. Prior to the amendment in 1929 the secton provided that such a right could be enforced against a transferee of the property if the transfer has been made with the intention of defeating the right and transferee had the notice of the intention. The Court, therefore, always required proof of the intention. In actual practice it was almost impossible to adduce proof of mere intention. In order to enable such proof to be adduced, a transferor must have announced his fraudulent intention of defeating the rights of persons entitled to maintenance and the transferee must have heard him doing so. To remove this difficulty and particularly to protect persons entitled to maintenance, it was considered necessary that the reference to the transferor's intention should be omitted from the section. With this object in view the section was amended accordingly. Thus a person having a right to receive maintenance out of the profits of immovable property can enforce his right against the transferee of the said immovable property under the following circumstances :-
(i) When the transfer is for valuable consideration but the transferee has notice of such right; or
(ii) When the transfer is gratuitous.It is not necessary to prove in either case that the transfer was made with the intention of defeating such right. But the right cannot be enforced against transferee for consideration and without notice of such right.
Q. 19 (A) A, a Hindu widow whose husband has left collateral heirs alleging that the property held by her as such is insufficient for her maintenance, agrees for purposes neither religious nor charitable, to sell a field of such property to B. B satisfies himself by reasonable enquiry that the income of the property is insufficient for A's maintenance and that the sale of the field is necessary and acting in good faith buys the field from A. `C' a collateral heir, files a suit to set aside the sale alleging that there was no necessity for the sale. Decide. (B) A transaction of sale of immoveable property has entered into by the husband after coming to know that the wife was going to present a suit for maintenance. Decide if it was a bona fide transfer and whether the property could be charged for ensuring payment of maintenance.
(1) for consideration,
(2) alleging of existence of circumstances authorizing the tranfer,
(3) the transferee has taken reasonable care to ascertain whether the circumstances exist, and
(4) he has acted in good faith, then those circumstances would, as between the transferor and any person affected by the transfer, be deemed to have been present.According to this section, therefore, when a transferee takes a transfer from a person whose power of transfer is limited and qualified, it is duty of the transferee to ascertain whether the circumstances justifying the transfer exist. If he makes reasonable enquiries and acts honestly, he is protected. In the above case, B satisfied himself by reasonable enquiry that the income of the property was insufficient and that the sale of the field was necessary. In these circumstances B is protected and C cannot challenge the validity of the sale. (B) Section 39 of the Transfer of Property Act provides that a person having a right to receive maintenance out of the profits of immovable property can enforce his right against the transferee of the said immovable property under the following circumstances :
(i) when the transfer is for valuable consideration but the transferee has notice of such right; or
(ii) when the transfer is gratuitous.In the given problem the transaction of sale of immovable property was entered into by the husband after coming to know that the wife was going to present a suit for maintenance, hence the same could not be said to be a bonafide transfer without notice and therefore the property could be charged for ensuring payment of maintenance without voiding the sale deed.
(1) A, the owner of a vacant plot of land, sold the plot to B by sale- deed which contained a covenant that B, and his heirs would keep the plot `uncovered with buildings' that is, he would not build. This is a restrictive or negative covenant.
(2) A sold his land to B. The sale-deed contained a covenant that B would lay out money in building or repairing. This is an affirmative covenant (i.e., an obligation to do something).Under the second paragraph of section 11 the transferor may impose conditions restraining the enjoyment of land if such restrictions are for the benefit of his adjoining land. Suppose A the occupying owner of plot X sells Northern half of the land to B absolutely but takes a covenant from B that no shops shall be erected on the purchased part, or supporse that A, the owner of plot X, sells the northern half of the plot X absolutely but takes a covenant from B that B shall carry on annual repairs to a drain passing through the purchased part. The former covenant is known as affirmative and the latter negative. Both affirmative and negative covenants continue to bind A and B personally but the problem that requires consideration is whether the covenants bind persons who subsequently acquire B's land and further whether the covenants anre enforceable by persons who latter acquire the southern part of plot X originally retained by A. If the restriction imposoed by the covenant constitutes an easement then it binds the servient heritage permanently. In case it is not an easement then this section applies. Under this section A or his assignee can enforce a negative covenant against the assignee of the transferee provided :
(i) the restriction is one the burden of which runs with the land, and
(ii) the assignee has notice of the restriction or paid no consideration.A owns two properties X and Y and sells X to B. B covenants that he shall keep open a portion of X adjoining Y and not build upon it. If B sells X to D and D has notice of the covenant B can refrain D from building in case he attempts to do so. Similarly if A has sold Y to C after the sale to B, C has a similar right to enforce the covenant against D. Covenants Annexed With Land A covenant is said to be annexed with the land when it binds the land in its inception or affects the nature, quality or the value of land. The benefit of such a covenant runs with the land for the benefit of which it is expressed to be made. When a covenant was imposed by vendor as owner of other land of which the land sold formed a part for the benefit of the unsold land, it is annexed to the unsold land so as to run with it or in other words its benefit runs with the whole of the land for the benefit of which it was expressed to be made and not only the original convenantee but his transferee or successor in interest of entire land can enforce the covenant. A covenant can be said to "touch and concern" the land when it is one which affects the nature or value of the land or benefits the land. What is essential for the effective annexation of a covenant to a land is the intention of original parties to the convenant, for discovering which court has to look to the wordings of covenant and the surrounding circumstances. If they show either that the covenant binds the land in its inception or if affects the nature, quality or value of the land, it will go with the land to the transferee as being annexed to it. The expression "Covenant runs with the land" is the exception to the general rule that all covenants are personal. See AIR 1970 SC 1872 (1875).
"Where, with the consent, express or implied, of the persons interested in immoveable property, a person is the ostensible owner of such property and transfers the same for consideration, the transfer shall not be voidable on the ground that the transferor was not authorised to make it: provided that the transferee, after taking reasonable care to ascertain that the transferor had power to make the transfer, has acted in good faith."The principle embodied in Section 41 is an exception to the general rule that a person can not pass a better title in the property than he himself has and the result could be avoided only under the equitable principle of estoppel laid down in Section 41. So general principle of law of transfer of property that no man can transfer to another a right or title greater than what he himself possesses and section 41 contains exception to this general rule that if the true owner permits another to hold himself out the real owner as by entrusting him with the documents of title or in some other way a third person who bonafide deals with that, other may acquire a good title to property as against the true owner. For section 41 to be invocked four conditions have to be satisfied, which are :-
(1) The transferor is the ostensible owner
(2) He sold the property by consent (Expressed or implied) of real owner.
(3) Transfer is for consideration
(4) Transferee had acted in good faith taking all reasonable care to ascertain that the transferor had power to transfer.For the applicability of this section it is necessary that the transferor is an ostensible owner with express or implied consent of the real owner. Where the real owner is incapable of giving consent e.g. minor or insane, and the transfer is made by an ostensible owner, this section is not appalicable. [Gurucharan Singh v. Punjab Electricity Board, Patiala, AIR 1989 P&H 127]. It is also necessary that the purchaser has exercised reasonable care and has purchased the property in good faith. Good faith means bona fide intention of the purchaser. If the purchaser has knowledge that transferor is an ostensible owner and has no authority, he cannot be said to have good faith. Where the transer is collusive and false there is no good faith and Section 41 does not apply. [Rai Sunil Kumar v. Thakur Singh, AIR (1984) Pat 80]. Ram Coommar v. Mcqueen. - In Ram Coommar v. Mcqueen (18 W.R. 166), the plaintiff brought the suit for recovery of the suit property which he claimed under the will of one Macdonald. The defendant's father had purchased the property from Bunnoo Bibi in whose name the property stood in the public Register having been purchased in her name from the original owner of the property. The plaintif contended that Bunnoo Bibi was only a benamidar for Macdonald who had purchased the property in her name and that she was not the real owner of the property. The defendant's father however, had neither notice of the benami title nor were there are specific circumstances to leave the purchaser to institute an inquiry into the title. On these facts the Privy Council held that the plaintiff was not entitled to recover upon his secret title. The Judicial Committee observed :
"It is a principle of natural equity, which must be universally applicable, that where one man allows another to hold himself out as the owner of an estate, and the third person purchases it for value from the apprent owner in the belief that he is the real owner, the man who so allows the other to hold himself out shall not be permitted to recover upon his secret title, unless he cannot overthrow that of the purchaser by showing either that he had direct notice, or something which amounts to constructive notice, of the real title, or that there existed circumstances which ought to have put him upon an inquiry that if prosecuted, would have led to a discovery of it."
Note : By virtue of the Benami Transaction Act, 1988, the law relating to transfer by an ostensible owner has now been changed in India. With certain exceptions, ostensible owners are now made real owners.
(1) The transferor should have made a fraudulent or erroneous representation that he had authority to transfer the property while actually he did not.
(2) The transferee should have acted on the representation and he should not have knowledge of the fact that the transferor had no authority.
(3) The transfer is for consideration.
(4) The transfer should not have been one forbidden by law.
(5) The transfror subsequently acquires an interest in the property.
(6) The contract is subsisting and has not been cancelled.
(7) The transferee exercises his option and asks the transferor to make good and transfer the property contracted to be transferred.
(8) The property should not have been purchased by other person for value without notice of prior transfer.In Banwari Lal v. Sukhdarshan Dayal, AIR 1973 SC 814, it has been held by Supreme Court that estoppel is a rule of evidence and except in cases like those under section 43 T.P. Act, when a grant is led by estoppel the rule does not operate to create interest in property regarding which the representation is made. The doctrine is applicable only to the transfers of properties for value; it is not applicable where the transfer is gratuitous i.e. withoout consideration. Thus where the property has been transferred by way of gift, the provisions of section 43 are not applicable because a gift of a property in which the donoor has no present fixed right at the date of the transfer, is void, as per section 124 T.P. Act.
(i) not having a title, or
(ii) having only a defective title.In which cases the subsequent acquisition of a good title enable the transfree to claim the benefit to that good title but it can have no application where to the knowledge of the transferee the transfer is forbidden. It is to be noted that the doctrine of estoppel is not fully recognised in Section 43 of the Act. Estoppel has been adopted by this section only to the extent that the subsequent estate passes to the transferee without any further act on the part of the transferor.
(A) Vendor should be in possession either actual or constructive of any portion of joint holding.
(B) That the land sold should not exceed the share held by co- sharer.Joint Transfer For Consideration - So far as joint transfer for consideration Section 45 of the Act says - "Where immovable property is transferred for consideration to two or more persons and such consideration is paid out of a fund belonging to them in common, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property identical, as nearly as may be the interests to which they were respectively entitled in the fund; and, where such consideration is paid out of separate funds belonging to them respectively, they are, in the absence of a contract to the contract respectively entitled to interests in such property in proportion to the shares of the consideration which they respectively advanced, In the absence of evidence as to interests in the fund to which they were respectively entitled, or as to the shares which they respectively advanced, such person shall be presumed to be equally interested in the property." Section 45 of the Act refers to the cases in which property is transferred to two or more persons for consideration and there is no contract providing for the quantum of interest which each is to take. In the case where money is paid out of a fund belonging to the purchasers in common, the rule is that their interests in the property transferred shall be identical with their interests in the fund. But where the money is contributed by the transferees out of their separate funds the section provides that they shall be respectively entitled in the property proportionate to their respective shares in the amount contributed. The proviso to the section lays down that if no evidence is led to show the respective interests of the transferees in the fund, or the shares which they respectively advanced, such person shall be deemed to be equally interested in the property. Joint Tenancy and Tenancy-in-Common - Distinction Section 45 of Transfer of Property Act deals with the question whether the transferees take as joint tenants or tenants-in-common. The rule of English law is to presume that a transfer to a plurality of persons creates a joint tenancy with rights of survivorship, unless there are words of severance. A joint tenancy has been recognized in a gift by will of a Native Christian, and the Parsee and also a Muslim. The Hindu rule is exactly opposite. In Jogeshwar Narain v. Ram Chand Dutt, the Privy Council said : "The principle of joint tenancy appears to be unknown to Hindu Law, except in case of coparcenary between members of an undivided family". Even if the grantees are members of a coparcenary they will take as tenancy-in-common, unless a contrary intention appears from the grant. It has been held that in India the Court must always lean against holding any particular bequest or grant as a joint bequest or joint grant. The presumption must always be in favour of a tenancy-in-common rather than joint tenancy. A joint tenancy may be severed and converted into tenancy-in-common by one of the joint tenants disposing of or contracting to sell his interest, or by mutual agreement or by a course of dealing by all the joint tenants sufficient to indicate a severance. A tenant-in-common is entitled to joint possession, and if excluded from such possession may sue for a declaration of his right. But if there is no exclusion or denial of his right a tenant-in-common who gives up joint possession has no right to sue for a share of his joint profits. Entry by one co-tenants in the absence of clear proof to the contrary, ensures for the benefit of all. If A and B are co-tenants of property of which A is in actual possession, and B sells his share to C, the possession of A is the possession of C. [See Bishwanath v. Rabija Khatun, (1933) 60 Cal. 616]. But in a case where A and B were tenants-in-common, each in possession of a moiety and A took possession of B's share on B's death by right of inheritance, his possession was adverse to a purchaser from B. [See Krishna Chandra Das v. Pooran Chandra Das, (1935) 62 Cal. 305]. Presumption of Equality. - In the absence of evidence showing in what share the consideration was paid, there is a presumption that the co-owner's interests are equal. In a case where A and B jointly purchased a property from C, `A' paid the whole consideration to C but debited in his account books half the amount against `B'. `B' did not pay this amount to A but claimed half the property. It was held that `B' was entitled to half the property but that court should pass a decree therefor only on condition of `B's paying up the amount (1912) 15 Ind.Cases 173 (173) (All.).
(1) Section 50 of the Registration Act gives a subsequent registered deed priority over a prior unregistered deed of which registration is optional. But as optional registration has been abolished by this Act as regards sale deed by Section 54, and mortgage deed by Section 59, the scope of this exception is limited and is applicable only to those territories to which the Act does not extend.
(2) When an instrument is executed by fraud, gross-negligence or misrepresentation, the transferee cannot claim priority.Forfeiture of priority. - Priority may be forfeited by fraud, misrepresentation or gross neglect on the part of the prior transferee.
(i) the person claiming relief under this section is a transferee of immoveable property
(ii) he has made improvements believing in good faith that he was absolutely entitled to the property and
(ii) He is evicted therefrom by person with better title.In------------------------------, AIR 1956 SC 727 it was observed that Section 51 merely lays down an equitable principle and enables a court to determine the equities between the parties. Benefit of Section is open only to bona fide occupants in their own right and not to squatters and trespassers. Even a lessee cannot claim compensation for improvements made by him U/s 51 of Act, his rights are controlled by Section 108 of Act.
(i) There must be pendency of a suit or proceeding.
(ii) The suit or proceeding must be pending in a competent court.
(iii) The suit or proceeding must not be collusive.
(iv) A right to immovable property must be directly and specifically in question in that suit or proceedings.
(v) The property in dispute must be transferred or otherwise dealt with by any party to the litigation.
(vi) The alienation must effect the rights of the other party.Effects of the Doctrine : When a property is transferred pending the suit is not `Ipso Facto' void, but it is only voidable at the option of the party. It means the party can transfer the property pending the suit, but the transfer will not affect the rights of any party thereto under any decree. Exceptions :
(1) Permission of the Court :- If a transfer is made with the permission of the court, then this doctrine cannot be attracted.
(2) Law of insolvency :- No transfer can be rendered as one fraudulent, if the same is affected under the law of insolvency for the time being in force.
(3) Effects of fraud :- (a) Whether the fraud is inchoate, that means, a transfer which is made under a sham sale deed, but no property is actually conveyed to the transferee.
(b) When the fraud is accomplished or perfected.
(1) There must be a transfer of immovable property.
(2) The transfer must be made with intent to defeat or delay the creditors.If three above two conditions are fulfilled, the transfer is voidable at the option of the creditors. Exception. - A transferee on good faith and for consideration is protected, that is the creditors cannot set aside a transfer made to a person who has acted honestly and has paid consideration. Fraudulent Transfers. - This section is of two parts. The first part lays down that 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. To take one illustration, A who is heavily indebted, and against whom suits for the recovery of debts are going to be filed, sells his house to B to save it from being attached and sold in payment of the debt. If B knows of A's fraudulent intention, the sale to B is liable to be set aside at the option of the creditors. It will be seen that the rights of a transferee in good faith and for consideration are not affected even though the transfer is made with intent to defeat the creditor. The second part of the section lays down that every transfer of immovable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee but no presumption to defraud shall necessarily arise by reason only that a subsequent transfer for consideration was made. It may be noted that Section 53 is applicable only where there is a fraudulent `transfer of property'. If the transaction is not a `transfer' within the meaning of Section 5 of the this Act, Section 53 cannot be made applicable. This section is not applicable where a deed of dissolution of partnership had the effect of defeating the interest of the creditors. [See : Ishwar Dass Hem Raj v. Radha Mal Arjan Dass, AIR (1960) Punj. 417].
Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof".The doctrine of part performance as provided in Section 53-A form part of substantive law. After the introduction of Section 53-A by Amending Act of 1929 in India the right to retain possession on the ground of part performance does not depend on equity but rests on the express provisions of the Section itself. Section 53-A was inserted principally for the protection of ignorant transferees who take possession or spend money in improvements relying on documents which are ineffective as transfers or on contracts which cannot be proved for want of registration. The effect of Section 53-A is to relax the strict provisions of this Act and the Registration Act, in favour of transferees in order to allow the defence of part performance to be established. In Nathu Lal v. Phool Chand, AIR 1969 SC 546 Supreme Court observed that following conditions are to be fulfilled for making out the defence of part- performance :-
(A) that the transferor has contracted to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty.
(B) that the transferee has, in part performance of the contract, taken possession of property or any part thereof or the transferee, being already in possession continues in possession in part performance of the contract.
(C) that the transferee has done some act in furtherance of the contract; and
(D) that the transferee has performed or is willing to perform his part of the contract.It was then held : "If these conditions are fulfilled then notwithstanding that the contract, though required to be registered has not been registered or where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, transferor or any person claiming under him is debarred from enforcing against the transferee any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract. In Sardar Govind Ro Mahadik v. Devi Sahai, AIR 1982 SC 989 it was reiterated by Supreme Court that to qualify for protection on the doctrine of part- performance it must be shown that there is an agreement to transfer of immoveable property for consideration and the contract is evidenced by a writing signed by the person sought to be bound by it and from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty. Similarly recently Supreme Court in Mool Chand Bhakru v. Rohan and Others, AIR 2002 SC 812 has observed that A person (claiming to be proposed vendee) cannot protect his possession of immoveable property on the plea of part performance u/s 53-A, on the basis of an oral agreement the terms of which have not been reduced in writing.
(a) to disclose to the buyer any material defect in the property or in the seller's title thereto of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover;
(b) to produce to the buyer on his request for examination all documents of title relating to the property which are in the seller's possession or power;
(c) to answer to the best of his information all relevant questions put to him by the buyer in respect to the property or the title thereto;
(d) on payment or tender of the amount due in respect of the price, to execute a proper conveyance of the property when the buyer tenders it to him for execution at a proper time and place;
(e) between the date of the contract of sale and the delivery of the property, to take as much care of the property and all documents of title relating thereto which are in his possession as an owner of ordinary prudence would take of such property and documents;
(f) to give, on being so required, the buyer, or such person as he directs, such possession of the property as its nature admits;
(g) to pay all public charges and rent accrued due in respect of the property up to the date of the sale, the interest on all encumbrances on such property due on such date, and except where the property is sold subject to encumbrances to discharge all encumbrances on the property then existing.(2) The seller shall be deemed to contract with the buyer that the interest which the seller professes to transfer to the buyer subsists, and that he has power to transfer the same :
Provided that where the sale is made by a person in a fiduciary character, he shall be deemed to contract with the buyer that the seller has done no act whereby the property is encumbered or whereby he is hindered from transferring it.The benefit of the contract, mentioned in this rule shall be annexed to and shall go with the interest of the transferee as such, and may be enforced by every person in whom that interest is for the whole or any part thereof from time to time vested. (3) Where the whole of the purchase-money has been paid to the seller, he is also bound to deliver to the buyer all documents of title relating to the property which are in the seller's possession or power :
Provided that, (a) where the seller retains any part of the property comprised in such documents, he is entitled to retain them all, and, (b) where the whole of such property is sold to different buyers, the buyer of the lot of greatest value is entitled to such documents. But in case (a) the seller, and in case (b) the buyer of the lot of the greatest value, is bound upon every reasonable request by the buyer or by any of the other buyers, as the case may be, and at the cost of the person making the request to produce the said documents and furnish such true copies thereof or extracts therefrom as he may require; and in the meantime, the seller, or the buyer of the lot of greatest value as the case may be, shall keep the said documents safe, uncancelled and underfaced, unless prevented from so doing by fire or other inevitable accident.(4) The seller is entitled -
(a) to the rents and profits of the property till the ownership thereof passes to the buyer;
(b) where the ownership of the property has passed to the buyer before payment of the whole of the purchase-money, to a charge, upon the property in the hands of buyer and transferee without, consideration or any transferee with notice of the non-payment, for the amount of purchase-money or any part thereof remaining unpaid and for interest of such amount or part from the date on which possession has been delivered.(5) The buyer is bound -
(a) to disclose to the seller any fact as to the nature or extent of the seller's interest in the property of which the buyer is aware, but of which he has reason to believe that the seller is not aware, and which, materially increases the value of such interest;
(b) to pay or tender, at the time and place of completing sale, the purchase money to the seller of such person as he directs: provided that, where the property is sold free from encumbrances, the buyer may retain out of the purchase-money, the amount of any encumbrances on the property existing at the date of the sale, and shall pay the amount so retained to the persons entitled thereto;
(c) where the ownership of the property has passed to the buyer, to bear any loss arising from the destruction, injury or decrease in value of the property not caused by the seller.
(d) where the ownership of the property has passed to the buyer, as between himself and the seller, to pay all public charges and rent which may become payable in respect of the property, the principal moneys due on any encumbrances subject to which the property is sold, and the interest thereon afterwards accruing due.(6) The buyer is entitled -
(a) where the ownership of the property has passed to him, to the benefit of any improvement, or increase in value of the property and to the rents and profits thereof;
(b) unless he has improperly declined to accept delivery of the property, to a charge on the property as against the seller and all persons claiming under him, to the extent of the seller's interest in the property, for the amount of any purchase-money properly paid by the buyer in anticipation of the delivery and for interest on such amount and, when he properly declines to accept the delivery also for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel specific performance of the contract or to obtain a decree for its rescission.An omission to make such disclosures as are mentioned in this section, paragraph (1) clause (a), and paragraph (5) clause (a), is fraudulent. In the absence of a Contract to contrary, the section sets for the rights and liabilities of the buyer and the seller. There is a clear distinction between the rights and liabilities before the completion of sale and rights and liabilities after the sale. The former are contractual; the latter are regulated by the rule that property having been passed to the buyer the transaction cannot be avoided. They are as follows : Liabilities of the seller before completion of the sale. - The duties of the seller before completion of the sale are :
(a) to disclose material defects in the property or in the seller's title thereto [Section 55(1)(a)];
(b) to produce title deeds [Section 55(1)(b)];
(c) to answer questions as to title [Section 55(1)(c)];
(d) to execute conveyance [Section 55(1)(d)];
(e) to take care of the property [Section 55(1)(3)]; and
(f) to pay outgoings [Section 55(1)(g)];Liabilities of Seller After Completion :- Liabilities of seller after completion of sale are :-
(a) to hand over the possession [Section 55(1)(f)]
(b) to covenant to title impliedly [Section 55(2)]
(c) to deliver title deeds on receipt of price [Section 55(3)]Buyer's Liabilities before Completion - Buyer has following liabilities before completion of sale :-
(i) To disclose facts materially increasing the value of property [Section 55(a)]
(iii) To pay price for the property.Buyer has following liabilities after sale :-
(a) To bear loss to property
(b) To pay outgoings.
(i) Mortgage is a transfer of an interest in immovable property.
To constitute a mortgage the transaction should involve the transfer of an interest in immovable property. Unless some interest in property is transferred there can be no mortgage. Mortgage creates a right in rem.
(ii) The interest transferred should be an interest in specific immovable property.
A mortgage is valid only when the subject-matter of the mortgage is specified with distinctness, otherwise it would be void for vagueness. The description is sufficiently specific if it renders the property identifiable or capable of being ascertained.
(iii) The transfer should be by way of security for an existing or future debt or monetary liability.Where a transfer of an immovable property involves these three elements, the transaction amounts to a mortgage. It is to be made clear that any oral mortgage regarding the immovable property is void. Difference between sale and mortgage - Sale is transfer of ownership. In sale there is an absolute transfer of all rights in the property sold. But in a mortgage there is transfer of an interest - there is a partial transfer. Where a joint family property is subject to mortgage, there is no transfer of ownership and the coparceners being its lawful owners are competent to allot the mortgaged property in oral partition to any of the coparceners. The coparcener to whom the mortgaged property is allotted becomes its absolute owner and is entitled to redeem the mortgage. Consequently, where the right to redeem is transferred by the coparcener, the transferee is also entitled to redeem the mortgage. (B) Distinction Between `Mortgage' and `Charge' - Charge has been defined in Section 100, T.P. Act as follows : "Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage the latter person is said to have a charge on the property." Two kinds of charges. - There are two kinds of charges. viz.-
(i) Arising by operation of law.
(ii) Created by the act of parties.A charge resembles a mortgage. It is also a form of security for the payment of money. However, there are following points of difference between a mortgage and a charge -- 1. A mortgage is a security for the payment of a debt while a charge is a security for the payment of the money (such money may or may not be a debt). There may be a covenant to pay in a mortgage but not so in a charge. 2. A mortgage may be a security for the performance of an engagement that may give rise to a pecuniary liability but that is not the case with a charge. 3. A charge does not operate to transfer to the charge holder any interest in specific immovable property as a mortgage does. It merely gives the charge holder the right to have a claim satisfied out of a particular property without transferring the property to him. It is only a decree for sale that in interest in the property is transferred in the case of a charge. 4. A charge does not involve a transfer of an interest in specific immovable property; whereas a mortgage does. 5. A mortgage must be executed in respect of a specified property but a charge may be created upon the wealth or property of a person which is not specified. 6. A mortgage can only be made by act of parties; whereas a charge may arise either by act of parties or by operation of law. 7. A mortgage gives rise to a right in rem but a charge does not create any such right. The charge is available only against a particular set of persons i.e. the persons who are affected with notice of the charge. 8. In a charge there lies no personal liability. This is the principal test that distinguishes a charge from a simple mortgage. A mortgagee can follow his security in who-so-ever hands it goes whereas a charge holder cannot do so. 9. Defence of purchase for value without notice is not available against a mortgage whereas it is good defence against a charge.
(1) Simple Mortgage :- Section 58(b) of T.P. Act says "Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay mortgage-money, and agrees, expressly or impliedly, that, in the event of his failing to pay according to his contract, the mortgagee shall have 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."So as per Section 58(b) following are main elements of Simple Mortgage :-
(a) Personal undertaking by Mortgagor.
(b) Right to have the mortgaged property sold to Mortgagee.
(c) No delivery of possession.(2) Mortgage by Conditional Sale:- Section 58(c) of T.P. Act defines `Mortgage by conditional sale' as : 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 effects or purports to effect the sale.In Tamboli Ramanlal Motilal v. Gharchi Chiman Lal Keshavlal, AIR 1992 SC 1236, it was observed that if there is no relation of debtor and creditor the question of it being mortgage by conditional sale does not arise. Essentials of a mortgage by conditional sale -- Following are the essentials of a mortgage by conditional sale: 1. The mortgagor must ostensibly sell the immovable property. 2. There must be a condition that either,
(a) on the repayment of the money due under the mortgage on a certain date, the sale shall become void or the buyer shall retransfer the property to the seller, or
(b) in default of payment on that date the sale shall become absolute.3. The condition must be embodied in the document which effects or purports to effect the sale. The word "ostensible" means that it has an appearance of sale but is really not a sale. It need not be accompanied with possession. It is to be noted that the sale does not become absolute in default of payment on the due date by itself. There must be a decree of foreclosure absolutely depriving the right of redemption of the mortgagor. Deed making reference to loan received in cash and providing that on payment back of loaned amount by executant on or before the due date the creditor would reconvey property to the executant. Held that the document was mortgage by conditional sale. [Smt. Janki and Oth. v. Ganesh, AIR 1984 All. 219]. (3) Usufructuary Mortgage :- Section 58(d) of T.P. Act defines `Usufructuary Mortgage' as follows:-
"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 in payment of the mortgage-money, or partly in lieu of interest or partly in payment of the mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee an unusfructuary mortgagee."A usufructuary mortgage is one in which (i) delivery of possession, or an express or implied undertaking on the part of the mortgagor to deliver it, and (ii) the enjoyment of the usufruct by the mortgagee until all his dues under the mortgage are paid off. It follows, therefore, that the mortgagee has neither the personal covenant of the mortgage to pay the mortgage money nor a right of sale nor a right to foreclose the mortgage. His only remedy is to pay himself out of the rents and profits of the mortgaged property. In this form of mortgage the property is given as a security to the mortgagee who is let into possession or is promised to be let into possession of the property and is permitted to repay himself out of the rents and profits of such property or out of a portion thereof. One great disadvantage of this form of mortgage is that the mortgagee is under an obligation to exercise great care and caution in the management of the property and he is to account for his receipts of the usufruct of the property. Another disadvantage is that it involves the locking up of one's money, because the usufruct of the property may not be sufficient to repay any part of the principal after payment of interest. Possession :- Essence of `Usufructuary Mortgage' is that Mortgagor either expressly or by necessary implication put the mortgagee in possession of property of Mortgagor. In Hathika v. Puthiya Purayil Padmanathan, AIR 1994 Ker. 141, the mortgagor had borrowed Rs. 1000/- from mortgagee and the possession of building remained with mortgagor. Mortgaged money was to be repaid within a period of six months and in case of default the mortgagee had the right to bring the property to sale and realise the amount. The document, which was described as "usufructuary mortgage" was held to be anomalous mortgage and not usufructuary mortgage as it had character of a simple mortgage too as mortgage was given right to sell the property to realise the mortgaged amount. So in Usufructuary Mortgage, Mortgagor is bound to put the mortgagee in possession of property and if the possession is not delivered, the mortgagee may sue for possession or for recovery of mortgaged money u/s 68(d) of T.P. Act. Rents and Profits. - The method by which the rents and profits are to be appropriated depends upon the terms of the mortgage-deed. The 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 when he pays the principal. In the second case, the mortgagor continues to pay interest and is entitled to recover possession when the rents and profits received by the mortgagee equal the amount of the principal. In the last case the mortgagor is not to recover possession until the principal and interest are paid out of the rents and profits. No personal liability. - The mortgagor cannot be sued personally for the debt. The mortgagee is only entitled to remain in possession of the mortgaged property till the principal and interest are defrayed according to the terms of the agreement. (Atmaram v. Suryan, 1928 Lah. 355). Since a usufructuary mortgagee is entitled to remain in possession until the debt is paid off, no time limit can be fixed expressly during which the mortgage is to subsist. (Ramnarayan Singh v. Adhindra Nath, 44 I.A. 87). Zuripeshgi Leases. - Zuripeshgi leases bear a close resemblance to usufructuary mortgages. A zuripeshgi lease means a lease for a lump sum paid in advance. The differences between a zuripeshgi lease and usufructuary mortgage are -
(1) Under a usufructuary mortgage, the mortgagee is authorized to retain possession until the mortgage money is satisfied, while in a zuripeshgi lease, the lessee is entitled to remain in possession for a definite period of time.
(2) In a zuripeshgi lease the relationship of debtor and creditor does not subsist.
(3) Sometimes, there are usufructuary mortgages in which there is no change of possession, the mortgagee executing a lease in favour of the mortgagor who retains possession and agrees to pay rent which is generally equivalent to the interest of the amount lent or due, whereas in case of a zuripeshgi lease, the lessee takes physical possession of the property leased.Kanam-kuzhikanam and usufructuary mortgage. - A kanam-kuzhikanam and a usufructuary mortgage have many common features. Both the transactions involve or may involve transfer of possession on payment of money by the transferee, set-off of profits against interest and retention of possession until repayment of the money. In spite of their close resemblance, the essential distinction between the two types of transactions must not be overlooked. A kanam-kuzhikanam is a lease and, therefore, a transfer of a right to enjoy the property. A mortgage is a transfer of an interest in the property for securing the repayment of a debt. The purpose of one is to enable enjoyment of the property by the transferee while that of the other is to secure the debt. Where a mortgage is created by a land owner, he transfers an interest in the land concerned. In case the mortgage is with possession, then the land- owner not only transfers an interest in the immovable property, but also transfers possession thereof. Obviously when this mortgage is redeemed, the mortgagor must necessarily take back the interest which he had earlier transferred and this would amount to retransfer to him, so that acquisition by him would be a transfer to him. (Labh Singh v. Punjab State (1971) 73 P.L.R. 765). (4) English Mortgage. - Where the mortgagor binds himself to re-pay the mortgage money on a certain date, and transfers the mortgaged property absolutely to the mortgagee but subject to the 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. This form of mortgage is said to be mostly confined to Presidency towns of Calcutta, Bombay and Madras. In this form possession is given to the mortgagee. In the case of Kartic Chandra Mullick v. Parshottam Das Goel, AIR 1988 Cal. 247, it was held that if there is an absolute transfer of undivided shares in suit property by mortgagor to mortgagee subject to provision for transfer and right of mortgagee to redeem mortgage the transaction is an English mortgage. In this form of mortgage the mortgagee has right to apply for passing decree for sale of the mortgage property. [Kartick Chandra Mullick v. Parshottam Das Goel, A.I.R. 1988 Cal. 247.] (5) Mortgage by Deposit of Title Deeds :- Mortgage by deposit of title deeds has been defined in Section 58(f) of T.P. Act as :
"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.""Mortgage by deposit of title deed" is also known as equitable mortgage. The two ingredients of an equitable mortgage are (i) delivery of the title- deeds of the creditor or his agent; (ii) an intention to create a security on them. "Delivery" means delivery of actual possession as a result of the agreement. Deposit of registration copy of gift-deed showing title of mortgagor was sufficient to create a valid equitable mortgage. Similarly where the original title-deed is lost, a certified copy of the document may be deposited provided the original deed is proved to be actually lost. [Ishwar Das v. Dhanang Singh, A.I.R. 1985 Del. 83]. The object of the legislature in providing for this kind of mortgage is to give facility to the mercantile community in cases where it may be necessary to raise money forthwith before an opportunity can be afforded of preparing the mortgage deed. The essential requisites of such a mortgage may be described as under:
1. There must be a debt.
2. Deposit of Title deeds; and
3. An intention that the deeds shall be security for the debt.The first thing required is a debt. It may be an existing or a future debt. The title deeds may be deposited also to cover a general balance that may be found on a running account. The second element is that the debtor should deliver the documents of title to immovable property on which the security is intended to be created to the creditor or his agent. It is however not necessary that the property to which the documents relate should situate within one of the towns mentioned in the clause. It is enough if the titled deeds of the property situating at any place are handed over to the creditor in town specified in the Act. The property may situate outside the town mentioned in the clause. Physical delivery of documents by the debtor to the creditor is not the only mode of deposit. There may be a constructive deposit. If the creditor is already in possession of the documents of the property of the debtor then only thing to be seen is whether the parties agreed to treat the documents in the possession of the creditor as delivery of the deed to him for the purpose of the transaction. The third element is that the deposit of the title deeds must be made with a distinct intention of the creating a security for the debt. The mere fact that the title deeds have been deposited is not sufficient unless there is an agreement that the deeds should stand as security. There is no presumption of law that the mere deposit of title deeds constitute a mortgage. No such presumption has been laid down either in the Evidence Act or in the Transfer of Property Act. It may be noted that though a mortgage by deposit of title deeds can be created by mere deposit of title deeds without any written contract between the parties, on the contract or the bargain between the parties is reduced to writing, it can not become effective unless the writing, is registered. But Registration is not necessary if the mortgage is complete without writing and the writing is merely a statement that the mortgage has been effected. Section 96 of the Transfer of Property Act places mortgages by deposit of title deeds on the same footing as simple mortgages. In Bank of Rajasthan Ltd. v. Pala Ram Gupta, AIR 2001 Del. 58 it was observed that when defendant seeking loan for construction of building from Plaintiff Bank and Defendant depositing original title deed for said purpose with plaintiff bank it amounts to creation of equitable mortgage. 6. Anomalous mortgage - Section 58(g) T.P. Act lays down that --
"A mortgage which is not a simple mortgage, a mortgage by conditional sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title deeds within the meaning of this section is called an anomalous mortgage."Out of 6 classes of mortgages as described in clauses (b) to (g) of section 58, T.P. Act first five are specific classes of mortgages and 6th one i.e. Anomalous Mortgage is a residuary clause of mortgage which simply means that if there is a mortgage of any type other than those specified in clauses (b) to (f) of section 58 T.P. Act than that falls under residuary clause i.e. section 58(g) and is known as Anomalous Mortgage. If a mortgage is neither purely simple nor usufructuary exclusively but mixture of two--such mortgage is anomalous mortgage. The classification of mortgages given in section 58 T.P. Act is not exhaustive. It only describes certain forms of mortgages which are in common use in India. Several other kinds of mortgages are also in use in various parts of India which have been given the name of anomalous mortgage. It has been defined in the Act as a mortgage which does not fall under any of the five specific clauses. An anomalous mortgage includes (1) a simple mortgage usufructuary and (2) a mortgage usufructuary by conditional sale. Modes of Transfer in Mortgage. - Section 59 T.P. Act provides that --
"Where the principal money secured is one hundred rupees or upwards, a mortgage, other than a mortgage by deposit of title deeds, can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses.
Where the principal money secured is less than one hundred rupees, a mortgage may be effected either by a registered instrument signed and attested as aforesaid or (except in the case of a simple mortgage) by delivery of the property."Thus as per section 59 there are three ways in which property may be transferred by way of mortgage :
(1) By Registered Instrument -- When mortgage is for Rs. 100/- or more and it is not by deposit of title deeds.
(2) Delivery of possession -- When amount is less than Rs. 100/- and it is not a simple mortgage.
(3) Deposit of Title deeds -- In this case registration is not required.
Provided that the right conferred by this section has not been extinguished by act of the parties or by decree of a court.The right conferred by this section is called a right to redeem and a suit to enforce it is called a suit for redemption. Nothing in this section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed, the mortgagee shall be entitled to reasonable notice before payment or tender of such money. Redemption of portion of mortgaged property. - Nothing in this section shall entitle a person interested in a share only of the mortgaged property to redeem his own share only, on payment of a proportionate part of the amount remaining due on the mortgage, except only where a mortgagee, or, if there are more mortgagees than one, all such mortgagees, has or have acquired, in whole or in part, the share of a mortgagor." So Section 60 of the Act lays down the rights of mortgagor to redeem the mortgaged property. It provides that at any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage money, to require the mortgagee - (a) to deliver to the mortgagor the mortgage deed and all documents relating to the mortgaged property which are in possession or power of the mortgagees; (b) where the mortgagee is in possession of the mortgaged property to deliver possession thereof to the mortgagor; and (c) at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgment in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished. The most important right possessed by the mortgagor is the right to redeem the mortgage. Under this section, at any time after the principal money has become due the mortgagor has a right on payment or tender of the mortgage- money to require the mortgagee to reconvey the mortgage property to him. The right conferred by this section has been called the right to redeem and a suit to enforce this right has been called suit for redemption. In English law the mortgagor's right of redemption is called the Equity of redemption. Redemption involves two things : (a) retransfer of the interest which had been originally transferred to the mortgagee, and (b) delivery of the possession. Both these things are done by virtue of the terms of the mortgage, and in pursuance of an agreement between the parties. Thus the re- transfer of the interest is also by virtue of an agreement and redelivery of the possession is also in pursuance of such an agreement. It is, therefore, futile to say that when a mortgagor redeems the land mortgaged by him with possession and acquires back the interest as well as the possession which he had earlier transferred to the mortgagee, he does not acquire back interest or the possession by `transfer' or by `agreement' (Labh Singh v. Punjab State (1971) R.L.R. 445 : 73 P.L.R. 765). Under the Indian law the right of redemption is a statutory right which cannot be fettered by any condition which impedes or prevents redemption. Any such condition is void as a clog on redemption. The Legislature has quite advisedly not used any such words as "in the absence of a contract to the contrary" in Section 60 with a view to prevent the mortgagor from contracting himself out of his right of redemption at the time of the mortgage. It is, therefore, manifest that the right cannot be clogged. The mortgagor's right of redemption is exercised :
(i) By paying or tendering mortgage-money to the mortgagee outside the court, i.e. privately :
(ii) By depositing the amount in the court, and
(iii) By a suit for redemption.
"A mortgagor who has executed two or more mortgages in favour of same mortgagee shall, in the absence of a contract to the contrary, when the principal money of any two or more of the mortgage has become due, be entitled to redeem any one such mortgage separately or any two or more of such mortgages together."(iii) Right of Usufructuary Mortgagor to recover possession:- Section 62 lays down that in the case of an usufructuary mortgage, the mortgagor has a right to recover possession of the property together with the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee,
(a) when the mortgagee is authorised to pay himself the mortgage money from the rents and profits of the property, when such money is paid.
(b) when the mortgagee is authorised to pay himself from such rents and profits or any part thereof - a part only of the mortgage money - when the term (if any) presented for the payment of the mortgage money has expired and the mortgagor pays or tenders to the mortgagee the mortgage money or the balance thereof or deposits it in courts as here-in-after provided.The provisions of section 62 are to be read with section 60 T.P. Act which lays down that a mortgagor who wants to redeem must pay the mortgage money. In case of a usufructuary mortgage special provision is made in section 62 T.P. Act as to when the mortgagor can recover possession of the mortgaged property. Other Rights of Mortgagor Accession to Mortgaged Property - The term accession denotes physical accretions or additions whether brought about by natural or artificial means. Section 63 lays down that where mortgaged property in possession of the mortgagee has received any accession, the mortgagor upon redemption is entitled to such accession. As regards natural accessions the rule is that they belong to the mortgagor is not bound to take separable accretions but if he desire to do so and to pay the cost, the mortgagee is bound to surrender it with the mortgaged property. When accession is inseparable, it is to be delivered to the mortgagor and the mortgagor is liable to pay cost if acquisition was necessary to preserve the property from the consent of the mortgagor, the mortgagor is liable to pay the cost of such structures. Improvements to Mortgaged Property - Section 63-A provides about improvements to mortgaged property. Ordinarily a mortgagee is not at liberty to make improvements and where mortgaged property is improved the mortgagor upon redemption is entitled to the improvements. However the mortgagor shall be liable to pay the cost of improvements in the following cases :
(i) if improvement was necessary to preserve the property from destruction or deterioration; or
(ii) was necessary to prevent the security from becoming insufficient; or
(iii) was made in compliance with the lawful order or public authority.Right of Mortgagor to Renewed Lease - Section 65 provides certain covenants which mortgagor is presumed to have made with the mortgagee in the absence of a contract to the contrary. These covenants are similar to the covenants of the seller laid down in Section 55(2) T.P. Act. These covenants, as detailed below, will be deemed to have been made into a mortgage contract where there is no contract to the contrary --
(i) Covenant for title
(ii) Covenant to defend the title
(iii) Liability to pay public charges
(iv) Performance of conditions of the lease where the mortgaged property is a lease.
(v) Liability to discharge prior mortgages.Mortgagor's Power to Lease out Mortgaged Property - The provisions have been made in section 65-A regarding the power of the mortgagee to lease the mortgaged property, if he is in possession of the same. It provides as follows :
1. Subject to the provisions of sub-section (2), a mortgagor while lawfully in possession of the mortgaged property, shall have power to make leases thereof which shall be binding on the mortgagee.
2. (a) Every such lease shall be such as would made in the ordinary course of management of the property concerned and in accordance with any local law custom or usage.
(b) Every such lease shall reserve the best rent that can reasonably be obtained, and no premium shall be paid or promised and no rent shall be payable in advance.
(c) No such lease shall contain a covenant for renewal.
(d) Every such lease shall take effect from a date not later than six months from the date on which it is made.
(e) In the case of a lease of buildings whether based with or without the land on which they stand, the duration of the lease, shall, exceed three years and the lease shall contain a covenant for payment of the rent and a condition of re-entry on the rent not being paid within a time therein specified.
3. The provision of sub-section (1) apply if and as far as a contrary intention is not expressed in the mortgage deed and provisions of sub-section (2) may be varied or extended by the mortgage deed and as so varied and extended, shall as far as may be, operate in like manner and with all like incidents, effects and consequences, as if such variations or extensions were contained in that sub-section.Right of Mortgagee Rights of mortgagee are :-
(1) Right of foreclosure or sale (Section 67)
(2) Right to sue for Mortgage money (Section 68)
(3) Right to exercise power of sale (Section 69)
(4) Right to get appointed a Receiver (Section 69-A)
(5) Right to accession to Mortgage property (Section 70)
(6) Right to the benefit of Renewed lease (Section 71)
(7) Right to spend money incertain cases (Section 72)
(8) Right to proceeds of revenue sale or compensation on acquisition of mortgaged property (Section 73)(1) Right to Foreclosure or Sale :- Section 67 of T.P. Act provides :- "In the absence of a contract to contrary, the mortgagee has, at any time after the mortgage money has become due to him and before a decree has been made for the redemption of the mortgaged property or the mortgaged-money has been paid or deposited as hereinafter provided, a right to obtain from the court a decree that the mortgagor shall be absolutely debarred on his right to redeem the property of a decree that the property be sold. A suit to obtain a decree that mortgagor shall be absolutely debarred of his right to redeem the mortgaged property is called a suit for foreclosure. Nothing in this section shall be deemed -
(a) to authorize any mortgagee other than a mortgagee by conditional sale or a mortgagee under an anomalous mortgage by the terms of which he is entitled to foreclose, to institute a suit for foreclosure, or an usufructuary mortgagee as such or a mortgagee by conditional sale as such to institute a suit for sale; or
(b) to authorise a mortgagor who holds the mortgagee's rights as his trustee or legal representative, and who may sue for a sale of the property, to institute a suit for foreclosure; or
(c) to authorise the mortgagee of a railway, canal, or other work in the maintenance of which the public are interested, to institute a suit for foreclosure or sale; or
(d) to authorise a person interested in part only of the mortgage- money to institute a suit relating only to a corresponding part of the mortgaged property, unless the mortgagees have, with the consent of the mortgagor, severed their interests under the mortgage.Foreclosure. - Foreclosure is a legal term which implies that the relief given by the equity against the forfeiture of the security is withdrawn. Foreclosure is the method by which the mortgagee acquires the property free from the mortgagor's right to redeem the property as inviolable, and notwithstanding that the contractual right to redeem may have been lost, it forbids the mortgagee to appropriate the absolute ownership without making an application to the Court. Until the time fixed in the deed for repayment has arrived, no question of foreclosure can arise, but as soon as that date has passed and the contractual right to redeem has been converted into the equitable right, the mortgagee can bring an action in the court praying that the mortgagor shall either pay what is due or be foreclosed, that is, deprived altogether of his right to redeem. (2) Suit for sale. - In case of simple mortgages, English mortgage and mortgage by deposit of title deeds the mortgagee, in the absence of a contract to the contrary has at any time after the mortgage money has become due to him, and before a decree has been made for the redemption of the mortgaged property, or the mortgage money has been paid or deposited, a right to obtain a decree from the court that the property be sold. Distinction between a suit for sale and a suit for foreclosure- (1) In a suit for sale the court gives the defendant 6 months' time to pay up and if the mortgage money is not paid within the said period the mortgagee becomes entitled to a final decree, for sale and then to bring the property to sale in execution of the said decree. After the mortgaged property is sold the proceeds of sale are applied in payment of the mortgage money. (2) In a suit for foreclosure the mortgagee prays to the Court that the mortgagor be absolutely debarred of his right to redeem. The effect of a decree in a foreclosure suit is that the ownership of the property passes from the mortgagor to the mortgagee. (3) A suit for sale may be brought in respect of (1) simple mortgage, (2) English mortgage and (3) mortgage by deposit of title deeds. A suit for foreclosure may be brought in respect of a mortgage by conditional sale or anomalous mortgage. (2) Suit for Mortgage Money: - Beside the remedy of foreclosure or sale, which is remedy against the mortgaged property, the mortgagee, has, under section 68 an alternate remedy, namely to sue for the mortgage money in certain cases and thus obtain a simple money decree. This section lays down that the mortgagee has a right to sue for the mortgage money in the following cases :
(a) Where the mortgagor binds himself to repay the same;
(b) Where, without any fault of either party, the mortgaged property is wholly or partially destroyed;
(c) Where the mortgagee is deprived of the whole or part of his security by reason of the wrongful act or default of the mortgagor, and;
(d) Where the mortgagee being entitled to possession, the mortgagor fails to deliver the same.(3) Right to Exercise Power of Sale :- Section 69 deals with the power of the mortgagee to sell mortgaged property without the intervention of the court. The ordinary rule is that mortgagee must sue for foreclosure or sale through court under section 67 or he can sue for mortgaged money under section 68. But section 69 gives power to the mortgagee to sell without recourse to courts under following cases :
(i) Where mortgage is an English Mortgage and neither of the parties is Hindu, Mohammedan or Buddhist or a member of any other race, sect, tribe or class from time to time specified by the State Government in the official Gazette.
(ii) Where mortgagee is the Government and the deed confers an express power of sale.
(iii) Where the mortgaged property or any part thereof was on the date of the execution of the mortgage, situate within the town of Calcutta, Madras, Bombay or in any other town which the State Government may specify in this behalf and the deed contained an express power of sale.The power of sale arises when default is made in payment of the mortgage money on the due date. (4) Right to Get Appointed a Reveiber:- Section 69-A of T.P. Act provides that Mortgagee having the right of sale u/s 69 of the Act is entitled to appoint receiver of the income of the mortgaged property or its part, however a receiver may be appointed in three ways -
(i) He may be nominated in the Mortgage deed.
(ii) He may be appointed by Mortgagee with Consent of Mortgagor.
(iii) Where parties do not agree; mortgagee may apply to the Court for appointment of receiver and person appointed by court shall be deemed to have been duly appointed by the mortgagee.(5) Right to Accession to Mortgaged Property - Section 70 of T.P. Act says -
"If, after the date of a mortgage, any accession is made to the mortgaged property, the mortgagee, in the absence of a contract to the contrary, shall, for the purposes of the security, be entitled to such accession."(a) A mortgages to B a certain field bordering on a river. The field is increased by allusion. For the purposes of his security, B is entitled to the increase. (b) A mortgages a certain plot of building land to B and afterwards erects a house on the plot. For the purposes of his security, B is entitled to the house as well as the plot. So the mortgagee has right to any accession that may be made to the mortgaged property after the date of mortgage. This Section is not limited to physical or natural accretions but also embraces an increase or enlargement of interest, the principle is that the additions to mortgaged property ensure for the benefit of the mortgagee increasing thereby the value of security. (6) Right to the benefit of the Renewed Lease :- Section 71 provides that when the mortgaged property is a lease and the mortgagor sletains a renewal of the mortgagee in the absence of a contract to the contrary, shall, for the purposes of the security, be entitled to the new lease. (7) Right to spend Money :- Under section 72 a mortgagee has a right to spend money for following purposes to preserve property from restriction or depreciation and he is entitled to be re-imbursed :
(a) for the preservation of the mortgaged property from destruction for future or sale
(b) for the supporting of the mortgagor's title to the property.
(c) the defence of his own title as against the mortgagor.
(d) the renewal of the lease where the mortgaged property is a renewable lease; and
(e) the insuring of the property which is by its nature insurable against loss or damage by fire.(8) Right to proceeds of Revenue Sale or compensation on Acquisition :- Section 73 provides that where mortgaged property is sold owning to failure to pay arrears of revenue or other charges of a public nature or rent due in respect of such property and such failure did not arise from any default on the part of the mortgagee, the mortgagee is entitled to claim payment of the mortgage money in whole or in part out of any surplus of the sale proceeds remaining after payment of the said charges etc. The mortgagee with possession is entitled to seek recovery of possession of leased premises from tenant who was included by him, for own his bonafide requirement of use. He is a landlord. Similarly where the mortgaged property is compulsorily acquired under the Land Acquisition Act or any other similar Act, the mortgagee is entitled to claim payment of the mortgage money in whole or in part out of the amount due to the mortgagor as compensation. This section embodies the doctrine of substituted security whereby the mortgagee is entitled not only to the mortgaged property but also to anything that is substituted for it.
"If a creditor has two funds, the interest of the debtor shall not be regarded, but the creditor having two funds shall take to that which paying him leaves another fund for another creditor." The underlying principle is that it shall not depend upon will of one creditor to disappoint another."In case of Devatha Pullaya v. Jaldu Manikyala Rao, A.I.R. 1962 Andh. P. 425, the Court observed that as a rule, the right of Marshalling cannot be exercised against the prior mortgagee where there is any doubt as to sufficiency of the mortgage-debt upon which the subsequent mortgagee has no claim. However, where a puisne mortgagee has taken the mortgage expressly on condition of discharging certain amount due on the prior mortgagee but falls to fulfill that term, he cannot exercise the right of marshalling. The right of Marshalling continues so long as the properties mortgaged to the second mortgagee are available to be sold in execution of prior mortgage. An attaching creditor can not claim any right of marshalling. (B) Contribution :- The right to compel contribution rests upon the principle that a fund which is equally liable with another to pay a debt shall not escape because the creditor has been paid out of that other fund alone; and on the other hand, that a creditor who has the means of satisfying his debts out of several funds shall so exercise his right as not to take from another or claimant the fund which forms his only security, section 82 provides -
"Where property subject to a mortgage belongs to two or more persons having distinct and separate rights of ownership therein, the different shares in or part of such property owned by such persons are, in the absence of the contract to the contrary, liable to contribute........."
"Where, of two properties belonging to the same owner, one is mortgaged to secure one debt and then both are mortgaged to secure another debt, and the former debt is paid out of the former property, each property is, in the absence of the contract to the contrary, liable to contribute -"The right to compel contribution may arise when the several properties belong to several owners. When the mortgaged property belongs to two or more persons. - Two or more persons must have distinct and separate rights of ownership and they are liable to contribute rateably to the debts secured by the mortgage. For instance, A, B and C effect a partition of the property in their equal shares. D recovers the debt of Rs. 9,000 from C. The shares of A and B will be each liable to pay Rs. 3,000 to C. The contribution should be rateable and no alternative method should be adopted. [Indian Overseas Bank Ltd. v. R.E.M. Ibrahim and Others, A.I.R. (1975) Mad. 92].
(a) any person (other than the mortgagee of the interest sought to redeemed) who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same;
(b) any surety for the payment of the mortgage-debt or any part thereof; or
(c) any creditor of the mortgagor who has in a suit for the administration of his estate obtained a decree for sale of the mortgaged property."So primarily Mortgagor has right to institute suit for redemption of mortgaged property but apart from him, as Section 91 says three type of persons as stated above have also right to institute the suit for the redemption. Section 91 makes it clear that different persons may be interested or may have claim over mortgaged property.
(i) legal, and
(ii) conventional.Legal subrogation takes place by operation of law when a mortgage debt is paid off by some person who has interest to protect. Conventional subrogation takes place when the person who pays off the debt has no interest to protect but advances the money under agreement that he will be subrogated to the rights of the creditor so paid. The law relating to legal subrogation is detailed in first para and the law relating to conventional subrogation is detailed in third para of section 92 of the Act. Persons entitled to be subrogated :- Section 92 read with section 91 of the Transfer of Property Act entitle the following persons to be subrogated --
(1) Any person having an interest in or charge upon the mortgaged property or upon the right to redeem.
(2) Any surety for the payment of the mortgage money
(3) A co-mortgagor
(4) Any other person who advances money with which the mortgage debt has been paid off.
(5) Any creditor of the mortgagor who has in a suit for the administration of his estate obtained a decree for the sale of the mortgaged property.Distinction between Legal and Conventional Subrogation:- In both kinds of subrogation the person who redeemed the mortgage or with whose money the mortgage is redeemed will be subrogated i.e. he will become entitled to same rights as regards redemption, foreclosure or sale of the mortgaged property as the mortgagee or any other mortgagee. But in the former case subrogation takes place by the very fact of redemption while in the latter subrogation will take place only if the mortgagor has agreed by a registered instrument that the person making the advance should be subrogated. The foundation of the right of subrogation is the well known equitable principle of reimbursement embodied in section 69 Indian Contract Act, that a person who is interested in the payment of money which another is bound by law to pay and who therefore pays it is entitled to be reimbursed by the other. But the Contract Act confers a personal right only whereas a right of subrogation involves an equitable charge on the property.
(B) Immovable property
(C) Partial Transfer
(E) Consideration.(A) Parties :- For the creation of lease i.e. relationship of landlord and tenant, it is necessary that there should be a contract between parties regarding transfer of a right to enjoy the property in consideration of either premium or rent or both. This contract may be expressed or implied. (B) Subject Matter - The subject matter of lease must be immoveable property which includes intangible immoveable property as well as benefit to arise out of land. (C) Partial transfer. - It is a transfer of a right of enjoyment, that is, right of possession and use of the property. It is not absolute transfer of all rights. Some rights remain with the lessor. The lessor retains an interest which is called a `reversion'. The rights and interest transferred is called `lease-hold'. A lessee gets an interest in the property which remains with him according to the terms of the lease and which is not defeated by any subsequent sale or transfer by the lessor. The word `demise' is also used to denote transfer by a lease. (D) Term. - The period for which the lease is to enure must be definite - it must have a certain beginning and certain end. If an interest is granted which, though of indefinite duration at first, is capable of being rendered definite by the happening of some event or by act of parties, it is a valid lease, for example, a lease for the duration of the war or a tenancy from year to year. Where according to the terms of the lease deed the lessor had a right to enter into possession of the leasehold if the rent was not paid by the lessee for three consecutive months and the lessor had not paid the rent for about six years before filing of the suit and thus the lease stood terminated, the full rights in the lease-hold property including the right to possession would be reverted to the lessor. The lessor having enforced his right of forfeiture has every right to take possession of the disputed premises and his possession could not be termed either illegal or unlawful and the defaulting lessee whose lease already stood terminated on breach of express covenants of the lease deed could not claim restoration of possession for the unexpired lease period. (Saraswati Gir v. Dhanpal Singh, AIR 1992 Punjab and Haryana 13). (E) Consideration. - The consideration is either premium or rent or premium plus rent. Premium is the sum paid or promised to be paid in lump sum. Money, a share of crops, service or anything of value to be given or rendered periodically is rent. Distinction Between `Lease' and `Licence' : As stated above Section 105 of T.P. Act provides `Lease' is a transfer of right to enjoy immoveable property made for certain term or duration in consideration of rent. Lease and Licence are different. Term `Licence' as defined u/s 52 of Indian Easement Act is a right to do or continue to do in or upon the immoveable property of grantor, something which in the absence of such right, be unlawful and such right would not amount to an easement or interest in property. In Ajab Singh v. Shital Puri, AIR 1993 All. 138, it was observed that A lease of a property has a right to possession and enjoyment of the devise to the exclusion of the lessor whereas a licencee does not have such a right. Since appellant in instant case had the right to exclusive possession and enjoyment of disputed property, he was a lessee and not the licencee. In Associated Hotel of India v. R.N. Kapoor, AIR 1956 SC 1262 had laid down following proposition in this regard :-
(1) To ascertain whether a document creates a licence or a lease, the substance of the document must be preferred to the form.
(2) The real test is the intention of parties whether they intended to create a licence or lease.
(3) If the document creates an interest in the property it is a lease but if it only permits other party to use the property of which legal possession continues with the owner it is a licence.
(4) In under a document a party gets exclusive possession of property, prima facie he is considered to be tenant but circumstances may establish otherwise, negativing the intention to create it.In the case of B.M. Lall v. Dunlop Rubber Co. Ltd., AIR 1961 S.C. 175, the Supreme Court held that the transaction is a lease if it grants an interest in the land and it is a licence if it gives a personal privilege with no interest in the land. The question is not of words but of substance and the label which parties choose to put upon the transaction, though relevant, is not decisive. The test of exclusive possession is not conclusive, though it is a very important indication in favour of the tenancy. Persons merely in permissive possession of licensee whose licence had been terminated would be equally bound by a decree for possession obtained by licensor against licensee. It was observed by the Supreme Court in M.N. Clubwala v. Fida Hussain Saheb, AIR 1965 S.C. 610, that --
(a) Whether an agreement creates between the parties the relationship of landlord and tenant or merely that of licensor and licensee, the decisive consideration is the intention of the parties.
This intention has to be ascertained of a consideration, of all the relevant provisions in the agreement.
(b) Exclusive possession is not conclusive evidence of a lease. If, however exclusive possession to which a person is entitled under an agreement with a landlord is coupled with an interest in the property the agreement would be construed not a mere licence but as a lease.So following are the points of distinction between two -
(1) A lease creates an interest in the property while a licence passes no interest in the property and merely makes an action lawful which without it would have been unlawful. The real test is `intention' of the parties.
(2) A lease gives the tenant a right to exclusive possession while a licence confers no such right on the licensee.
(3) A lease is assignable, but a licence is generally non- transferable.
(4) A lease unlike a licence is not revocable.
(5) A lease is not determined by the grantor making an assignment of its subject-matter, but a licence is determined in such a case. In the case of Shafiquddin v. Pyarelal, A.I.R. 1978 S.C. 298, the Supreme Court observed that effect of the resolution and its acceptance by A and B was not to create any lease but the transaction was licence.
(6) A lessee can bring an action for trespass, but a licensee cannot sue in his own name.
(7) A lease in some cases requires registration but a licence does not.
(8) A lease-holder creates a heritable interest but a licence does not survive to the heirs and representatives of the licensee.
(9) A licence is determined by the death of the grantor while a lease is not.
"(a) The lessor is bound to disclose to the lessee any material defect in the property, with reference to its intended use, of which the former is and the latter is not aware, and which the latter could not with ordinary care discover;
(b) the lessor is bound on the lessee's request to put him in possession of the property;
(c) the lessor be deemed to contract with the lessee that, if the latter pays the rent reserved by the lease and performs the contract binding on the lessee, he may hold the property during the time limited by the lease without interruption.The benefit of such contract shall be annexed to and go with the lessee's interest as such, and may be enforced by every person in whom that interest is for the whole or any part thereof from time to time vested." (B) Rights and Liabilities of the Lessee
(d) If during the continuance of the lease any accession is made to the property, such accession (subject to the law relating to alluvion for the time being in force) shall be deemed to be comprised in the lease :
(e) if by fire, tempest or flood, or violence of an army or of a mob, or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void :
Provided that, if the inquiry be occasioned by the wrongful act or default of the lessee, he shall be entitled to avail himself of the benefit of this provision:
(f) if the lessor neglects to make, within a reasonable time after notice, any repairs which he is bound to make to the property, the lessee may make the same himself, and deduct the expense of such repairs with interest from the rent, or otherwise recover it from the lessor :
(g) if the lessor neglects to make any payment which he is bound to make, and which, if not made by him, is recoverable from the lessee or against the property, the lessee may make such payment himself, and deduct it with interest from the rent, or otherwise recover it from the lessor:
(h) the lessee may even after the determination of the lease remove, at any time whilst he is in possession of the property leased but not afterwards all things which he has attached to the earth; provided he leaves the property in the state in which he received it :
(i) when a lease of uncertain duration determines by any means except the fault of the lessee, he or his legal representative is entitled to all the crops planted or sown by the lessee and growing upon the property when the lease determines, and to free ingress and egress to gather and carry them :
(j) the lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease :
Nothing in this clause shall be deemed to authorise a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee:
(k) the lessee is bound to disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take of which the lessee is, and the lessor is not, aware, and which materially increases the value of such interest :
(l) the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf :
(m) the lessee is bound to keep, and on the termination of lease to restore the property in as good condition as it was in, at the time when he was put in possession subject only to the changes caused by reasonable wear and tear or irresistible force and to allow the lessor and his agents at all reasonable times during the term, to enter upon the property and inspect the condition thereof and give or leave notice of any defect in such condition and when such defect has been caused by any act or default on the part of lessee, his servants or agents he is bound to make it good within three months after such notice has been given or left :
(n) if the lessee becomes aware of any proceeding to recover the property or any part thereof, or of any encroachment made upon or any interference with, the lessor's rights concerning such property, he is bound to give with reasonable diligence, notice thereof to lessor:
(o) the lessee may use the property and its products (if any) as a person of ordinary prudence would use them if they were his own, but must not use or permit another to use the property for purpose other than that for which it was leased or fell or sell timber, pull down or damage buildings belonging to the lessor or work mines or quarries not open when the lease was granted or commit any other act which is destructive or permanently injurious thereto :
(p) he must not without the lessor's consent, erect on the property any permanent structure, except for agricultural purpose.
(q) On the determination of the lease, lessee is bound to put lessor into possession of the property".
1. Waiver of forfeiture Section 112.
2. Waiver of Notice to quit Section 113.Waiver of forfeiture :- Section 112 T.P. Act provides for waiver of forfeiture. Provisions of Section 111(g) have made it clear that if there is a breach of condition of lease by the lessee, the lease is not determined ip- so-facto but it gives an option to the lessor to elect whether he would determine the tenancy or not. It has always been the policy of the courts to lean against forfeiture and therefore if the lessor with full knowledge that forfeiture has incurred, acknowledges the continuance of the tenancy, he will be deemed to have waived the forfeiture. So, if there has been a breach of express condition the lessor may waive or condone the breach of condition. It may be indicated by accepting the rent which becomes payable after forfeiture or by claiming rent or by enforcing a claim for rent due. Waiver of Notice to quit :- Section 113 provides that a notice given under Section 111(h) is waived with the express or implied consent of the person to whom, it is given, by any act on the part of the person giving it showing an intention to treat the lease as subsisting. (a) A, the lessor, gives B, the lessee, notice to quit the property leased. The notice expires. B tenders and A accepts rents, which has become due in respect of the property since the expiration of the notice. The notice is waived. (b) A, the lessor, gives B, the lessee, notice to quit the property leased. The notice expires and B remains in possession. A gives to B, as lessee, a second notice to quit. The first notice is waived. Section 113 deals with the waiver of notice to quit just as section 112 deals with the waiver of forfeiture. The distinction between the two lies in the fact that the forfeiture can be waived without the consent of the lessee whereas in waiver of notice to quit the consent of the lessee is necessary as is evidenced from two illustrations above. In waiver of notice to quit the tenant has to prove that the landlord, by accepting the rent for the period subsequent to the termination of tenancy, had an intention to treat the lease as subsisting. In the absence of any such intention being proved, mere acceptance of rent during the pendency of the ejectment suit cannot amount to waiver. Relief against forfeiture :- On the basis of equity principle in England, section 114 T.P. Act provides that if lease is determined by forfeiture for non-payment of rent and the lessor sues to eject lessee and at the time of hearing the lessee pays or tenders to the lessor the rent in arrears together with interest and cost or gives security, the court in lieu of making a decree for ejectment, pass an order to relieving the lessee against the forfeiture and thereupon the lessee shall hold the property as if the forfeiture had not occurred. Section 114-A provides that if lease has been determined by forfeiture for breach of an express condition which provides that on breach thereof the lessor may re-enter, no suit for ejectment shall lie unless and until the lessor has served on the lessee a notice in writing --
(a) Specifying the particular breach complained of, and
(b) If the breach is capable of remedy, requiring the lessee to remedy the breach;and the lessee fails, within a reasonable time from the date of the service of the notice, to remedy the breach if it is capable of remedy. Accepting of rent under protest does not amount to waiver. Effect of Surrender on under-lease :- Section 115 of T.P. Act provides :- "The surrender, express or implied, of a lease of immoveable property does not prejudice an underlease of the property or any part thereof previously granted by the lessee, on terms and conditions substantially the same (except as regards the amount of rent) as those of the original lease; but, unless the surrender is made for the purpose of obtaining a new lease, the rent payable by, and the contracts binding on, the under-lessee shall be respectively payable to and enforceable by the lessor. The forfeiture of such a lease annuls all such under-leases, except where such forfeiture has been procured by the lessor in fraud of the under-lesses, or relief against the forfeiture is granted under section 114."
1. There must be mutual transfer of ownership of two things.
2. In exchange no price is paid.
3. An exchange of immovable property of Rs. 100 or upwards can only be effected by a registered instrument.(b) Exception to the rule. - The exception is given in Section 119 which is due to the fact that there is no price in exchange. Where one of the parties to an exchange, loses the whole or part of the property received in exchange, he may at his option either claim that his property shall be returned to him or he may ask for compensation for the loss. Where there was defect in title of land received in exchange and a party was deprived of some land due to such defect, it was held by the Supreme Court that in such situations the opposite party is liable to return land to that extent. Jattu Ram v. Hakam Singh, A.I.R. (1994) S.C. 1653. In the case of a sale where part of the property sold is lost, the purchaser must retain the portion in which a title subsists. Rights and Liabilities of Parties to Exchange :- Section 120 provides that -- "Save as otherwise provided in this chapter, each party has the rights and is subject to the liabilities of a seller as to that which he gives and has the rights and is subject to the liabilities of a buyer as to that which he takes." This section prescribes that each party has the rights and in subject to the liabilities of a seller as to that which he gives and has the rights and is subject to the liabilities of a buyer as to that which he takes. It is because each party to an exchange has a dual capacity i.e. of seller as to which he gives and buyer as to which he takes. Accordingly, where the properties are immovable, section 55 of the Act will determine the rights and liabilities of the parties and where they are movable the provisions of the Sale of the Goods Act will apply. There cannot be a right of pre-emption in exchange. Exchange of Money :- Section 121 T.P. Act provides that -- "On an exchange of money, each party thereby warrants the genuineness of the money given by him." It means, in the case of an exchange of one form of money to another, each party is deemed to warrant the genuineness of the money given by him. For example, where A gives a currency note of Rs. 100/- to B and B gives Rs. 100/- in coins, A guarantees that the note is genuine and B guarantees that any coin is not spurious.
(1) that it must be made voluntarily, and
(2) that it should be without consideration.This is apart from the other ingredients like acceptance, etc. Essentials of gifts. - The essentials of a valid gift are as under:
(i) there must be transfer of ownership.
(ii) the ownership must relate to a property in existence,
(iii) the transfer must be without consideration,
(iv) it must have been made voluntarily,
(v) donor must be competent person,
(vi) the transferee must accept the gift.When a gift of immovable property takes effect. - Section 123 of the Transfer of Property Act provides for how a transfer of gift is effected as follows :- For the purpose of making a gift of immovable property, the transfer must be affected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses. For the purpose of making a gift of movable property, the transfer may be effected either by a registered instrument signed as aforesaid or by delivery. Such delivery may be made in the same way as goods sold may be delivered. This section lays down the modes of conveyancing in gifts. A gift of immovable property must be made through registered instrument whereas a gift of movable property may be effected also be delivery of possession. Under Section 123 of the Transfer of Property Act, a gift of an immovable property irrespective of its value, must be made through a registered deed. Thus the gifts of immovables, whether corporeal or incorporeal or valuing more than Rs. 100 or less, must be in writing, must be signed by or on behalf of the donor, attested by at least two competent witnesses and must also be registered. Even if the value of the property is very small, if it is an immovable property its gift may be effected only by a registered instrument. Section 123, therefore, excludes any other mode of a gift of immovable property if a donee has taken the possession of immovable property under an unregistered gift deed he would not be allowed to protect his possession u/s 53-A of T.P.Act. The doctrine of part performance has no application in gift.
1. Debts secured by mortgage of immovable property.
2. Damages for breach of the contract.
3. Damages in tort.
4. A claim to mesne profits.Mode of Transfer of Actionable Claims :- Section 130 of Act provides regarding mode of transfer of Actionable claims as:- "(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 authorised agent, shall be completed 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 proceeding and without making him a party thereto. Exception. - Nothing in this section applies to the transfer of a marine or fire policy of insurance or affects the provisions of section 38 of the Insurance Act, 1938 (4 of 1938)." (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 in section 31, 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 provisions of Section 132. Rights and Liabilities of Transferee of an Actionable Claims Rights. - From the date of the transfer, all the rights of the transferor in the actionable claim vest in the transferee. The transferee may sue or institute proceedings for the actionable claim in his own name without obtaining the transferor's consent to such suit or proceedings and without making him a party thereto. Liabilities. - The transferee of an actionable claim is to take it subject to all the liabilities and equities to which the transferor was subject in respect thereof at the date of the transfer. (Section 132). Illustrations. - (1) A transfers to C a debt due to him by B, A being then indebted to B. C sues B for the debt due by B to A. In such suit B is entitled to set off the debt due by A to him, although C was unaware of it at the date of the transfer. (2) A executed a bona in favour of B under circumstances entitling the former to have it delivered up and cancelled. B assigns the bond to C for value and without notice of such circumstances. C cannot enforce the bond against A. Persons disqualified to buy an actionable claim. - Section 136 enacts : `No Judge, legal practioner or officer connected with any Court of Justice shall buy or traffic in, or stipulate for, or agree to receive any share of, or interest in, any actionable claim, and no Court of Justice shall enforce, at his instance, or at the instance of any person claiming by or through him, any actionable claim, so dealt with by him as aforesaid.' The object of this prohibition is to maintain the standard of justice. "It is of great importance in all countries..........that no officer of a Court of Justice should be even exposed to the suspicion that in the discharge of his official duties his conduct may be influenced by any personal consideration."