Transfer of Property Act
Frequently Asked Questions on Transfer of Property Act
Ans. Historical Background :- Before passing of Transfer of Property Act 1882, there was no specific codified law relating immoveable properties. There was state of uncertainty in Courts in Presidency towns, as far as administration of justice on the subject. Similar was the situation in other parts of India. Courts, were deciding the matters primarily on principles of "Equity justice and good Conscience". In the absence of any legislative enactments a confusion started arising because of conflicting decisions of court on any point. Because of such Caotic situation, strong necessity of codified law on the subject was felt.
In order to remove such confusion, a Law Commission was appointed in England to prepare a substantive Law of Transfer of properties in India. The draft bill as prepared by Law Commission was widely criticized because of many diversities and anomalies. Bill was revised and re-published but again received criticism and it was pointed that Bill should be confined to its application on transfer of properties by act of parties and should not contain unnecessary matters and ultimately draft Bill was again given back to third Law Commission, consisting of Sir Charles Turner and other eminent jurists. Finally the Bill was passed on 17th February, 1882.
After passing of Transfer of Property Act 1882 situation had improved little because of conflicting opinion of different High Courts on many provisions of Act. Act was required to be amended to remove state of confusion on the subject. Since the passing of Transfer of Property Act 1882 it was amended on twelve occasions. Provisions of Act were primarily based on decisions of Chancery Courts and Courts of Common Law in England. So in order to remove draw-baks, Act was thoroughly revised and a Bill was drafted by Legislative Department of India in 1926 and in 1927 a special Committee was appointed to examine the provisions of Act for its amendment. Committee suggested various important changes in Act and ultimately Transfer of Property (Amendment) Act XX of 1929 was passed which brought following important changes -
(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."
Ans. (A) Immovable Property. - Section 3 of Transfer of Property Act defines "Immoveable Property" as-
"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 :-(a) Land
(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 includes1. 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 properties1. 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.
Ans. Attestation :- Attestation means witnessing of execution of deed such as Will, Mortgage, Gift or sale etc. In Attestation it is necessary to prove that the executant of deed signed it in presence of attesting witnesses and witnesses signed the deed in presence of the executant.
In Kumar Harish Chandera Singh Deo v. Bansidhar Mohanty and Others, AIR 1965 SC 1738, it was observed that the object of the attestation is to protect the executant from being required to execute a document by the other party there to by force, fraud or undue influence.
Similarly was held in Dhiren Bailung v. Must. Bhutuki and others, AIR 1972 Gouhati 44 it was also observed that Attestation and execution are two different acts, one following the other. The former is to ensure that executant was free agent and not under pressure nor subject to fraud when executing the document.
In order to constitute valid attestation, the essential conditions are (i) there must be two attesting witness (2) Each of them must have seen the executant sign or fix his mark to the instrument and (3) Each of the two attesting witness must have signed the instrument in the presence of the executant. In M.L. Abdul Jabbar Sahib v. H. Venkata Sastri, 1969 SC 1147 it was observed by Supreme Court that `To attest is to hear witness to a fact. For attestation it is essential that witness should have put his signature "animo attestendi" that is for the purpose of attesting that he has seen the executant sign or has received from him a personal acknowledgement of his signature. If a person puts his signature on the document for some other purpose for example to clarify that he is a scribe or identifier or a registering officer, he is not an attesting witness."
In section 3 of the T.P. Act "attested" in relation to an instrument, means and shall be deemed always to have meant attested by two or more witnesses each of whom has seen the executant sign or affix his mark to the instrument, or has seen some other person sign the instrument in the presence and by the direction on the executant, or has received from the executant a personal acknowledgement, of his signature or mark, or of the signature of such other person and each of whom has signed the instrument in the presence of the executant, but it shall not be necessary that more than one of such witnesses shall have been present at the same time, and no form of attestation shall be necessary.
Legal Effect of Attestation -- Legal effect of attestation is that the document which requires attestation is valid only when it is properly attested and valid and proper attestation is proved. However mere attestation of a document does not show that the attestator had notice of its contents. Attestation estops the person putting his witness from denying the execution. However there may be circumstances attending the attestation, such as that the contents were read over to the attestator and in that case he may be estopped from challenging the right of the transferee of denying the authority of the executant to execute the document. It becomes binding on him also.
Ans. Section 3 of Transfer of Property Act defines the term "Notice" as-
"a person is said to have notice" of a fact when he actually knows that fact, or when, but for wilful abstention from an enquiry or search which he ought to have made, or gross negligence, he would have known it.
Explanation I. - Where any transaction relating to immoveable property is required by law to be and has been effected by a registered instrument, any person acquiring such property or any part of, or share or interest in, such property shall be deemed to have notice of such instrument as from the date of registration or, where the property is not all situated in one sub-district, or where the registered instrument has been registered under sub-section (2) of section 30 of the Indian Registration Act, 1908 (16 of 1908), from the earliest date on which any memorandum of such registered instrument has been filed by any Sub-Registrar within whose sub-district any part of the property which is being acquired, or of the property wherein a share or interest is being acquired, is situated :
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.
Ans. Transfer of Property :- Section 5 of Transfer of Property Act lays down as :-
"......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.
Ans. Family Arrangement
In Kale v. Deputy Director of Consolidation, AIR 1976 SC 807 Supreme Court while explaining about "Family arrangement" has observed that ".......term family has to be understood in a wider sense so as to include within its fold not only close relations or legal heirs but even those persons who may have some sort of antecedent title, a semblance of a claim or even if they have a spes succession is so that future disputes are sealed forever and family instead of fighting claims inter-se and wasting time, money and energy on such fruitless and futile litigations is able to devote its attention to more constructive work..." Supreme Court further observed - "Even if one of the parties to settlement has no title under the arrangement the other party relinquishes all its claim or titles in favour of such person and acknowledges him to be the sole owner, then the antecedent title must be assumed and family arrangement will be upheld."
In Ram Charan Das v. Girja Nandini Devi, AIR 1966 SC 323 Supreme Court observed that "To effect family arrangement, all that is necessary is that the parties must be related to one another in some way and have a possible claim to property or a claim or even a semblance of a claim on some ground as say "affection".
Registration and Family Arrangement
In A.C. Lakshmipathy and others v. A.M. Chakarapani Reddiar, AIR 2001 Mad. 135, it was observed by Madras High Court that :
"A family arrangement can be made orally. If made orally, there being no document, no question of registration arises. If the family arrangement is reduced to writing and it purports to create, declare, assign, limit or extinguish any right, title or interest of any immoveable property, it must be properly stamped and duly registered as per the Stamp Act and Registration Act. Whether the terms have been reduced to the form of a document is a question of fact in each case to be determined upon a consideration of the nature of phraseology of the writing and the circumstances in which and the purpose with which it was written. However, a document in the nature of a Memorandum, evidencing a family arrangement already entered into and has been prepared as a record of what had been agreed upon, in order that there are no hazy notions in future, it need not be stamped or registered. Only when the parties reduce the family arrangement in writing with the purpose of using that writing as proof of what they had arranged and, where the arrangement is brought about by the document as such, that the document would require registration as it is when that it would be a document of title declaring for future what rights in what properties the parties possess. If the family arrangement is stamped but not registered, it can be looked into for collateral purposes. Whether the purpose is a collateral purpose, is a question of fact depends upon acts and circumstances of each case. A person cannot claim a right or title to a property under the said document, which is being looked into only for collateral purposes. A family arrangement which is not stamped and not registered cannot be looked into for any purpose in view of the specific bar in Section 35 of the Stamp Act."
Similarly in Kale v. Dy. Director of Consolidation (Supra) Supreme Court observed :-
"In Tek Bahadur Bhujil v. Debi Singh Bhyiyil, AIR 1966 SC 292 it was pointed out by this court that a family arrangement could be arrived at even orally and registration would be requiried only if it was reduced into writting.
It was also that a document which was no more than a memorandum of what had been agreed to, did not require registration........So it is only when the parties reduce the family arrangement in writing with the purpose of using that writing as proof of what they had arranged and where arrangement is brought about by the document as such, that the document would require registration as it is then that it would be a document of title declaring for future what rights in what properties the parties possess."
Ans. Section 7 of Transfer of Property Act says - "Every person competent to contract and entitled to transferable property or authorised to dispose of transferable property not his own, is competent to transfer such property either wholly or in part and either absolutely or conditionally, in the circumstances, to the extent and in the manner, allowed &prescribed by any laws for the time being in force.'
In Balai Chandra Mondal v. Indu Rekha Devi, AIR 1973 SC 782, it was observed that A person's conduct in collecting rents and managing an estate of the landlord does not empower him to transfer the land as the landlord's agent.
Section 7 of the Act however does not deal with the question as to who can be transferee of property. Section 6(b) provides that no transfer can be made to a person legally disqualified to be transferee. According to that provision a minor is not disqualified to be transferee although a contract with a minor is void. As it was held in a decision reported in AIR 1936 Pat. 153 that there is nothing in Section 7 to prevent a person not competent to contract from being transferee of property. So this means if a minor enter into contract through guardian or next friend he can be purchaser or mortgagee, otherwise not.
Ans. Section 8 of Transfer of property Act lays down the general rule of transfer of property. Section 8 says about operation of transfer and lays down :
"Unless a different intention is expressed or necessarily implied, a transfer of property passes forthwith to the transferee all the interest which the transferor is then capable of passing in the property and in the legal incidents thereof.
Such incidents include, when the property is land, the easements annexed thereto, the rents and profits thereof accruing after the transfer, and all things attached to the earth;
and, where the property is machinery attached to the earth, the moveable parts thereof;
and, where the property is a house, the easements annexed thereto, the rent thereof accruing after the transfer, and the locks, keys, bars, doors, windows, and all other things provided for permanent use therewith;
and, where the property is a debt or other actionable claim, the securities therefor (except where they are also for other debts or claims not transferred to the transferee), but not arrears of interest accrued before the transfer,
and, where the property is money or other property yielding income, the interest or income thereof accruing after the transfer takes effect.
So as held in Vishwa Nath v. Ram Raj, AIR 1991 All. 193 that there may be presumption that when land is transferred, all things attached to the earth such as tree and shrubs, are also transferred along with the land in view of provisions of Section 8 r/w Section 3 of T.P. Act, however there can be no presumption in case of vice versa.
So Court in certain cases construe the deed of transfer to determine the extent of interest transferred thereby under such deed and in view of provisions of Section 8, Court can, in the absence a clear and expressed intentions of parties to deed as to what is and what is not transferred under a deed, hold that transferor intended to transfer, all the incidents attached to the property to the transferee. The object of Section 8 is to stabilize title and to remove from the region of pure speculation, what passed in the mind of transferor of the transferee at the date of transfer. Similarly in--------------------------------, AIR 1940 Pat. 516 it was observed that the object of Section is to clarify what are the legal incidents of each particular class of property which passes along with the property when it is transferred and not to lay down any rule as to what words are necessary to effect a transfer of any particular kind of property.
As per Section 8 of the Act following are the necessary incidents attached to different property and ordinarily passes from transferor to transferee in the absence of clear intention of parties to the contrary.
As a matter of construction, the grant of land must be taken to be not only of the land but also of every thing beneath or with the land. Prima- facie the owner of a surface of the land is entitled ex-juse to everything beneath the land and in the absence of any reservation, in the grant, the minerals necessarily pass with the rights to the surface.
The golden rule of construction is to ascertain the intention of the parties to the instrument after considering all the words in their ordinary and natural sense.
To ascertain this intention the court has to consider --
|
Property |
Legal Incidents |
|
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 words
Where 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).
Ans. Section 10 of Transfer of property Act lays down the rule that any transfer of property, term of which absolutely restrain the transferee for further alienation of property is void, this is also termed as "Rule against alienability". Section 10 says :-
"Where property is transferred subject to a condition of limitation absolutely restraining the transferee or any person claiming under him from parting with or disposing of his interest in the property, the condition or limitation is void, except in the case of a lease where the condition is for the benefit of the lessor or those claiming under him, provided that property may be transferred to or for the benefit of a woman (not bring a Hindu, Mohammedan, or Buddhist), so that she shall not have power during her marriage to transfer or charge the same or her beneficial interest therein."
According to section 10 of the Act it is permissible to make a transfer subject to conditions but such conditions must not contravene the provisions of the Act and the transfer takes effect as if no such condition had been attached to the transfer. On the other hand there are certain conditions which if imposed, render the transfer itself void. Section 10 is one of the group of sections which deals with void condition of the former type.
This section lays down that where property is transferred subject to a condition absolutely restraining the transferee from parting with his interest in the property the condition is void. Suppose A transfers his property to B with a condition that B shall not sell it. This condition is void and B takes the property absolutely and he may sell or not as he pleases.
The principle underlying the Section 10 of the Act is that a right of transfer is incidental to and inseparable from the beneficial ownership of property. The rule in the section that condition of absolute restrain of alienation is void is founded on the principle of public policy allowing free circulation and disposition of property.
In-----------------, AIR 1986 Ker. 56 it was observed that To improve a total restraint on transfer of property or to impose rules which keep it out of circulation forever offends public policy, irrespective of whether such conditions are imposed by deed of transfer, a will or a simple contract.
An absolute restraint is one that takes away the power of alienation completely or substantially e.g. a condition on the transferee that he shall not alienate property, except for religious purposes. Partial restraint is one that imposes some restriction on the power of alienation but the transferee is substantially free to alienate property in a wide variety of ways e.g., a condition that transferee cannot transfer the property for any religious purpose. Thus, if power of alienation is restricted to a particular person, only then it is void as an absolute restraint. If the power of alienation is exercisable in favour of a class of persons, it would be construed as a partial restraint.
In P.V.S. Vencatachellum v. P.V.S. Kabalumurthy Pillai, AIR 1955 Mad. 350 it was held that Section 10 does not prohibit a partial restraint on the disposition of property but renders an absolute restraints void--------In deciding the question whether the condition or limitation restraining the disposition of property is absolute or partial the court has to look at the substance and not so much to form of condition or limitation.
Exceptions to Section 10
Lease - When the condition is for the benefit of the lessor, it will be valid. The lessor can always restrict his lessee's liberty of alienation. The logical reason for this exception is that a landlord should be free to choose the person who shall be in possession of his land. Thus, a condition in a lease, that the lessee shall not sublet or assign (otherwise the lessor may re-enter) is valid.
Married woman - The second exception is for the benefit of a married woman (not being a Hindu, Muslim or Buddhist), so that she shall have no power, during her marriage, to transfer or charge the property. Thus a condition restraining alienation may be imposed when the property is transferred to a married woman.
Ans. When a person makes an absolute transfer, he cannot at the same time impose upon his transferee any condition whereby he is restrained in his enjoyment or disposition of property. A full ownership of property confers upon its owner complete liberty of action with regard to its enjoyment and disposition etc. If any condition or limitation is imposed upon such liberty that condition would be repugnant under Section 11 of the T.P. Act Section 11 of the act says that where on a transfer of property, an interest therein is created absolutely in favour of any person, but the terms of the transfer direct that such interest shall be applied or enjoyed by him in a particular manner, he shall be entitled to receive and dispose of such interest as if there were no such direction.
The principle is plain enough. When a property is transferred absolutely, it must be transferred with all its legal incidents; the vendor is not competent to sever from the right of property incidents which the law inseparably annexed to it and thereby to abrogate the law by private arrangement.
A condition postponing enjoyment beyond the minority of the donee is void for repugnancy. Where a testator directed that his son was not to enjoy the property bequeathed to him till four years after his death. The son attained majority before the father died. It was held that the son took an immediate absolute interest and so the restraint on enjoyment was to be regarded as invalid.
1. A makes an absolute gift of a house to B with a direction that B shall reside in it. The gift is absolute and the direction is void. B may live in the house or not as he pleases.
2. A makes a gift of a house to B on condition that the gift will be forfeited if B does not reside in it. The condition is valid, for the gift is not an absolute gift but it is a gift subject to a condition of a defeasance, or of revocation.
3. A sold farm to B with the condition that B pays Rs. 4000/- per year so long as B is in enjoyment of the property. The condition is void and B is not bound to pay Rs. 4000 to A per year. [Lilawati v. Firm Ram Dhari, AIR 1971 P&H 87].
Exception. - Exception to the general rule that restriction on the enjoyment of an absolute interest cannot be imposed is equally important. If the transferor is the owner of another piece of immovable property also, he may for the benefit of that property impose a restriction on the enjoyment of the property transferred by him. Section 11 relates on the enforcements of the restrictions aganst the transferee, were Section 42 refers to the enforcement of the restriction against purchasers from the transferee.
Ans. Rule against perpetuity :- Section 14 of the Transfer of Property Act, 1882, provided for the Rule as follows :-
Section 14 rule against perpetuity. - "No transfer of property can operate to create an interest which is to take effect after the life-time of one or more persons living at date of such transfer, and the minority of some persons who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong."
The policy of the law has been to prevent property from being tied up for ever. There are two ways in which the property may be tied up or rendered inalienable. viz., either by imposing a condition absolutely restraining the transferee from parting with, or disposing of, his interest in the property or by creating a succession of partial future interests in favour of the unborn persons and so postponing to a remote period the time when the property will vest in somebody absolutely. Section 10 of the Act strikes the first method by invalidating conditions against alienation. This section restrains the power of creating future interests by providing in the rule against perpetuities that such interest must arise within certain limits. The rule of perpetuity looks to the date at which the contingent interest will vest, if they vest at all, and holds them to be void as a perpetuity if this date is too remote. Though invariably called the "rule against perpetuities", a better name would be the "rule against remoteness of vesting".
The modern rule against perpetuity is that no contingent or executory interest in property can be validly created unless it must necessarily vest within the maximum period in one or more lives in being and 21 years afterwards. It is this modern rule which with certain modifications has been adopted in section 14 of the T.P.Act.
So long as the transferees are living persons any number of successive estates can be created. A transfer may be made to A for life and then to B for life and then to C for life and so on provided A, B and C are all living persons at the date of transfer. But if the ultimate beneficiary is some one not in existence at the date of the transfer, section 13 requires that the whole residue of the estate should be transferred to him. If he is not born before the termination of the last prior estate, the transfer to him falls under section 14. If he is born before the termination of the last prior estate he takes a vested interest at birth.
The rule against perpetuity, however, does not require that the vesting shall take place at the birth of the ultimate beneficiary. What it does require is that the vesting cannot be delayed in any case beyond his minority.
Analysis of the rule
(1) The vesting of estate cannot be postponed beyond the life time of any one or more persons living at the date of the transfer. For example, if an estate is given to a living person, A for life, then to a living person B for life and then to the unborn son of B the son of B must be in existence on or before the date of the expiry of the life estate in favour of B.
It means that except in minority there must be no interval between the termination of the previous interest of a living person and the vesting of the interest in the person who was not in existence at the date of the transfer.
(2) The vesting of absolute interest in favour of an unborn persons may be postponed until he attains full age. For example, an estate may be transferred to A, a living person and after his death to his unborn son when he attains the age of 18, such a transfer would not be violative of the rule against perpetuity.
Exceptions to the rule against perpetuity
There are following exceptions to the rule against perpetuity :
(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..
Ans. Section 16 of Transfer of Property Act says :-
"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.
Ans. Rule against accumulation. - Section 17 relates to the rule against accumulation and provides how long the income of any property transferred can be directed to be accumulated so as to prevent its being received, and enjoyed by the transferee. The section permits accumulation during the following periods :
(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.
Ans. Section 19 of Transfer of Property Act has defined the term "Vested interest" as -
"Vested interest. - Where, on a transfer of property, an interest therein is created in favour of a person without specifying the time when it is to take effect, or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the terms of the transfer.
A vested interest is not defeated by the death of the transferee before he obtains possession.
Explanation. - An intention that an interest shall not be vested is not to be inferred merely from a provision whereby the enjoyment thereof is postponed, or whereby a prior interest in the same property is given or reserved to some other person, or whereby income arising from the property is directed to be accumulated until the time of enjoyment arrives, or from a provision that if a particular event shall happen the interest shall pass to another person."
This Section (Section 19) and Section 119 of Succession Act, 1925 give expression to the English notion of vested interest and makes it the law of the land except in case of Mohammedans.
So aninterest is said to be 'vested' when it is not subject to any condition precedent i.e. - when it is to take effect immediately or on the happening of some event which is certain. An estate or interest is vested when there is an immediate right of present enjoyment or a present right of future enjoyment and intention of person creating the interest must be gathered from the language employed by the grantor in the grant giving the plain and natural meaning of words employed.
Thus, when an interest is vested, it becomes the property of the transferee and is under Section 6 transferred by him even before he has obtained possession. If the transferee dies, his interest vests in his legal representatives whether or not he has obtained possession. Indeed, there is a strong presumption, that on a transfer of property, the transferor intends to confer a vested interest in the transferee.
(a) A makes a gift to B of Rs. 100 to be paid to him on the death of C, B gets a vested interest, as the event, namely, C's death is certain.
(b) A property is transferred to A for life and after his death to B. Here, although a prior interest in favour of A intervenes, but B's interest is vested as the determination of A's interest is a certain event.
Then Section 20 of Transfer of Property Act deals with creation of `vested interest' in favour of unborn person. Section 20 lays down -
"Where on a transfer of property, an interest therein is created for the benefit of a person not then living, he acquires upon his birth, unless contrary intention appears from the terms of the transfer a vested interest, although he may not be entitled to enjoyment thereof immediately on his birth."
So where the transferor expresses his intention that the property should not vest in unborn transferee until some time after his birth or makes the vesting contingent on the happening of an uncertain event the vesting will be postponed till the time specified arrives but in no case vesting of interest can be postponed beyond `the limit laid down by Section 14 of the Act, So once it is admitted that gift to unborn child did not offend Section 13 or 14 of the Act they acquire a vested interest the moment the child born u/s 20 of the Act.
In Rajesh Kanta v. Smt. Shanti Devi, AIR 1957 SC 255 question arose as to whether interest taken by beneficiaries under a trust is a `vested' or `contingent' interest. In this case one Ramani Kanta Roy executed a registered trust deed in respect of his properties and his eldest son Rajesh Kanta Roy was appointed sole trustee to manage properties subject to powers and obligations. After the execution of Trust deed, Ramani Kanta died.
Clause 12 of the deed was the main under which Rajesh Kanta and his brother Ramendra Kanta Roy got any interest in the properties. This clause showed that Lots I to IV of the properties ultimately went ot Rajesh and Lot V alone went to Ramendra. But the interest which either of them was to get in the properties allotted to each was expressed to be one which each would get after the termination of the trust. It was only after the happening of two events viz. (i) the discharge of all the debts specified in the Schedule including the debts if any which might be incurred by the trustee for the payment of settler's debts, and (ii) the death of the settler himself, that the trust was to come to an end, it was on coming to an end of the trust that the sons were to get the properties allotted to them.
The question was whether the interest created by the trust deed was vested or contingent.
Supreme Court observed - "Death of a person is certain and not an uncertain event, so mere fact that a transferee is not entitled to immediate enjoyment does not necessarily make the interest a contingent one"--------It was thus held that interest taken by two brothers under the trust deed was a vested interest.
So far as the fact that settler attached great importance to the liquidation of debts, Supreme Court observed that there is nothing to show that settler was apprehensive that debt would remain undischarged and that he considered the ultimate discharge of debt to be an uncertain event therefore sons took the vested interest but only enjoyment was burdened till liquidation of debt.
Contingent Interest :- Section 21 of the Act says :-
Transfer to members of a class who attain a particular age- Section 22 of T.P. Act provides that where, on a transfer of property, an interest therein is created in favour of such members only of a class as shall attain a particular age, such interest does not vest in any member of the class who has not attained that age.
This section contemplates a transfer to a contingent class. Thus a gift to such of the children of A as shall attain the age of 18 is a gift to a contingent class. No child of A has a vested interest constitutes a condition which must be fulfilled before any one of them can take. In other words until those persons attain that age they have a contingent interest.
A fund is transferred to such of the children A as shall attain the age of 18. No child of A who is under the age of 18 has a vested interest in the fund.
Transfer contingent on happening of specified uncertain Event - Section 23 of the Act lays down that where, on a transfer of property, an interest therein is to accrue to a specified person if a specified uncertain event shall happen, and no time is mentioned for the occurrence of that event the interest fails unless such event happens before or at the same time as the intermediate or precedent interest ceases to exist.
Sections 23 and 24 deal with the case of a transfer which may become vested at a date not exactly specified on the happening of a specified uncertain event. In order that such interest which is at the out set contingent, may become vested, it is essential that the event must happen before or at the same time as the prior interest ceases to exist. The object of the section is to prevent property from remaining without any owner.
Transfer to such of certain persons as survive at some period not specified - Section 24 provides that where, as a transfer or property, an interest therein is to accrue to such of certain persons as shall be surviving at 30 period, but the exact period is not specified, the interest shall go to such of them as shall be alive when the intermediate or precedent interest ceases to exist, unless a contrary intention appears from the terms of transfer.
"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|
Vested interest |
Contingent interest |
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Definition |
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(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. |
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Nature |
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(2) It is ownership. |
(2) It is only a chance of becoming an owner; however, it is different from spes successions. |
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Fulfilment of condition |
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(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. |
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Effect of transferee's death |
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(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. |
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Whether transferable and heritable |
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(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. |
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Present right of Enjoyment |
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(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. |
Ans. Rule of acceleration of subsequent interest. - (a) This rule of acceleration of the subsequent interest on failure of prior disposition is mentioned in Section 27 of the Transfer of Property Act which lays down:
"Where, on a transfer of property, an interest therein created in favour of one person, and by the same transaction an ulterior disposition of the same interest is made in favour of another, if the prior disposition under the transfer shall fail, the ulterior disposition shall take effect upon the failure of prior disposition, although the failure may not have occurred in the manner contemplated by the transferor.
But, where the intention of the parties to the transaction is that the ulterior disposition shall take effect only in the event of the prior disposition failing in a particular manner, the ulterior disposition shall not take effect unless the prior disposition fails in that manner."
Illustrations. - (1) A transfers Rs. 500 to B on condition that he shall execute lease within three months after A's death, and, if he should neglect to do so, to C. B dies in A's lifetime, the disposition in favour of C takes effect.
(2) A transfers property to his wife, but, in case she should die in his life-time, transfers to B that which he had transferred to her. A and his wife perish together under circumstances which make it impossible to prove that she died before him. The disposition in favour of B does not take effect.
We see that the section enunciates the doctrine of acceleration. Thus where there is a gift in remainder, expectant on the termination of an estate for lifie, and the prior life estate becomes void, the gift does not fall but is accelerated. [Ajodhia v. Raldman, 10 Cal. 482 (P.C.)].
(b) Conditional Limitation. - A conditional limitation is one containing a condition which divests an estate that has vested and vests it in another person. As regards the prior interest it is condition subsequent, but as regards the ulterior interest it is condition precedent. This rule is embodied in Section 28 which provides :
"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".
Ans. Doctrine of Election is one of the important rule of transfer of property which has been explained in Section 35 of Transfer of Property Act. Section 35 says -
"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,
subject nevertheless,
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.'
Ans. Section 36 of T.P. Act lays down as :-
"In the absence of a contract or local usage to the contrary, all rents annuities, pensions, dividends and other periodical payments in the nature of income shall, upon the transfer of the interest of the person entitled to receive such payments, be deemed, as between the transferor and the transferee, to accrue due from day to day, and to be apportionable accordingly, but to be payable on the days appointed for the payment thereof."
The appointment frequently denotes not but distribution and in its ordinary technical sense, the distribution of one subject in proportion to another previously distributed. Sections 36 and 38 of T.P. Act are based on. Sections 2, 3 and 7 of Apportionment Act 1870 of England. Some properties yield an income which is periodical, upon transfer of such property question as to apportionment of periodical income, arising from such property between transferor and transfere arises. Though Section 8 of the Act gives general rule that upon tansfer of a property, all the interests which transferor is then capable of passing in the property passes through to transferee, but Section 8 has no application. Section 36 says that all periodical payments shall be deemed to accrue from day to day and be apportioned between transferor and the transferee on that basis.
In Sk. Sattar Sk. Mohd. Choudhari v. Gundappa Amabadas Bukate, AIR 1997 SC 998 it was observed that provisions of Section 36 and 37 provides that even if the estate is in possession of a tenant, who is under an obligtion to pay rent, there can still be severance of such estate.
However it is important to point out that principles of Section 36 is not applicable to cases of partition of joint families and in the absence of a contract or other circumstances showing contrary intentions, the presumption in such case ought to be that rent or profit accrued to the joint family even before the date of the partition but not realised till then, would belong to that co-sharer to whom has been allotted, the interest of the family in property in respect of which such rent of profit has accrued.
Section 37 of the Act then provides :-
Section 37 of the Act provides about benefit of obligation on severance. It lays down as under :
When in consequence of a transfer property is divided and held in several shares and there upon the benefit of any obligation relating to the propety as a whole passes from one to several owners of the property, the corresponding duty shall, in the absence of a contract to the contrary amongst the owners, he performed in favour of each of such owners in proportion to the value of his share in the property provided that hte duty can be severed and that the severance does not substantially increase the burden of the obligation, but if the duty cannot be severed or if the severance would substantially increase the burden of the obligation, the duty shall be performed for the benefit of such one of several owners as they shall jointly designate for that purpose.
Provided that no person on whom the burden of the obligation lies shall be answerable for failure to discharge it in manner provided by this section unless and until the State Government by notification in the official Gazette so directs.
(a) A sells to B, C, and D a House situated in a village and leased to E on an annual rent of Rs. 30/- and delivery of one fat sheep, B having provided half the purchase money and C and D one quarter each. E having notice of this must pay Rs. 15 to B; Rs. 7.50 to C; Rs. 7.50 to D and must deliver the sheep according to the joint direction to B, C and D.
(b) In the same case each house in the village being bound to provide ten days labour each year on a dyke to prevent inundation. E had agreed as a term of his lease to perform this work for A. B, C and D severally require E to perform ten days work due on account of the House of each. E is not bound to do more than ten days' work in all according to such direction as B, C and D may join in giving.
Ans. (A) Transfer by person authorised under special circumstances. - Secton 38 of the Act says that where a Hindu widow or the Manager of Hindu family or the guardian of a minor who is authorised to dispose of immovable propety only under certain circumstances, transfers immovable property for consideration, alleging the existence of such of circumstances, as between the transferee and transferor and other persons affected by the transfer, such circumstances shall be deemed to have existed, if the transferee (i) has used reasonable care to ascertain the existence of such circumstances, and (ii) has acted in good faith.
In Hanooman Prasad Pandey v. Babooee Munraj Kunwar [(1856) 6 M.I.A. 393] where a mortgage had been executed by the manager of an infant, who, under the Hindu Law, has only a limited and qualified power of disposal over the minor's immovable property and can alienate if only for the minors needs or for the benefit of the estate.
The principle was followed before the T.P. Act and has now been embodied in Section 38 of the Act. The principal object of the section is not only to protect innocent transferees for value, but also to protect other persons affected by the transfer such as reversioners, and the effect that where a transfer is alleged to be for legal necessity and such necessity cannot be established by direct evidence, it will be deemed to exist i.e. if it can be shown that the transferee has taken reasonable care to ascertain if such circumstances existed and has acted in good faith.
Section 38 of the T.P. Act lays down that :
"Where any person, authorised only under circumstances in their nature variable to dispose of immovable property transfer such property for consideration alleging the existence of such circumstances, they shall, as between the transferee on the one part and the transferor and other persons (if any) affected by the transfer on the other part be deemed to have existed, if the transferee, after using reasonable care to ascertain the existence of such circumstances has acted in good faith."
A, a Hindu widow, whose husband has left collateral heirs, alleging that the property held by her as such is insufficient for her maintenance agrees for purposes neither religious nor charitable, to sell a field, part of such property to B. B satisfies himself by reasonable enquiry that the income of the property is insufficient for A's maintenance, and that the sale of the field is necessary and, acting in good faith, buys the field from A. As between B on the one part and A and the collateral heirs on the other part, a necessity of the sale shall be deemed to have existed.
Thus, the transferee of an immovable property from a person who is authorised to alienate under certain circumstances, for example, legal necessity is protected if the following conditions are satisfied -
(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.
Ans. (A) C's suit must be dismissed. Under Section 38, Transfer of Property Act, where any person, authorized only under certain circumstances to dispose of immovable property, transfers such property :
(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.
Ans. Covenant - Covenant in simple words means agreement or a promise. In England, a contract contained in a sealed instrument is called a covenant. The person bound by the promise is called the covenantor and the person entitled to the benefit of it is called the covenantee.
Section 11 (Second paragraph) and Section 40 of T.P. Act refers to affirmative and negative convenants in a transfer. Section 40 lays down as under :-
"Where, for the more beneficial enjoyment of his own immovable property, a third person has, independently of any interest in the immovable property of another or of any easement thereon, a right to restrain the enjoyment in a particular manner of the latter property, or
Or of obligation annexed to ownership but not amounting to interest or easement. - Where a third person is entitled to the benefit of an obligation arising out of contract and annexed to the ownership of immoveable property, but not amounting to an interest therein or easement thereon,
such right or obligation may be enforced aganst a transferee with notice thereof or a gratutious transferee of the property affected thereby, but not against a transferee for consideration and without notice of the right or obligation, not against such property in his hands."
A contracts to sell Sultanpur to B. While the contract is still in force he sells Sultanpur to C, who has notice of the contract. B may enforce the contract against C to the same extent as against A.
Section 40 of the Transfere of Property Act refer to affirmative and negative covenants in a transfer. Covenant means agreement or promise. Such agreements may be either affirmative or negative. An affirmative covenant is an agreement between the transferor and the transferee whereby the transferee affirms or undertakes to do something. For example, an agreement requiring the expenditure of money is an affirmative covenant. Affirmative covenants are collateral; they are not annexed to the land, i.e., `do not run with the land'. In a negative or restrictive covenant the transferee binds himself to use or abstains from using, certain property. In other words, it is an agreement restrictive of the user of the land, is in the nature of an easement restricting the use or enjoyment of certain land. For example, where the owner of the land undertakes or covenants to use the premises for private residence only, or to keep certain windows obscured, or not to build, not to open a public house, not to use for business purposes, such covenants are negative in substance. The distinction between an affirmative and a negative covenant may further be explained by the illustrations;
(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).
Ans. Section 41 of T.P. Act deals with transfer by an ostensible owner. An ostensible owner is one who has all the indicia of ownership without being the real owner. Section 41 says :-
"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.
Ans. Section 43 T.P. Act lays down the doctrine "feeding the grant by estoppel." It provides as follows :
"Where a person fraudulently or erroneously represents that he is authorised to transfer certain immovable property and professes to transfer such property for consideration, such transfer shall at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract, of transfer subsists.
Nothing in this section shall impair the right of transferees in good faith or consideration without notice of the existence of the said option."
A, a Hindu who has separated from his father B, sells to C three fields, X, Y and Z representing that A is authorised to transfer the same. Of these fields Z does not belong to A, it having been retained by B on the partition; but on B's dying A as heir obtains Z. C not having rescinded the contract of sale, may require A to deliver Z to him.
Section 43 applies to all kinds of transfer for consideration. Principle of feeding the grant by Estoppel comes into play when a transfer is made by person who has no title to the property transferred but later on he acquires title to that property. So Section 43 laid down the rule of estoppel which is not the estoppel which is a rule of evidence preventing a party from alleging and proving the truth of facts. It is a kind of estoppel which affects legal relations.
Essentials - To attract the application of the section the conditions required for invoking the doctrine are as follows :
(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.
Ans. Under Section 43 of T.P. Act when the transferor subsequently acquires interest in the property the transfer operates at once at the option of the transferee. The new interest stands transferred, at the option of the transferee at once to him. But under Section 115 no such thing happens. Under that section the transferor is only precluded from denying that he did not have any interest in the property at the time of transfer. In the undernoted case "A" mortgaged his share as well as his mother's share in a property. In execution of the decree for sale, obtained on the mortgage. B purchased the property. Subsequently, A got the interest of his mother on her death. It was held that B could get the benefit of Section 43 of T.P. Act. But Section 115 applied and A was estopped from denying his title. The section applies only to cases where the invalidity of a transfer is due merely to the transferor, either -
(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.
Ans. Transfer by a Co-owner : The interest of a co-sharer in common property can be sold, mortgaged or leased to another co-sharer or to a stranger. Section 7, 8 and 44 recognize the validity of such transfer. Section 44 lays down as under :-
"Where one or two or more co-owners of immovable property legally competent in that benefit transfers his share of such property or any interest therein the transferee acquires, as to such share or interest and so far as is necessary to give effect to the transfer the transferor's right to joint possession or other common or part enjoyment of the property, and to enforce a partition of the same, but subject to the conditions and liabilities affecting, at the date of the transfer, the share or interest so transferred."
Where the transferee of a share of a dwelling house belonging to an undivided family is not a member of the family, nothing in this section shall be deemed to entitle him to joint possession or other common or part enjoyment of the house."
So Section 44 of the Act has two limbs. Under the first limb the purchaser by the purchase acquires, inter-alia, the right to joint possession of property along with the other co-sharers. Under the second limb, Section 44 does not entitle him to join possession. Acquisition of right to joint possession and giving effect to such right are distinct questions. Second part of the section is designed to prevent an outsider from enforcing his way into a dwelling house in which other members of the transferor's family have right to live.
Transfer by a co-sharer in order to be valid must satisfy following two conditions :-
(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.).
Ans. Doctrine of Priority - The Principle of the rule in section 48 of T.P. Act is based on the equitable maxim "Qui prior est tempore potior est fire", which means that one which is first in time is better in law. However it must be noted that rule of priority is invoked only when the interests created by transfer either at the sale or at different time, conflict with each other and the transfers thus created are valid and complete transfers.
Where the transfers create inconsistent rights, no question of priority would arise. But where they are of one type, the question arises as to which of them should precede the other. For instance, A mortgages his immovable property to B. B would get few rights over the property. But A still remains the owner and as such a power to redeem the mortgage and can get the property back to himself. Now instead of redeeming the mortgage, A transfers that right to a third person altogether either by sale or mortgage. If it is a sale, he will have no interest in the property, and the vendee would be entitled to redeem the property from B. If it is a mortgage, then it would be a mortgage of the remaining rights. In that event there will be two mortgages one in favour of B, and the other in favour of such other third person. Two mortgages have thus been created out of the same determination, though not exactly of the same character. The question for determination is which of the two mortgages stand first and has a better claim. The rule of priority in Section 48 is that whichever is executed first in point of time must be preferred to the other later in date. The section that where a person purports to create by transfer at different times rights in or over the same immovable property and such rights cannot at all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created.
Exception to the rules of priority. - There are following exceptions to the rules of priority -
(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.
Ans. Section 50 T.P. Act provides that :
"No person shall be chargeable with any rents or profits of any immovable property, which he has in good faith paid or delivered to any person of whom he in good faith held property, notwithstanding, it may afterwards appear that the person to whom such payment or delivery was made, had no right to receive such rents or profits."
A lets a field to B at a rent of Rs. 50 and then transfers the field to C. B having no notice of transfer, in good faith pays the rent to A. B is not chargeable with the rent so paid.
The Section 50 contemplates payment of rent in good faith for the same tenancy to a wrong person. The expression "good faith" will exclude cases where a person has acted in a grossly negligent manner, sufficient to charge him with notice of real owner's right. Section 50 protects a tenant in respect of any payment which he makes bona fide to a person from whom he held the property though it subsequently turns out that the person to whom he made the payment had no right to it. Section 50 is subject to the doctrine of "Lis pendens" contained in Section 52, if therefore, the tenant makes any payment to the mortgagor during the pendency of suit for redemption, he does so at his own risk and he cannot claim protection under Section 50.
Section 51 of T.P. Act lays down provisions for protection for Improvements made by bona fide holder under defective titles as ;
"When the transferee of immoveable property makes any improvement on the property, believing in good faith that he is absolutely entitled thereto, and he is subsequently evicted therefrom by any person having a better title, the transferee has a right to require the person causing the eviction either to have the value of the improvement estimated and paid or secured to the transferee, or to sell interest in the property to the transferee at the then market value thereof, irrespective of the value of such improvement.
The amount to be paid or secured in respect of such improvement shall be the estimated value thereof at the time of the eviction.
When, under the circumstances aforesaid, the transferee has planted or sown on the property crops which are growing when he is evicted therefrom, he is entitled to such crops and to free ingress and egress to gather and carry them."
So Section 51 of Act is based upon the maxim that he who seeks equity must do equity. Section 51 is an exception to rule enunciated by the maxim "quie quid plantatur solo solo cedit" and is a general provision dealing with improvements effected by a transferee to transferred property while Section 63-A of Act is a special provision dealing with improvements effected by a mortgagee in possession.
In order that Section 51 may apply, it is essential that -
(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.
Ans. Section 52 of T.P. Act lays down the doctrine of "lis pendens" as:-
"During the pendency in any Court having authority within the limits of India excluding the State of Jammu and Kashmir] or established beyonds such limits] by the Central Government of any suit or proceedings which is not collusive and in which any right to immoveable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.
Explanation. - For the purposes of this section, the pendency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the institution of the proceeding in a Court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has been obtained, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force".
So Section 52 is an expression of principle of the maxim "pendente lite nihil innovetur" i.e. pending a litigation, nothing new should be introduced. Section 52 provides that pendente lite, neither party to the litigation, in which any right to immoveable property is in question, can alienate or otherwise deal with such property so as to effect his opponent. So Section 52 is intended to protect the parties to litigation against alienations by their opponents during the pendency of the suit. It is important to point out here that wherever the T.P. Act is not applicable, the doctrine of `Lis pendens' which is based on justice, equity and good conscience, principles as contained in Section 52 would still apply.
In Abdul Aziz v. District Judge, AIR 1994 All. 167, it was observed that Section 52 comes into existence from the point of the institution of suit and continues to survive till the satisfaction of the decree.
In K.A. Khader v. Rajamma John Madathil, AIR 1994 Ker. 122 it was observed that effect of doctrine of lis pendens as embodied in Section 52 of T.P. Act is not to annul all voluntary transfers effected by the parties to a suit but only to render it subservient to the rights of the parties thereto under the decree or order which may be made in that suit. Its effect is only to make decree passed in the suit binding on the transferee, if he happens to be third party person even if he is not a party to it. The transfer will remain valid subject, however, to the result of suit.
The doctrine, as observed by Turner, L.J. in Bellamy v. Sabine, (1987) De C and J. 566), rests "upon this foundation that, it would plainly be impossible that any action or suit could be brought to a successful termination if alienations pendente lite were allowed to prevail. The plaintiff would be liable in every case to be defeated by the defendants, alienating before the judgment or decree, and would be driven to commence his proceedings de novo subject again to the same course of proceeding". Lord Cranworth in the same case explained that the doctrine did not rest on the ground of notice. He said :
"It is scarcely correct to speak of lis pendens as affecting a purchaser through the doctrine of notice...It affects him not because it amounts to notice, but because the law does not allow litigant parties to give to others pending the litigation, rights to the property in dispute, so as to prejudice the opposite party.
The doctrine is, therefore, based upon expediency and it is immaterial whether the transferee pendente lite had or had not notice of the suit.
In M/s Supreme General Films Exchange Ltd. v. Brijnath Singh, A.I.R. (1975) S.C. 1810 - Plaza Talkies, a theatre was attached in execution of a decree against the owner of a theatre. A lease of the same theatre was executed in favour of appellant Company during the attachment.
Held. - It was held by the Supreme Court that the lease is to be struck by the doctrine of lis pendens because the lease purported to create entirely new rightly pendente lite.
Essentials of this section
(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.
Ans. Section 53 of T.P. Act says :-
(1) Every transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed.
Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration.
Nothing in this sub-section shall affect any law for the time being in force relating to insolvency.
A suit instituted by a creditor (which term includes a decree holder whether he has or has not applied for execution of his decree) to avoid a transfer on the ground that it has been made with intent to defeat or delay the creditors of the transferor, shall be instituted on behalf of, or for the benefit of all the creditors.
(2) Every transfer of immovable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee.
For the purposes of this sub-section no transfer made without consideration shall be deemed to have been made with intent to defraud by reason only that a subsequent transfer for consideration was made.
So Section 53 lays down that every transfer made with intent to defeat or delay the creditor is voidable at the option of the creditors so defeated or delayed.
(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].
Ans. Doctrine of `Part performance' has been provided in Section 53-A of T.P. Act, in following words :-
"Where any person contracts 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,
and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract,
and the transferee has performed or is willing to perform his part of the contract,
then, notwithstanding that 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, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract :
Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof".
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.
Ans. Sale Defined. - Section 54 defines sale as follows : "Sale is transfer of ownership in exchange for a price paid or promised or part paid and part promised." The phrase, "transfer of ownership" is significant as signifying that in a sale there is an absolute transfer of all the rights in the property sold. The expression "transfer of ownership" stands in contrast with the expression `transfer of an interest' occurring in Section 53 in the definition of mortgage and with `transfer of a right to enjoy property' in the definition of lease.
Essential elements of a Sale. - The elements of a sale are -
(1) The parties. - The parties to a sale are the seller also called (vendor) and buyer (vendee). The seller must be competent to transfer and the buyer may be any person who is not disqualified to be a transferee.
(2) Subject-matter. - The subject-matter of a sale is immovable property. Immovable property includes (1) land, (2) benefits to arise out of land, and (3) things attached to the earth. In other words `immovable property' includes both tangible immovable property such as houses, land and things attached to the earth or intangible immovable property such as benefits derived from land, e.g., right of ferry or fishery or a right to a mortgage debt.
(3) Conveyance. - The sale does not become complete unless the seller actually does an act having an effect in law of transferring the seller's rights in the property to the buyer. In case of tangible immovable property of the value of one hundred rupees and upwards or in the case of intangible immovable property the transfer must be effected by a registered instrument. In the case of tangible immovable property, of a value less than one hundred rupees, the transfer may be made either by registered instrument or by delivery of the property. Delivery of a tangible immovable property takes place when the seller places the buyer or such person as he directs, in possession of the property.
(4) Price - The Consideration of a Contract of Sale - Price means money price. If consideration of transfer is something other than money, it is not a sale. [Commr. of I.T. v. M/s Motors and General Stores Pvt. Ltd., AIR 1968 SC 200]. But pre-payment of the price is not a condition precedent to the completion of the sale. If the intention is that the ownership should pass on registration of sale deed, sale is complete as soon as deed is registered or not, whether price is agreed to be paid in part later or not, buyer can sue for possession.
Rights and Liabilities Of Buyer and Seller - Section 55 of T.P. Act 1882, provides for rights and liabilities of buyer and seller as follows :-
"In the absence of a contract to the contrary, the buyer and seller of immoveable property respectively are subject to the liabilities and have rights mentioned in rules next following or such of them as are applicable to the property sold :-
(1) The seller is bound -
(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.
Ans. (A) Mortgage - Definition
Section 58 of the T.P. Act defines mortgage as the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced, or to be advanced by way of loan, an existing or future debt, or performance of an engagement which may give rise to a pecuniary liability.
The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage money; and instrument (if any) by which the transfer is affected is called a mortgage deed.
The essential elements of a mortgage are the following :-
(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.
Ans. Kinds of Mortgage - As it is provided u/s 58(a) of T.P. Act that Mortgage" is transfer of interest in a specific immoveable property for the purpose of securing the payments of money advanced or to be advanced by way of loan, an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability.
Such transfer of interest in immoveable property, may be in different ways and thus there are different kinds of mortgage. Section 58(b) to (g) of T.P. Act provide as to different kinds of mortgages, which are as follows:-
(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.
Ans. Right of Redemption. - Right of redemption and principle of integrity of mortgage means that a mortgage debt is indivisible. Section 60 of T.P. Act provides this in following words :-
"At any time after the principal money has become due, mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage- money, to require the mortgagee (a) to deliver to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee, (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and (c) at the cost 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 mortgage has been extinguished :
Provided that the right conferred by this section has not been extinguished by act of the parties or by decree of a court.
The right conferred by this section is called a right to redeem and a suit to enforce it is called a suit for redemption. Nothing in this section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed, the mortgagee shall be entitled to reasonable notice before payment or tender of such money. Redemption of portion of mortgaged property. - Nothing in this section shall entitle a person interested in a share only of the mortgaged property to redeem his own share only, on payment of a proportionate part of the amount remaining due on the mortgage, except only where a mortgagee, or, if there are more mortgagees than one, all such mortgagees, has or have acquired, in whole or in part, the share of a mortgagor." 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.
Ans. The courts of equity in England strictly adhered to the belief that a mortgage was merely a security for the payment of debt and as such redeemable by discharge of such debt. They established the doctrine, that the maxim "modus et covenentio wincunt legam" (agreement of the parties override the law) did apply to mortgages and held that the equity of redemption could not be restricted even by an express agreement of the parties. This doctrine is represented by the maxim `once a mortgage always a mortgage'. It means that a transaction could not, at one time be a mortgage and at another cease to be so, by having any stipulation in the mortgage deed which is calculated to prevent redemption. It means that no contract between a mortgagor and mortgagee made at the time of the mortgage and as per of the mortgage transaction can be valid if it prevents the mortgagor from getting back his property on paying of what is due on his security. Any bargain which has that effect is invalid and is inconsistent with the transaction being a mortgage. In India the mortgagor's right of redemption is a statutory right and any condition inconsistent with this right is invalid as clog under Section 60 of the Transfer of Property Act. in Ajit Singh v. Kakhbir Singh, A.I.R. 1992 P and H 193 and Punjab and Haryana High Court has observed that in India the right of redemption being statutory right, cannot be fettered by any condition which impedes or prevents redemption and any such condition is void. The Court further provided that the circumstances in which a mortgagor was compelled to secure the loan and other terms and conditions etc. are relevant factors for determining whether particular term of redemption amounts to a `clog' on the equity of redemption.
The maxim, `Once a mortgage always a mortgage' was interpreted in Noakes and Company v. Rice, [1902 A.C. 24] Lord Davey observed that a mortgage cannot be made irredeemable and that a provision to that effect is void. In this leading case Rice, a licensed victualler mortgaged his premises and goodwill, etc., to Noakes and Company, brewers subject to proviso that if Rice paid back all the money and interest due on the security, Noakes and Company would surrender or recover the premises to Rice or to such person as he would direct. In the mortgage deed there was a covenant that during the continuance of the term whether or not any money be due on the security, Rice should not use or sell upon the premises any liquors not exclusively obtained from Noakes and Company. Held Rice was entitled to get a decree for redemption as the covenant as to exclusive purchase of liquors from Noakes and Company was a clog on the equity of redemption and as such void. From the very conception of mortgagor, three principles may be deduced : (i) Once a mortgage always a mortgage i.e., a mortgage cannot be made irredeemable and that a provision to that effect is void. Thus, mortgage is an exception to the maxim the agreement to the parties overrides the law, (ii) The second principle is that the mortgagee shall not reserve to himself any collateral advantage outside the mortgage contract, (iii) The third principle from the maxim, once a mortgage always a mortgage and nothing but a mortgage is that any stipulation which prevents the mortgagor who has paid the principal, interest and cost from getting back the property in the State in which he mortgaged it, is void.
In Shivdev Singh v. Sucha Singh, AIR 2000 SC 1935, it was observed that "Right of Redemption, can not be taken away. The court will ignore any contract the effect of which is to deprive the mortgagor of his right to redeem the mortgage. --------for "once a mortgage always a mortgage" and therefore always redeemable-----------It is right of mortgagor on redemption by reason of very nature of mortgage to get back the subject of mortgage and to hold and enjoy as he was entitled to hold and enjoy it before the mortgage. If he is prevented from doing so or is prevented from redeeming the mortgage, such prevention is bad in law and it has always been termed as a clog. Such a clog is inequitable. The Law does not countenance it. Long term for redemption by itself is not a clog on equity of redemption, whether or not in particular transaction, there is clog on equity of redemption depends primarily upon period of redemption, circumstances under which mortgage was created, economic and financial position of mortgagor and his relation vis-a- vis him and mortgagee.
Ans. Rights of Mortgagor
As discuss earlier, one of the most important right of Mortgagor is right is redemption.
(i) Right of Redemption - The word `redeem' means to buy back or to pay off the loan and take back the property. This mortgagor's right to redeem the mortgageed property is called in English Law `equity of redemption'. The right of redemption was a creation of the Court of Equity. If the mortgagor fails to pay the loan on the appointed day then at law he loses his right to recover the property yet equity compels the mortgagee to surrender the property if the mortgagor applies to redeem at any time before sale. This right to redeem the mortgaged property on payment of the mortgage money, after the date fixed for payment, is called in English law the mortgagor's equity of redemption. Section 60 uses the `right of redemption' instead of `equity of redemption' thereby indicating that the right of redemption is under the Indian Law a statutory right.
The right of redemption cerises when the principal money secured by mortgage has become due & it can be exercised by payment or tender to mortgagee at proper time & place.
(ii) Right to Redeem Separately or Simultaneously :- This right has been provided u/s 61 of T.P. Act and embodies doctrine of Consolidation Section says -
"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.
Ans. (A) Marshalling:- Section 81 of the T.P. Act lays down the rule of Marshalling Securities. It lays down that if the owners of two or more properties mortgages them to one person, and then mortgages one or more of the properties to another person, the subsequent mortgagee is entitled to have the prior mortgage debt satisfied, out of the property or properties, not mortgaged to him so far as the same will extend, but not as to prejudice the rights of the prior mortgagee, or of any other person who has for consideration acquired an interest in any of the properties. This rule, however, is subject to a contract to the contrary. Thus, where A mortgages X and Y to B, then mortgages X to C if B threatens, i.e., to realize his mortgage out of X so as to deprive C of security, C under the Doctrine of Marshalling can compel B to realize his mortgage as far as possible out of Y so as to leave X available for himself. This principle was stated in Aldrich v. Cooper, which is the foundation of the equitable doctrine of Marshalling. In this case the first creditor had a right of proceedings against the free- hold property and copyhold property of the debtor. The second creditor has a right of proceeding only against free-hold property in the circumstances if the first creditors were to proceed against the free-hold property in the first instance, the rights of second creditor would be imperilled. Lord Eldon enunciated the following rule :-
"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].
Ans. Section 91 of T.P. Act lays down as :-
"Besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of, the mortgaged property, namely :-
(a) any person (other than the mortgagee of the interest sought to 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.
Ans. Doctrine of subrogation. - Section 92 of the Transfer of Property Act, provides -
"Any of the persons referred to in Section 91 (other than the mortgagor) and any co-mortgagor shall, on redeeming property subject to the mortgage, have, so far as regard redemption, foreclosure or sale of such property, the same right as the mortgagee whose mortgage he redeems may have against the mortgagor or any other mortgagee.
The right conferred by the section is called the right of subrogation and a person requiring the same is said to subrogated to the right of the mortgagee whose mortgage he redeems.
A person who has advanced to a mortgagor money with which the mortgagee has been redeemed shall be subrogated to the rights of mortgagee whose mortgage has been redeemed, if the mortgagee has by registered instrument agreed that such persons shall be so subrogated.
Nothing in this section shall be deemed to confer a right of subrogation on any person unless the mortgage in respect of which the right is claimed has been redeemed in full."
The term `subrogation' which simply means substitution, comes from Roman Law. In Roman Law, a creditor, who lent money to the debtor the purpose of payment of a mortgage on condition that he was to be substituted in the place of the mortgagee, was entitled to claim the benefit of the security discharged with his money. The right has been recognised in all modern systems, and is derived from Roman Law. Prior to the Amendment of 1929, this doctrine of subrogation was only confined to a subsequent mortgagee paying off a prior mortgagee. As a matter of justice and equity the principle of subrogation should apply generally to all case other than those of a mortgagor pays off his own debt or of a mere volunteer. In Bisseswar Prasad v. Lala Sarnam Singh (1907) 6 Cal.L.J. 134 it was observed as follows :-
"The doctrine of subrogation is a doctrine of equity jurisprudence. It does not depend upon privity of contract, express or implied, except in so far as equity may be supposed to be imported into the transaction, and thus raise a contract by implication. It is founded on the fact and circumstances of each particular case and on the principles of natural justice. While, therefore, the doctrine will be applied in general wherever the person other than a mere volunteer pays a debt or a demand, which in equity or good conscience should have been satisfied by another or where the liability of one person is discharged out of a fund belonging to another, or where one person is compelled for his own protection or that of some interest which he represents to pay a debt for which another is primarily responsible or wherever a denial of the right would be contrary to equity and good conscience the doctrine will never be permitted, where the application of it would work injustice to the rights of those having equal or superior equalities."
In Kadanda Sugar Indust. Pvt. Ltd. v. Devru Ganapathi Hegde Bahairi, AIR 1993 Kant. 288, it was observed that the payment of mortgage money after the preliminary decree has been passed will not make any difference to the right of respondents for subrogation when all the requirements of Section 92 are in existence.
In Mamata v. United Commercial Bank Ltd. A.I.R. 1987 Cal. 280 the Calcutta High Court has discussed on the points as follows :-
The legal principle is spelt out in Section 140 of the Indian Contract Act with regard to the arising of the right to subrogation in favour of the guarantor on his payment of the debt to the creditor and as spelt out in Section 92 of the Transfer of Property Act with regard to the accruing of the right of subrogation in favour of a person who redeems the mortgage in full; and the well settled position as enunciated in this respect in A.I.R. 1937 Cal. 336, (In re : Upendra Nath Kar). Mr. Mukerjee, however, submits on the authority of some books on equity and injunction and on the reliance of the decision in A.I.R. 1949 F.C. 218 (Kondamudi Sriramuly v. Myneni Pundari Kakshayya), that equitable doctrine of subrogation can be invoked even before payment.
Kinds of Subrogation :- Subrogation is of two kinds, namely
(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.
Ans. `Lease' has been defined u/s to 5 of Act as :-
"A lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.
Lessor, lessee, premium and rent defined. - The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent."
As per section 105 T.P. Act a lease of immovable property is a transfer of a right to enjoy such property made for a certain time or in perpetuity. The expression "transfer of a right to enjoy" stands in contrast with the words "transfer of ownership" occurring in section 54 in the definition of sale. In a sale all the rights of ownership, which the transferor has, passes on the transferee. In a lease, there is partial transfer, that is a transfer of a right of enjoyment for a certain time.
Essential Elements Of a Sale - This section defines lease of immoveable property as a partial transfer i.e. transfer of a right to enjoy such property. Essential elements of a lease are :-
(A) Parties
(B) Immovable property
(C) Partial Transfer
(D) Duration
(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.
Ans. The duration of certain kinds of tenancies has been prescribed by Section 106. Section 106 as amended in year 2003 says -
"Duration of certain leases in absence of written contract or local usage. - (1) In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months' notice and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee by fifteen days' notice.
(2) Notwithstanding anything contained in any law for the time being in force, the period mentioned in sub-section (1) shall commence from the date of receipt of notice.
(3) A notice under sub-section (1) shall not be deemed to be invalid merely because the period mentioned therein falls short of the period specified under that sub-section, where a suit or proceeding is filed after the expiry of the period mentioned in that sub-section.
(4) Every notice under sub-section (1) must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property."
The above stated Section 106 of T.P. Act was amednded in 2003 to remove all doubts and confusions.
Ans. Rights and Liabilities of the Lessor :- Section 108 of T.P. Act deals with Rights and Liabilities of Lessor. Part (A) of Section 108 deals with that of lessor and lays down as -
"(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".
Ans. Determination of lease means termination or end of contract of lease and thereby legal relation between lessor and lessee comes to an end. Section 111 of T.P. Act deals with various circumstances in which a lease is terminated. Section 111 of lays down :-
A lease of immoveable property determines :-
(a) By efflux of time limited thereby :- Where lease is created for certain duration lease comes to end on expiry of that duration. In P.S. Bedi v. Project and Equipment Corpt. of India Ltd., AIR 1994 Del. 255 it was held that where tenancy is to be terminated by efflux of time, the tenant is not entitled to any statutory notice to quit.
(b) Where such time is limited conditionally on the happening of some event - by happening of such event.:- So when the term of the lease is related to some event or it depends upon the happening of a specified event then the lease terminates on the happening of that event. In this connection clause (b) of section 11 provides that a lease of immovable property determines where such time is limited conditionally on the happening of some event by the happening of such event. Thus a lease for life of the lessee terminates on the death of the lessee."
(c) By Termination of Lessor's Interest :- Where the interest of the lessor in the property terminates on or his power to dispose of the same extends only to, the happening of any event - by the happening of such event.
This clause operates where the lessor has only a limited interest. A lease by a Hindu widow would come to an end on her death; a lease granted by a mortgagee in possession determines on redemption because a mortgagee in possession cannot grant a lease extending beyond the term of the mortgage. The legal position in this connection is very clear. The mortgagee in possession must, on redemption, restore possession of the mortgaged property to the mortgagor in the same condition as it was at the time when it was mortgaged.
(d) Merger :- In case the interest of lessee and the lessor in whole of the property become vested at the same time in one person in the same right. So Section 111(d) of Act deals with doctrine of merger. When two estates merge into one or unite, it is called merger.
In Ramesh Kumar Jhambh v. Official Assignee, High Court Bombay, AIR 1993 Bom. 374 it was observed that the doctrine of merger is atracted when a lease hold and reversion coincide. If the lessee purchases the lessor's interest, the lease is relinquished as the same person cannot at the same time be both landlord and tenant. The doctrine of merger is based on principle of union of two conflicting interests which cannot be held by one person at the same time.
(e) By Express Surrender :- By express surrender, that is to say, in case the lessee yields up his interest under the lease to the lessor, by mutual agreement between them.
(f) By Implied Surrender :- Section 111(f) of Act contemplates determination by implied surrender.
Illustration - A lessee accepts from his lessor a new lease of the property leased, to take effect during the continuance of the existing lease. This is an implied surrender of the former lease and such lease determines thereupon.
In P.M.C. Kunhiraman Nair v. C.R. Nagaratha Iyer, AIR 1993 SC 307 - it was observed that there can be implied, surrender, if the lessor grants a new lease to a third person with assent of lessee under the existing lease who delivers the possession to such person or where lessee directs his such tenant to pay rent directly to the lessor.
(g) By Forfeiture :- Section 111(g) provides "by forfeiture; that is to say,
(1) in case the lessee breaks an express condition which provides that, on breach thereof, the lessor may re-enter; or
(2) in case the lessee renounces his character as such by setting up a title in a third person or by claiming title in himself; or
(3) the lessee is adjudicated an insolvent and the lease provides that the lessor may re-enter on the happening of such event; and in any of these cases the lessor or his transferee gives notice in writing to the lessee of his intention to determine the lease :"
(h) On the Expiration of Notice to Quit -- Clause (h) of section 111 lays down that lease of immovable property determines on the expiration of a notice to determine the lease, or to quit; or of intention to quit the property leased duly given by one party to the other. The periodic leases like leases from year to year or from month to month are terminated by notice to quit under section 106 T.P. Act. On termination of tenancy by notice the relationship of landlord and tenant comes to an end and acceptance of money as rent does not automatically amount to the waiver of the notice to quit. It is the intention of the landlord which is material i.e. whether he intended to waive notice by accepting money as rent or he intended not to waive it off and accepted the amount as damages for wrongful use and occupation and not as rent. If the notice is not in accordance with law it is invalid.
Doctrine of "Waiver" - A waiver is an intentional relinquishment of a known right. There can be no waiver unless the person against whom the waiver is claimed had full knowledge of his rights and of facts enabling him to take effectual action for the endorsement of such rights. Waiver is meaningful in following two respects :
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."
Ans. Term "Exchange" has been defined u/s 118 of T.P. Act as :-
"When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called "Exchange".
A transfer of property in completion of an exchange can be made only in the manner provided for the transfer of such property by sale."
So Exchange is the mutual transfer of ownership of one thing for the ownership of another neither thing or both things being money only. Such a transaction by which mutual ownership is transferred is called an exchange and the things may be movable or immovable. It should be noted that if one of the two properties which are to be exchanged exceeds the other in value, the transaction would nonetheless be an exchange if some money is paid by the owner of the other property in order to equalize the value of both property.
A transfer of property in completion of an exchange can be made only in the manner provided for the transfer of such property by sale. In exchange the ownership of one thing is transferred in consideration of the ownership of another thing. Section 120 of the Act provides that the rights and liabilities of the parties are precisely those provided for the parties in a transaction for sale. Each party to an exchange has a dual capacity. He is a seller as to that which he gives and a buyer, as to that which he takes. Certain rights available to seller and a buyer in a sale transaction are necessarily excluded in the case of an exchange. Thus there can be no seller's charge for unpaid purchase money in the case of an exchange.
Essentials. -
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.
Ans. What is Gift ?
In Section 122 of the Transfer of Property Act, `gift' has been defined as under :-
"Gift" is the transfer of certain existing movable or immovable property, made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.
Such acceptance must be made during the life-time of the donor and while he is still capable of giving.
If the donee dies before acceptance, that gift is void.
Gift is the transfer of ownership in an existing movable property without any consideration. The essence of gift is a voluntary and gratuitous transfer of ownership in a property in favour of another person. Gifts may either be a Gift inter vivos, of Gift Testamentary. A gift `inter vivos' takes place between living persons. Testamentary gift is termed as "will" and takes place (operates) only after the death of the transferor (testator). Gifts by testaments (i.e., a will) are outside the scope of this Act. The Transfer of Property Act lays down the law relating of gifts inter vivos only.
A gift is undoubtedly a transfer which does not contain any element of consideration in any shape or form. In fact, where there is any equivalent or benefit measured in terms of money in respect of a gift the transaction ceases to be a gift and assumes a different colour. The motive or the purpose of making a gift should not be confused with the consideration which is the subject-matter of the gift. Love, affection, spiritual benefit and many other factors may enter in the intention of the donor to make a gift but these filial considerations cannot be called or held to be legal considerations as understood by law. It is manifest, therefore, that the passing of monetary consideration is completely foreign to the concept of a gift having regard to the nature, character and the circumstances under which such a transfer takes place. (Sonia Bhatia v. State of U.P., A.I.R. 1981 S.C. 1274).
Section 122 of the Transfer of Property Act, thus clearly postulates that a gift must have two essential characteristics :
(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.
Ans. Under Section 125 a gift of a thing to two or more donees of whom one does not accept it is void as to the interest which he would have taken had he accepted. The gift in the instant case would not fail in toto. It is void only to the extent of 1/3rd interest which Z would have taken had he accepted the gift. So X and Y can claim each of his 1/3rd share of the gifted property.
When a gift is made to two persons jointly of whom one dies not accept it, the other donee cannot take the whole gift. But gift made to two donees jointly with right of survivorship is valid and upon death of one the surviving donee takes the whole. [Charia Cannan v. Karumbi, A.I.R. 1973 Ker. 64].
Ans. Revocation of gift - Section 126 of the Act lays down as to when a gift may be suspended or revoked. The gift may be suspended or revoked by agreement between the donor and the donee and on the happening of any specified even which does not depend on the will of the donor. A gift revokable at the donor's pleasure is no gift at all.
When gift is revoked wholly or in part at the mere will of the donor, the gift is void.
The donor cannot revoke gift at his will and pleasure but he had to get it set aside in court of law by putting such pleas as bear on the invalidity of the gift deed.
A gift of certain properties was executed in lieu of the past and future services rendered to by donee to donor. But for future services by donee to donor as condition to failure of it, the gift deed will be revoked was not mentioned as a condition in gift deed. It was unconditional and cannot be revoked. Moal Raj v. Jamma Devi, A.I.R. 1995 H.P. 117.
Again a gift may be revoked in any of the cases in which if it were a contract, it might be rescinded.
This section however protects the interest of a transferee for value without notice. [Ali Miji v. Uziz Ali Sheik, AIR 1938 Cal 157].
In Afshar Shaikh v. Sulaiman Bibi, AIR 1976 SC 163 it was held that law as to undue influence in case of gift inter vivos is the same as in the case of a contract. It is not sufficient for person seeking the relief to show that the relations of parties have been that the one naturally relied upon the other for advice and other was in position to dominate the will of first in giving. More than mere influence must be proved so as to render influence in language of law to be "Undue".
Ans. Onerous gift. - (a) The term onerous gift has been defined under Section 127 of the Transfer of Property Act which runs as follows :
Where a gift is in the form of a single transfer to the same person of several things of which one is, and the others are not burdened by an obligation, the donee can take nothing by the gift unless he accepts it fully.
Where a gift is in the form of two or more separate and independent transfers to the same person or several things, the donee is at liberty to accept one of them and refuse the others, although the former may be beneficial and the latter onerous.
This section is based upon the maxim qui senise commodum sentise debet et onus (he who receives advantage must bear the burden also. Thus the principle is that he who accepts the benefit of transaction must also accept the burden of the same).
Onerous gift to disqualified person. - A donee not competent to contract and accepting property burdened by any obligation is not bound by his acceptance. But if, after becoming competent to contract, and being aware of the obligation, he retains the property given, he becomes so bound.
Illustrations. - (a) A has shares in X, a prosperous joint-stock company, and also shares in Y, a joint-stock company in difficulties. Heavy calls are expected in respect of the shares in Y. A gives B all his shares in joint- stock companies. B refuses to accept the shares in Y. He cannot take the share in X.
(b) A, having a lease for a term of years of a house at a rent which he and his representatives are bound to pay during the term and which is more than the house can be let for, gives to B the lease and also, as a separate and independent transaction, a sum of money. B refuses to accept the lease. He does not, by his refusal, forfeit the money.
Section 129 of the Transfer of Property Act lays down that the chapter relating to gift of the Transfer of Property Act, shall be deemed to have no effect on any rule of Mohammedan Law.
(c) Y's death before acceptance. - In the present case under Section 125 of the Transfer of Property Act, if Y dies before the acceptance of the gift, the gift would be void only to the extent of his interest and would be valid to the extent of X's interest.
Y's death after acceptance. - In case Y dies after acceptance the gift will be complete and the shares will pass on his heirs. In case X's and Y's shares are defined the surviving donee and the heirs of deceased donee will get accordingly. In case of undermarcated shares presumption would be of equal shares. Y's death in either case will have no effect on the right of X under the gift.
Ans. Universal Donee
A universal donee is a donee of the entire property, excepting any insignificant part for maintenance by the donor. Where the donor retains the equity of redemption in certain properties and makes a gift of the other properties, the donee is not a universal donee. The position of universal donee and universal legatee is nearly the same.
Where a donee holds the entire properties of the donor, he is bound to discharge the latter from all the liabilities to the extent of the property comprised in the gift. The liability of the donee is personal for the debts due by and liabilities of the donee at the time of the gift to the extent of the property comprised therein.
Law relating to universal donee is contained under Section 128 of T.P. Act. It provides that where a gift consists of donor's whole property, the donee is personally liable for all the debts due by, and liabilities of the donor at the time to the gift of the extent of the property comprised therein.
If the universal donee is a minor, he would be under no liabilities unless he retained the property after attaining majority. This section applies to gifts by Mohammedans or in favour of Mohammedans but it does not apply to Hiba-bil- ewaz because it is not a gift.
If donor is earning some money by way of salaries but he has made gift of all of his movable and immovable properties, the donee is nevertheless universal donee. [Shaikh Pathamma Bi v. Sri Venkata Chalapathy Finance Company, A.I.R. 1978 A.P. 401].
Ans. Actionable claim. - "Actionable claim means a claim to any debt other than a debt secured by mortgage of immovable property or hypothecation or pledge of immovable property or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognize as affording ground for relief whether such debt or beneficial interest be existent, accruing, conditional or contingent." (Section 3).
Actionable claims therefore include :
Claims. - (1) as to unsecured debts, or
(2) as to beneficial interest in movable property.
Illustrations. - (a) A owes Rs. 1,000 to B. The debt of Rs. 1,000 is an actionable claim.
(b) A pays Rs. 5,000 to B for his house in anticipation of the execution of the sale-deed. This repayment is an actionable claim.
(c) A lets a farm to B on an annual rent of Rs. 5,000. This Rs. 5,000 is an actionable claim.
(d) Money due for goods sold.
(e) The right to claim benefit of a contract for the purchase of goods.
(f) A claim to money due under insurance policy.
(g) A claim to rent to fall due in future.
(h) A claim to recover arrears of maintenance.
(i) A Mahomeden widow's claim for unpaid dower.
(j) A negotiable instrument.
The following are not actionable claims :
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."