Transfer of Property Act Notes - Pahuja Law Academy

TPA

TRANSFER OF PROPERTY ACT (STUDY PLAN)

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

LECTURE-1 Definition clause

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

Explain the meaning of “Transfer of property” under Transfer of property Act. Also discuss what can be transferred?

Distinguish between movable and immovable property..

Define explain expression “Immovable property” under Transfer of property Act.

What do you mean by (Profit a prendre) Explain through case law. .

Explain the doctrine of fixture. .

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

LECTURE-1

STAR FACTS

• Act ‘4’ of 1882

• Passed on 17/02/1882

• Came into force on 1st July 1882

[Trick to remember]

Property ——- (land)

• Signed by Lord Rippon

• Transfer of property is a subject in “concurrent list” of 7th schedule of Constitution of India as [ENTRY 6 OF LIST III]

Except

That relating to agricultural land C is a state subject and the same is [ENTRY 18 LIST II]

FOR understanding PREAMBLE

Scope/ object of this statute 1st understand

WHAT IS PROPERTY?

Property means anything to which any person may have legal title

[LEGAL- means something enforceable by law]Legal title comprises of Bundle of Rights likewise ownership is nothing but Bundle of Rights which comprises

• Right to Sale

• Right to possess

• Right to enjoyment etc.

Following four factors will decide as to which statute will govern the transaction.

These are

The preamble of the Transfer of property Act, 1882 provides that it is expedient to define and amend the law relating to transfer of property by act of parties.

By summarizing this we can arrive at the conclusion that T.P. Act 1882 is an Act to deal with only specified transactions of transfer by Act of parties

Since

As has been already told that, prior to this enactment, the courts were deciding the matters

• By referring English Law on real properties

• Customary Laws &

• Justice, equity, good conscience and fair play.

Thus

The laws laid down so far were amended by this act and certain new provisions were incorporated.

This preamble now is where as it is expedient to define and amend Certain parts of the law relating to transfer of property by Act of parties

T.P. Act 1882 is supplemental to:-

• Indian Registration Act 1908

• Indian Contract Act 1872

THUS

From the above discussion we can safely infere that the PROVISIONS OF T.P. ACT are NOT EXHAUSTIVE AND , This Act deals with transfer by Act of parties i.e. by living persons ,which is also known as inter-vivos transfer.

Living persons—for the purpose of this Act

Includes—[i.e. inclusive definition]

BUT

Laws governing such transfers to or by such company, associated body shall prevail upon the provisions of this law.

NOW

Let us understand basic scheme of the Act if helps

• To understand the structure of Act

• To memorise sections

• To comprehend the concept of the Act.

Section 5 of TP Act 1882, defines –

An Act by which

• a living person

• conveys property

• to

—one or more living persons or

—himself or

—himself and one or more living persons

living persons for purposes of this act includes :-

• individual

• company

• association or

• body of individual either incorporated or not

Evident from the above definition

A person need not be an owner of the property

Thus, as per section 7

Persons competent to transfer are :-

• persons competent to contract and

• entitled to transferable property or authorize to dispose of transferable property not his own.

The Transfer once done is operable forthwith in the absence of any express or implied contract otherwise.

DEFINITION CLAUSE

1. Immovable property

2. Instrument

3. Attested

4. Registered

5. Attached to the earth

6. Actionable claims

7. A person is said to have notice.

Instrument means a legal document. Where a property is transferred through any document is called instrument. Section 3 of the Act defines instrument as a non- testamentary instrument. it clarifies that the Act excludes testamentary instruments.

Registered means

• Registered in any part of the territories to which TP Act extends, under the law regulating registration of documents in those territories

Immovable Property

Defined in Para I of section 3 but the definition is neither comprehensive nor exhaustive and is merely negative definition and merely provides :-

-Immovable property does not include

• Standing timber

• Growing crop and

• Growing Grass

Term immovable property is also defined u/S- 2(6) of Registration Act, 1908 –<

immovable property” includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass.

S- 3(26) of General Clauses Act, 1897 – “immovable property” shall include land,benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.

Thus, holistic and harmonious construction of all the three definitions the term Immovable property includes :-

1) Land,

2) benefits arising out of land (profit a prendre) &

3) Things attached to the earth

Attached to earth has been defined in para V of section 3 of TP Act

Benefit to arise out of earth :-

Is in peri materia with “Profits a prendre” in English law

Prendre means TO TAKE (a French verb)

The phrase “benefits arising out of land “ means profits derived from land without having any substantial control over the land. it is also known as “profit a prendere”. Ordinarily / in the absence of any intention to the contrary, all the benefits arising out of land stands transferred to the transferee, forthwith.

Illustration :- 1. X sells his land to Y but defers the transfer of possession to another one year so as to allow the benefits of the trees standing and growing thereon.

Illustration :- 2. X sells a forest to Y, the trees, rivers, minerals etc,. forming part of the land will go with it forthwith in the absence of any express contract to the contrary or by necessary implication.

Case Law:

Ananda behera vs. State of Orissa:

(AIR 1956 SC 17)

Held : Right to catch fish from chilka lake was held to be an interest in immovable property being benefit arising out of land.

Shanta bai vs. State of Bombay

(AIR 1959 SC 532)

Held : Right to fell, cut and collect standing timber from the trees in various stages of their growth and extending over a period of 12 years was held to be an interest in an immovable property.

State of Orissa vs. Titaghur paper mills company limited

Things attached to earth:–

Is in peri meteria with “doctrine of fixture”–

And means :-

• Things rooted in earth

• Things imbedded in earth or

• Things attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is so attached.

Thus, the question of nature of property is a mix question of fact and law and can be determined on the basis of –

• Intention, object and purpose of the party attaching the property

• Duration of attachment

• Degree of attachment

• Mode of attachment

And is known as doctrine of fixtures and is based on the maxim “quic quid plantature solo, solo credit” which means whatever planted to soil belongs to soil.

Case law:

On the basis intention, duration and purpose

Bamdev Panigrahi vs. Manorama Raj

(AIR 1974 AP 226)

Touring talkie case.

Duncans industries limited vs. State of UP

(2000) 1 SCC 633

Fertilizer business case.

Sirpur parper mills limited vs. CCE

(1998) 1 SCC 400

Notice

Para VII of interpretation clause that is section 3 of TP Act deals with notice

Notice means:-

Knowledge of a fact

Significance :-

In law knowledge of a fact affects one’s legal rights & liabilities.

Types of notice:-

(i) Actual notice

(ii) Constructive notice

(1) Actual notice means and express notice and is a matter of fact. It is sufficient to raise the presumption and determine the rights and liabilities of the party having actual notice of material facts.

Pre Requisites of Actual notice :-

• Must be definite information

• Information shall be given by the person interested

• Information shall be given to the party to the transaction

• Information shall be given in the course of same transaction

(2) Constructive notice –also known as implied / deemed notice. The doctrine of notice purely based on equity. It’s a mix question of fact and law

It is a knowledge with the court impute to the person under the circumstances raising strong presumption.

Legal presumption of constructive notice is raised by the court under following five circumstances

(a) Willful abstention from enquiry or search

(b) Gross negligence

(d) Actual possession as notice

(e) Notice to the agent ( also called as ‘imputed notice’)

Llyod banks limited vs. P. E. Guzdar and Company (1929) 56 Calcutta 868

Imperial bank of India vs. U. Raj GYAW (1923) 50 IA 283

Ahamdabad municipal Corporation vs. Haaji Abdul gafoor AIR (1971) SC 1201

Md. Mustafa vs. Haaji Md Issa AIR (1987) Patna V

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

PRELIMINARY QUESTIONS

Immovable property does not include standing timber:

(a) True

(b) False

(d) Only the branches of timber does not include in immovable property.

A sheesham tree is:

(a) Movable property.

(b) Immovable property.

(d) Depend

“Standing timber-comes under the definition of ‘movable property, therefore; ‘bamboo’ would not come under the definition of immovable property”. This was laid down in:

(a) State of Orrisa v Titagarh Paper Mills Ltd.

(b) Md. Afzal v Qasim

(d) Nalha Lal v Phoolchanara

Which of the following is an immovable property :

(a) Standing timber

(b) Growing crops

(d) Tree bearing fruits

Which is not the immoveable property?:

(a) A lease of land

(b) Growing crops

(d) A life interest in the income of immoveable property

Which is not the immoveable property?:

(a) A lease of land

(b) Growing crops

(d) A life interest in the income of immoveable property

Which is not the immoveable property?:

(a) A lease of land

(b) Growing crops

(d) A life interest in the income of immoveable property

Which of the following does not come under the immovable property’ as per the T. P. Act?

(a) Rights relating to lease

(b) Easementary rights

(d) Sale of a ceiling fan

The term “profit a prendre“ means

(a) Things imbedded in the earth

(b) Things attached to the earth

(d) all of the above

Living person for the purpose of section 5 of the Transfer of Property Act, 1882 means

(a) an individual

(b) company

(d) all of the above

The Transfer of Property Act, 1882 came into force on

(a) 1 July 1882

(b) 1 July 1881

(d) 1 September 1881

‘Imputed notice’ means

(a) actual notice

(b) constructive notice

(d) all of the above

LECTURE-2

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

A sold a house to B and on that date B executed a separate that if he wished to sell the house, he would not sell it to any other person unless A declines to purchase. Examine the validity of this restraint on alienate..

What do you understand by conditional transfer of property?.

What is the difference between section 10 and 11 of the Transfer of property Act?.

Under which conditions a direction for accumulation is void?

What are the exceptions of the directions of accumulations ?

• Absolute transfer of property be transferred in case of sale, exchange and gift.

(Section 10)

1. Muhammad Raza v. abbas bandi Bibi (AIR 1932 PC 158.)

A partial restraint is valid and enforceable. A condition restricting the transfer outside the family of the transferor is valid and enforceable.

2. Brahmanand v. Raushni

A transferee can transfer his property only in favour of any of his successor was held as an absolute restriction & void.

3. Tagore v. Tagore (1878 Privi Counsel)

A transferee can transfer his property only for religious purpose been held as absolute restriction & void

(Section 11)

• Restraining the mode of the transfer

• Transfer must be of absolute interest

• Absolute transfer of property be transferred in case of sale, exchange and gift.

(Section 12)

• Transfer involving the condition that in case of insolvency that in case of insolvency or attempted transfer of the property would be void.

• Such condition is VOID but transfer is valid

Section 17 – Direction for accumulation

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

PRELIMINARY QUESTIONS

‘Rule against double possibilities’ was recognized in which one of the following cases?:

(a) Girjesh Datt v Datadin.

(b) Whitby v Mitcell

(d) Sopher v Administrator General of Bengal.

‘Rule against accumulation’ is an important rule of the T. P. Act, laid down in:

(a) Sec. 17.

(b) Secs. 17-18.

(d) Secs. 18-20

‘Rule against accumulation’ is an important rule of the T. P. Act, laid down in:

(a) Sec. 17.

(b) Secs. 17-18.

(d) Secs. 18-20

‘What is the limit of accumulation of income in relation to the transfer of property -:

(a) Life of the transferor.

(b) A period of 18 years from .the date of the transfer.

(d) Only (b).

‘A direction for accumulation of income even beyond the periods stated in Sec. 17 of the T. P. Act is valid if it is for the purpose of:

(a) Payment of the debts of the transferor.

(b) Provision of portions for children.

(d) All of the above.

‘Under T. P. Act, a condition absolutely restraining the alienation is:

(a) Valid.

(b) Void.

(d) Irregular

‘‘A’ sold a property to ‘B’ on the condition that ‘B’ could not transfer the property without ‘A’s consent

(a) The condition is illegal.

(b) The condition is legal.

(d) None of the above

‘Which of the following conditions amounts to an absolute restraint on alienation of property:

(a) A condition that transferee shall not transfer the property by way of gift.

(b) A condition that transferee shall not transfer the property for a period of 5 years.

(d) A condition that transferee shall not transfer the property to a particular person.

A, B and C divided a Joint Family Property and made a settlement that if any of them does not have a successor then he will not sold his portion and leave-it to other relatives:

(a) The condition is illegal.

(b) The condition is illegal in relation to private property.

(d) None of the above

‘A’ has certain property. ‘B’ is ‘A’s son and his only heir. Then:

(a) B cannot transfer the property during A’s lifetime.

(b) B can transfer the property during A’s life time.

(d)The T. P. Act does not contain any provision in this regard.

A sells a house to B directing B that he cannot reside in it but can use it only as agodown or shop , the condition being

(a) Valid.

(b) Void.

(d) Valid, B is entitled to use the house as his residence.

LECTURE-3

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

A transfers property of which he is the owner to B in trust for A and his intended wife successively for their lives and after the death of the survivor, the eldest son of the intended marriage for life. And after his death for A’s second son. Does the interest so created for the benefit of the eldest son take effect? Decide.

What is meant by rule against perpetuity? Illustrate pointing out the distinction between English and Indian Law.

A property is given to Anil for life and afterwards to Bimal. Bimal transfer this interest to Chandan, Bimal dies during the life time of Anil. Chandan claims the property? Decide.

How a property to an unborn person can be transferred?.

What are the exceptions of rule against perpetuity?

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

Transfer for the benefit of unborn person not in existence

(Section 13)

• No direct transfer to unborn person. A transfer to unborn person can be made in following manner,

• Transfer for benefit of unborn person : two rules

1. Prior limited interest must be created in favor of a person in existence at the date of transfer.

2. Further “the whole of the remaining interest” of the transferor in the property must be given to the unborn person i.e. only absolute interest may be given

Leading cases

5. vesting of interest in favor of ultimate beneficiary may be postponed only up to the life or lives of living person plus minority of ultimate beneficiary ; but not beyond that

Why a person desires to make a perpetual transfer?

• To attach his name with the property for long time or for always.

• To make sure use of property as transferor wants.

Exceptions of rule against perpetuity:

1. S- 18

2. Creation of charge

3. Renewal of lease (s-105)

4. Mortgage

5. Personal rights like right to preemption

6. Provision for payment of debt (sec -17)

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

PRELIMINARY QUESTIONS

Whether a transfer can be made in favour of an unborn person?

(a) Yes by machinery of trust

(b) Yes

(d) None of the above

Section 13 of T. P. Act deals with:

(a) Conditions restraining alienation;

(b) Oral transfers

(d) Registration of transfers

When does an unborn person acquire vested interest on transfer?>

(a) As soon as he is born.

(b) On attaining majority.

(d) After marriage if female.

The ‘Rule against perpetuity is discussed in which section of T. P. Act?

(a) Sec 14.

(b) Sec15.

(d) Sec 17.

In transfer of property, law is against perpetuity because:

(a) The property will remain tied up forever.

(b) There will be no industrial progress.

(d) All of the above.

“The rule against perpetuity applies only in those circumstances where a new interest in immovable property is created.” This was held in:-

(a) Nafar Chandra v Kailash.

(b) Padamanath Ayyar v Sitaram Ayyar.

(d) Ram Prasad v Ram Mohit.

‘Rule against double possibilities’ was recognized in which one of the following cases?

(a) Girjesh Datt v Datadin.

(b) Whitby v Mitchell.

(d) Sopher v Administrator General of Bengal.

The rule against double possibilities has been incorporated under section

(a) Section 14

(b) Section 13

(d) Section 11

The restrictions contained under sections……………………. shall not apply in the case of a transfer of property for the benefit of public in advancement of religion, knowledge, commerce, health, safety, or any other subject beneficial to mankind.

(a) 14, 16 and 17

(b) 14, 15 and 16

(d) 16, 17 and 18

Provision for the Contingent and Vested interest has been given under sections ………….. respectively.

(a) 19 and 20

(b) 19 and 21

(d) 21 and 22

LECTURE - 4

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

What do you understand by doctrine of acceleration?.

What do you understand by transfer by an ostensible owner?.

What is ‘doctrine of election’? State the exceptions of it, if any ?

What is “apportionment” ? state the relevant provision under the transfer of property Act ?

What do you understand by ‘Feeding grant by Estopple’ ? State the relevant provision under the transfer of property Act.

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

Doctrine of Acceleration (Section 27)

Essentials

(i) Section 27 of the Act contemplates a situation in which a second transfer takes effect on failure of prior valid interest.

• Two interests created in the same transaction.

• Upon failure of the first interest the subsequent interest takes effect even though failure of the first was not in the manner intended by the parties

Exceptions

Paragraph (2) of the section 27

First, where the prior interest is VOID the second interest dependent on it also fails and cannot be carried out under this section.

Second , where the intention of the parties is clear and specific that the second transfer fails in particular manner, the second or subsequent transfer would not take effect unless the prior interest fails in that particular way.

Section 41

Transfer by Ostensible owners

Ostensible Owner— A person who have all characteristics of real owner except the intention to own the property.

Essentials

• There is transfer of an immovable property by ostensible owner with express/ implied consent of the real owner.

• The transfer is for consideration

• The transferee has acted in good faith.

• The transferee has exercised reasonable care in finding out the transferor’s power to make the transfer.

NOTE—The above mentioned rule is exception to the maxim ‘nemo dat quod non habet’ ‘Which means no person can transfer a better title than he himself’

[Section 35]

Doctrine of election

The doctrine of election is stated in Section 35 of the Transfer of Property Act alongside Section 180 to 190 of the Indian Succession Act.

Section 180, Circumstances in which election takes place.—Where a person, by his will professes to dispose of something which he has no right to dispose of, the person to whom the thing belongs shall elect either to confirm such disposition or to dissent from it, and, in the latter case, he shall give up any benefit which may have been provided for him by the Will.

Section 182 in the Indian Succession Act, 1925

Section 182, Testator’s belief as to his ownership immaterial—The provisions of sections 180 and 181 apply whether the testator does or does not believe that which he professes to dispose of by his Will to be his own.

Illustrations

The farm of Sultanpur was the property of C. A bequeathed it to B, giving a legacy of 1,000 rupees to C. C has elected to retain his farm of Sultanpur, which is worth 800 rupees. C forefeits his legacy of 1,000 rupees, of which 800 rupees goes to B, and the remaining 200 rupees falls into the residuary bequest, or devolves according to the rules of intestate succession, as the case may be.

It states that when a party transfers a property over which he does not hold any right of transfer and entailed in that transaction is the benefit conferred upon the original owner of the property, such title-holder must elect his option to either validate such transfer of property or reject it; upon rejection, the benefit shall be relinquished back to the transferor subject nevertheless:

• “Where the transfer has been through gratuitous means and the transferor has become incapable of making a new transfer.

• In all cases where the transfer is for consideration”.

An illustration to further explain:

A owns a property that is worth Rs 800. B professes to transfer the same to C through the Rs1000 instrument to A. But the A, the owner opts/elects to retain his property and thus, forfeits the gift of Rs 1000.

EXCEPTIONS

When the owner who is considering the election between retaining the property and accepting a particular benefit, chooses the former, he is not bound to relinquish any extraneous benefit that he gains through the transaction.

The acceptance of the benefit by the original owner shall be deemed to be as election by him to validate the transfer, if he is aware of his responsibilities and the circumstances that might influence a prudent man into making an election.

This knowledge of the circumstances can be assumed if the person who gains the benefit enjoys it for a period of more than two years. Further discussion over this has been made under the heading of “Modes of Election”.

If the original owner does not elect his option within a year of the transfer of property, the transferor would require him to elect his choice. Even after the reasonable time, if he still does not also still elect, the original owner shall be assumed to have elected the validation of the property transfer as his choice.

In context of a minor, the period of election shall be stalled till the individual attains majority unless he is represented by a guardian.

UNDERSTANDING THE PRINCIPLE

In simple words, a person utilizing the benefits of an instrument also has to carry the burden attached. This doctrine is founded upon a model wherein a person persuades another to act in a manner to his prejudice and derives any advantage from that, then he cannot turn around and claim that he was not liable to perform his part as it was void. This doctrine is universal and is applicable to Hindus, Muslims as well as Christians and is applicable to movable as well as immovable properties.

So, this doctrine contains the principle that the exercise of a choice by a person left to himself of his own free will to do one thing or another binds him to the choice which he has voluntarily made, and is founded on the equitable doctrine that he who accepts benefit under an instrument or transaction of his choice must adopt the whole of it or renounce everything inconsistent with it. Thus, it is a general rule that a person cannot approbate and reprobate at the same time. Also, the election is confined to the case of a gift or Will and does not apply in case of a legal remedy.

Conditions precedent for equity of election:

• A transfer of property by a person who has no right to transfer;

• As a part of the same transaction, he must confer some benefit on the owner of the property and

• Such owner must elect either to confirm such transfer or to dissent from it.

OTHER IMPORTANT CONDITIONS

Proprietary Interest

Election over a property is not asked to made by a person unless he holds a proprietary interest which are disposed off in derogation of the person’s rights.

So, election cannot take place if the property that is decided by the transferor to be disposed does not happen to be owned by any individual to whom an interest is being provided through the transfer. Also, it cannot take place if the transferor does not provide any benefit on the individual who is the original owner of the property.

“As part of the same transaction”

One cardinal condition for the doctrine of election to be executed is that the benefit conferred upon the original owner should be as part of the same contract by which he transfers the property over which he holds no right to transfer.

In the landmark case of Ramayyar v. Mahalaxmi, a widow had given a gift in excess of her powers and had then provided a will which stated that “excluding the properties which I have already given away, I will make the following dispositions”. The Court ordered that the plaintiff under the will was not excluded from the election doctrine from contesting the previous gift which wasn’t the issue of the will at all.

Donor’s Intention

In order to create a situation of election, it is important that the intention of the testator should be clear with regard to disposing of the property which he does not own. Parol evidence is not acceptable and thus the intention must be prima facie clear.

Indirect Benefit

The benefit that the original owner is conferred with has to be direct in nature and if indirect, he does not need to elect. This principle is explained in Section 184 of Indian Succession Act, 1925 and states that “when the devisee who claims derivatively through another does not take under the deed, and is not bound by the equity attaching thereto.”

Difference in Capacity

An individual can in one capacity utilize a benefit while can dissent or reject that benefit in another capacity. It means to explain that it is possible to facilitate two roles of an individual wherein he can for example, accept legacy for an estate while in his personal competence, he could retain the property.

Modes of Election

The election by the owner can either be direct or indirect. In direct election, it is simply through communication about the elected choice or option. Though, in case of an indirect election, “the acceptance of the benefit by the original owner is subject to two conditions:

1. He has to be aware of his duty to elect, and

2. There must be proof of knowledge of circumstances which would influence the judgment of a reasonable man in making an election:

Enjoyment for two years of the benefit by the person on whom it is conferred with any dissent.

The election shall be presumed when the donee acts in such a manner with the property gifted to him that it becomes impossible to return it to the original owner in its original state.

Difference between English Law and the Indian Law Perspective:

The English law depends upon the principle of compensation which means that if the original owner does not choose to validate the transfer, he can keep the property and also the benefit accrued, subject to compensation provided to the donee, to the extent of the property he had suffered a loss for.

whereas in case of Indian law, this doctrine is influenced by the principle of forfeiture which states that if the original owner does not choose to validate the transfer, the donee incurs a forfeiture of the conferred benefit which goes back to the transferor.

COMPENSATION

Estimated cost of the property which is attempted to be transferred towards the transferee is the approximation of the compensation that he shall receive. However, in context of immovable properties, there arises the issue of changing value of the property according to the lapse of time. Thus, this valuation is to take place at the date of the instrument becoming operational rather than at the time of election

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

PRELIMINARY QUESTIONS

The ‘doctrine of election’ is laid down in:

(a) Sec. 30.

(b) Sec. 55.

(d) Sec. 35.

In which of the’ following cases it was laid down that “no person can at the same time accept or reject an instrument of transfer”.

(a) Rangamma v Atchama.

(b) Vidhyamma v V. Shakar Narayan.

(d) Rendell v Pen.

The rule of election has been stated by Lord justice Lopez in:

(a) Cavendish v Dacre.

(b) Dalton v Fitzerald.

(d) Den v Slaiter.

Election implies:

(a) Choosing between two rights where there ista clear intention that both were not intended to be enjoyed.

(b) Transfer under one condition where there are two conditions.

(d) None of the above.

Mark the incorrect statement in relation to doctrine of election:

(a) This rule will apply only when two properties are transferred by the same deed.

(b) The owner of the property should get a direct benefit from the transfer.

(d) The period of limitation for election is one year.

Which of the following is a leading case on ‘doctrine of .election’:

(a) Kapoor v Kapoor.

(b) Satyendra Nath Thakur v Nilkant Mishra.

(d) All of the above.

The farm of Sultanpur is the property of C and worth Rs. 80,000. A, by an instrument of gift professes to transfer it to B, giving by the same instrument Rs.1,00,000 to C. A dies before the election. B shall be:

(a) Entitled to get Rs. 20,000 from C.

(b) Entitled to get Rs. 80,000 from C.

(d) Not entitled to get any amount from any one.

Which section deals with apportionment of periodical payments as between the transferor and the transferee?

(a) Sec. 35.

(b) Sec. 36.

(d) Sec. 38.

When property is transferred, what is to be apportioned between the transferor and the transferee:

(a) Rents, annuities, pensions.

(b) Rents, annuities, pensions and dividends.

(d) None of the above.

A has let his house at a rent of Rs. 100 payable on the last date of each month. A sells house to B‘ on the 15th of June. On 30th June what will be apportionment?

(a) A will get a Rs. 100.

(b) B will get Rs. 100.

(d) The tenant will be exempted from payment of rent of that month.

LECTURE-5

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

What do you understand by Doctrine of part Performance”? What are the requirements of part performance?

Define fraudulent transfer under Section 53 of TPA?

What is doctrine of “lis pendens”? State the relevant provision under transfer of property, Act 1882

Under what conditions a transfer of an immovable property is bound by the decision of the Court?

What are the exceptions to the provision of fraudulent transfer, under transfer of property, Act 1882?

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

DOCTRINE OF PART PERFORMANCE:- (Section-53A)

STAR FACTS:-

• Inserted by 1929 amendment Act.

• Substantially amended by 2001 amendment.

• Originated from the schools of equity.

• Applies only to transfers of Immovable Property.

Essential ingredients:-

• Contract to transfer must be in writing

• For consideration — signed by the Transferor.

• Certainty of terms as to constitute transfer.

• Document is registered (after 2001 amendment).

• Possession of property.

Taken by the transferee in part performance of the contract.

Transferee retained the possession & has done some act in furtherance of the contract.

Absolute transfers:-

• SALE—- chapter III, sections 54-57

• Exchange—Chapter VI Sections 118-121

• Gift———- Chapter VII Sections 122-129L

‘Lis pendens’

[Section 52]

The doctrine of ‘lis pendens’ as laid down under section 52 is as follow:

(A) During the pendency of a suit or proceeding.

(B) Property cannot be transferred or otherwise dealt with.

(C) If so transferred the transferee is bound by the decision of the court whether o not he had notice of suit or proceeding.

Essentials of section 52

(A) There is a pendency of suit or proceeding.

(B) The suit or proceeding must be pending in a Court of competent jurisdiction.

(D) The suit or proceeding must not

(E) The property in dispute must be transferred or otherwise dealt with by any party to suit.

(F) The transfer must affect the rights of the other party to litigation.

Fraudulent Transfer

(Section 53)

Fraudulent Transfer of Property and its effect

1. Introduction

The principle of section 53 is based on the rule of justice, equity and good conscience. The section enumerates fraudulent transfer. A transfer made with intention to defeat any right of the transferee or of any other person interested therein is called fraudulent transfer of property. Such transfer is not void but voidable at the option of person named.

Fraudulent Transfer

What is Fraudulent Election?

• In Re More (1887)

• Musher shalu v. Lala Haqun Lal (1915 P.C)

• Abdul Shakur v. Arzee Papa Rau (1963 SC)

In all the three cases a fraudulent transfer based on fraudulent election in favour of any of the creditor have been declared fully lawful and beyond subject of ambit of S.53

Essential Elements

1. There must be a contract of transfer of property.

2. The contract must be:-

a) In writing

b) Signed

c) Registered[sec 17(1-A) of reg. Act (1908)]

3. At the time of contract Plaintiff must be competent to transfer.

4. Defendant (Transferee):-

a) Either has taken possession already in possession done some act in furtherance of the contract.

b) He has performed or is willing to perform his part of the contract.

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

PRELIMINARY QUESTIONS

Which section of T. P. Act deals with fraudulent transfers?

(a) Sec 53.

(b) Sec 52.

(d) Sec 55-A.

Every transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be:

(a) Void.

(b) Voidable.

(d) Irregular.

Under Section 53 of the Transfer of Property Act,’ 1882, every transfer of immovable property made with the intent to defeat or delay the creditors of the transferor is: –

(a) Voidable at the option of any creditor of the transferor.

(b) Void and hence transfer of property is inoperative.

(d) Void if made in favour of any person without consideration.

Every transfer of immoveable property made to defraud subsequent transferee, the first transfer being without consideration is:

(a) Void.

(b) Voidable.

(d) Voidable at the option of transferor.

Section 53-A of T. P. Act deals with:

(a) Fraudulent transfers.

(b) Part-performance of a contract.

(d) Doctrine of election.

Mark the incorrect statement:

(a) The doctrine of part performance of contract is based on the general doctrine of prevention of fraud.

(b) It is meant to protect transferee, who have taken possession, spent money in further improvements, in reliance upon the documents which are ineffective as transfers for want of registration, etc.

(d) In India, the doctrine applies to oral as well as written agreements.

WThe doctrine of part performance as given in Sec. 53-A of T.P. Act is:

1. A statutory right.

2. An equitable right.

3. Available in defence.

Codes:

(a) 1 and 3.

(b) 1 and 2.

(d) 2 and 3.

Which is not the ingredient of Sect 53-A of T. P. Act?

(a) Agreement for transfer.

(b) Consideration.

(d) Moveable property.

An act of part performance must be an act in performance of:

(a) Crime.

(b) Tort.

(d) Will.

In which of the following cases, the Supreme Court held that: “In considering whether a person is willing to perform his part of the contract, the sequence in which the obligations under a contract are to be performed must be taken into account”:

(a) Perumal v Ramaswami.

(b) Ram Prasad v Ram Mohit.

(d) Sant Lal v Kamla Prasad.

LECTURE-6

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

What is SALE? Whether it is mandatory to register the transaction?

What do you understand by mortgage? How many kinds of mortgage has been prescribed under the Transfer of Property Act, 1882?

Briefly discuss the RIGHTS and LIABILITIES of the mortgagor.

Distinguish between mace shelling and contribution.

What are the essential elements of charge?

Section 13

Transfer of property for the benefit of person not in existence.
Exception to sec-5
How?—sec-13

Prior limited interest must be created in favor of a person in existence at the date of transfer.
Further “the whole of the remaining interest” of the transferor in the property must be given to the unborn person.

Grijesh Dutt v/s Data din

Whitby versus Mitchell

PERPETUAL TRANSFER

MEANING	HOW IT CAN BE MADE
1. It is tying up property for indefinite period.	1. By imposing a condition restraining alienation.[Prohibited u/s -10]
1. It is disposition which matter property in alienable for an indefinite period.	2. By creating a limited interest in favour of unborn person one after another (Prohibited u/s 13)
3. It is a transfer for generation after generation according to desire of the transferor.	3. By restricting vesting of interest in favor of unborn person U/S 13 even after attaining his majority (Prohibited u/s 14 Transfer is void)

Why a person desires to make a perpetual transfer?
To attach his name with the property for long time or for always.
To make sure use of property as transferor wants.

14 Rule against perpetuity

Section .13

Unborn person

Creation of limited interest in favour of person or persons living on the date of transfer and

Generally on birth specially otherwise after attaining any age etc but never after attaining majority

Vesting of interest in unborn person

Transfer whole remaining interest in the property in favor of

Sunder raj versus Natrajan (1925) P.C.

Exceptions of rule against perpetuity:

S- 18
Creation of charge
Renewal of lease (s-105)
Mortgage
Personal rights like right to preemption
Provision for payment of debt (sec -17)

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

PRELIMINARY QUESTIONS

Whether a transfer can be made in favour of an unborn person?

(a) Yes by machinery of trust

(b) Yes

(d) None of the above

Section 13 of T. P. Act deals with:

(a) Conditions restraining alienation;

(b) Oral transfers

(d) Registration of transfers

When does an unborn person acquire vested interest on transfer?

(a) As soon as he is born.

(b) On attaining majority.

(d) After marriage if female.

The ‘Rule against perpetuity is discussed in which section of T. P. Act?

(a) Sec 14.

(b) Sec15.

(d) Sec 17.

In transfer of property, law is against perpetuity because:

(a) The property will remain tied up forever.

(b) There will be no industrial progress.

(d) All of the above.

“The rule against perpetuity applies only in those circumstances where a new interest in immovable property is created.” This was held in:-

(a) Nafar Chandra v Kailash.

(b) Padamanath Ayyar v Sitaram Ayyar.

(d) Ram Prasad v Ram Mohit.

‘Rule against double possibilities’ was recognized in which one of the following cases?

(a) Girjesh Datt v Datadin.

(b) Whitby v Mitchell.

(d) Sopher v Administrator General of Bengal.

lec-7 on Doctrine of acceleration

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

What do you understand by doctrine of acceleration.
What do you understand by transfer by an ostensible owner ?

S-27, Para-2,

Where it is intended by the parties that the ulterior disposition shall take effect, only on the failure of the prior interest must be in specified manner

Transfer by an ostensible owner– Doctrine of holding out

Looks like real owner

Transfer by an ostensible owner S.41

Essential Elements
Transferor must be appeared as a real owner.
He holds such position with consent of the real owner
The transferee must not be acquainted with the reality. ( he is in good faith)
The transfer must be for consideration.

Privy Council adjudicated that the Maquin could not could not challenged the vallidity of transfer because the purchase was done in good faith.

When justice is to made between two innocent person then more innocent and more innocent

Ram kumarKundu v/s Maquine, 1872

Transfer by unauthorized person who subsequently acquires the interest.(section.43)

“ Feeding the grant by Estoppel”

Essential Elements
Transferor must be appeared as a real owner.
He holds such position with consent of the real owner
The transferee must not be acquainted with the reality. ( he is in good faith)
The transfer must be for consideration.

Privy Council adjudicated that the Maquin could not could not challenged the vallidity of transfer because the purchase was done in good faith.

When justice is to made between two innocent person then more innocent and more innocent

Ram kumarKundu v/s Maquine, 1872

Transfer by unauthorized person who subsequently acquires the interest.(section.43)

“ Feeding the grant by Estoppel”

The transferor must not have not have ti

tle to make the transfer
He must have represented that he has title.
The transferee has trusted on the transferor and get transferred the property with consideration.
Subsequently transferor acquinted the title.

Case on Good Faith

Md. Sulaman v/s ShakeenaBiBi (1992 Allahabad)

Ostansible owner

Karmarivassy v/s Ratansi Nancy

INTRODUCTION to Doctrine of election

The doctrine of election is stated in Sec. 35 of the Transfer of Property Act alongside Section 180 to 190 of the Indian Succession Act.

Sec-180. Circumstances in which election takes place.—Where a person, by his will professes to dispose of some thing which he has no right to dispose of, the person to whom the thing belongs shall elect either to confirm such disposition or to dissent from it, and, in the latter case, he shall give up any benefit which may have been provided for him by the Will.

Section 182 in The Indian Succession Act, 1925

Testator’s belief as to his ownership immaterial.—The provisions of sections 180 and 181 apply whether the testator does or does not believe that which he professes to dispose of by his Will to be his own.

Illustrations

(i) The farm of Sultanpur was the property of C. A bequeathed it to B, giving a legacy of 1,000 rupees to C. C has elected to retain his farm of Sultanpur, which is worth 800 rupees. C forefeits his legacy of 1,000 rupees, of which 800 rupees goes to B, and the remaining 200 rupees falls into the residuary bequest, or devolves according to the rules of intestate succession, as the case may be.

“Where the transfer has been through gratuitous means and the transferor has become incapable of making a new transfer.
In all cases where the transfer is for consideration”.[i]

An illustration to further explain :

EXCEPTIONS

In context of a minor, the period of election shall be stalled till the individual attains majority unless he is represented by a guardian.

UNDERSTANDING THE PRINCIPLE

So, this doctrine contains the principle that the exercise of a choice by a person left to himself of his own free will to do one thing or another binds him to the choice which he has voluntarily made, and is founded on the equitable doctrine that he who accepts benefit under an instrument or transaction of his choice must adopt the whole of it or renounce everything inconsistent with it. Thus, it is a general rule that a person cannot approbate and reprobate. Also, the election is confined to the case of a gift or Will and does not apply in case of a legal remedy.

Conditions precedent for equity of election:

A transfer of property by a person who has no right to transfer;
As a part of the same transaction, he must confer some benefit on the owner of the property and
Such owner must elect either to confirm such transfer or to dissent from it.

OTHER IMPORTANT CONDITIONS

Proprietary Interest

Election over a property is not asked to made by a person unless he holds a proprietary interest which are disposed off in derogation of the person’s rights.

“As part of the same transaction”

In the landmark case of Ramayyar v. Mahalaxmi, a widow had given a gift in excess of her powers and had then provided a will which stated that “ excluding the properties which I have already given away, I will make the following dispositions”. The Court ordered that the plaintiff under the will was not excluded from the election doctrine from contesting the previous gift which wasn’t the issue of the will at all.

It is to be noted that different nature of two properties is not a bar to election by the owner like in the case of Ammalu v. Ponnammal where a person who was managing the properties of the daughter of his deceased brother, died leaving a will bequeathing a portion of it to B. It was held that the doctrine of election did apply for the niece.

Donor’s Intention

Indirect Benefit

The benefit that the original owner is conferred with has to be direct in nature and if indirect, he does not need to elect.[xxi] This principle is explained in Section 184 of Indian Succession Act, 1925 and states that “when the devisee who claims derivatively through another does not take under the deed, and is not bound by the equity attaching thereto.”

Difference in Capacity

Modes of Election

He has to be aware of his duty to elect, and
There must be proof of knowledge of circumstances which would influence the judgment of a reasonable man in making an election :

Enjoyment for two years of the benefit by the person on whom it is conferred with any dissent.”

The election shall be presumed when the donee acts in such a manner with the property gifted to him that it becomes impossible to return it to the original owner in its original state.

Difference between English Law and the Indian Law Perspective

But in the Indian law context, this doctrine is influenced by the principle of forfeiture which states that if the original owner does not choose to validate the transfer, the donee incurs a forfeiture of the conferred benefit which goes back to the transferor.

COMPENSATION

CONCLUSION

Section 35 of the Transfer of Property Ac, 1882 explains the concept of the Doctrine of Election. This project tries to deal with the various nuances involved in the doctrine through the usage of various landmark judgments. Herein, special emphasis has been placed upon providing a clear understanding of the conditions necessary for the election by the original owner to take place. The differences between the Indian Law perspective as well as the English Law perspective is brought out through critical analysis of the provisions i.e. Principle of forfeiture and Principle of compensation. Various aspects such as Proprietary Interest, Compensation estimated, indirect benefit, the intention of the donor etc have been dealt and explained for the enhanced understanding over the model of Doctrine of Election.

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

PRELIMINARY QUESTIONS

The ‘doctrine of election’ is laid down in:

(a) Sec. 30.

(b) Sec. 55.

(d) Sec. 35.

In which of the’ following cases it was laid down that “no person can at the same time accept or reject an instrument of transfer”.

(a) Rangamma v Atchama.

(b) Vidhyamma v V. Shakar Narayan.

(d) Rendell v Pen.

The rule of election has been stated by Lord justice Lopez in:

(a) Cavendish v Dacre.

(b) Dalton v Fitzerald.

(d) Den v Slaiter.

Election implies:

(a) Choosing between two rights where there ista clear intention that both were not intended to be enjoyed.

(b) Transfer under one condition where there are two conditions.

(d) None of the above.

Mark the incorrect statement in relation to doctrine of election:

(a) This rule will apply only when two properties are transferred by the same deed.

(b) The owner of the property should get a direct benefit from the transfer.

(d) The period of limitation for election is one year.

Which of the following is a leading case on ‘doctrine of .election’:

(a) Kapoor v Kapoor.

(b) Satyendra Nath Thakur v Nilkant Mishra.

(d) All of the above.

The farm of Sultanpur is the property of C and worth Rs. 80,000. A, by an instrument of gift professes to transfer it to B, giving by the same instrument Rs.1,00,000 to C. A dies before the election. B shall be:

(a) Entitled to get Rs. 20,000 from C.

(b) Entitled to get Rs. 80,000 from C.

(d) Not entitled to get any amount from any one.

Which section deals with apportionment of periodical payments as between the transferor and the transferee?

(a) Sec. 35.

(b) Sec. 36.

(d) Sec. 38.

When property is transferred, what is to be apportioned between the transferor and the transferee:

(a) Rents, annuities, pensions.

(b) Rents, annuities, pensions and dividends.

(d) None of the above.

A has let his house at a rent of Rs. 100 payable on the last date of each month. A sells house to B‘ on the 15^th of June. On 30^th June what will be apportionment?

(a) A will get a Rs. 100.

(b) B will get Rs. 100.

(d) The tenant will be exempted from payment of rent of that month.

lec-8 on Doctrine of election

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

What do you understand by doctrine of acceleration?
What do you understand by transfer by an ostensible owner?

Topic -10

Doctrine of Acceleration

S-27, Para-2,

Where it is intended by the parties that the ulterior disposition shall take effect, only on the failure of the prior interest must be in specified manner

Transfer by an ostensible owner– Doctrine of holding out

Looks like real owner

Essential Elements
Transferor must be appeared as a real owner.
He holds such position with consent of the real owner
The transferee must not be acquainted with the reality. ( he is in good faith)
The transfer must be for consideration.

Privy Council adjudicated that the Maquin could not could not challenged the vallidity of transfer because the purchase was done in good faith.

When justice is to made between two innocent person then more innocent and more innocent

Ram kumarKundu v/s Maquine, 1872

Transfer by unauthorized person who subsequently acquires the interest.(section.43)

“ Feeding the grant by Estoppel”

Essentials elements
The transferor must not have not have title to make the transfer
He must have represented that he has title.
The transferee has trusted on the transferor and get transferred the property with consideration.
Subsequently transferor acquinted the title.

Case on Good Faith

Md. Sulaman v/s ShakeenaBiBi (1992 Allahabad)

Ostansible owner

Karmarivassy v/s Ratansi Nancy

Apportionment

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

PRELIMINARY QUESTIONS

The ‘doctrine of election’ is laid down in:

(a) Sec. 30.

(b) Sec. 55.

(d) Sec. 35.

In which of the’ following cases it was laid down that “no person can at the same time accept or reject an instrument of transfer”.

(a) Rangamma v Atchama.

(b) Vidhyamma v V. Shakar Narayan.

(d) Rendell v Pen.

The rule of election has been stated by Lord justice Lopez in:

(a) Cavendish v Dacre.

(b) Dalton v Fitzerald.

(d) Den v Slaiter.

Election implies:

(a) Choosing between two rights where there ista clear intention that both were not intended to be enjoyed.

(b) Transfer under one condition where there are two conditions.

(d) None of the above.

Mark the incorrect statement in relation to doctrine of election:

(a) This rule will apply only when two properties are transferred by the same deed.

(b) The owner of the property should get a direct benefit from the transfer.

(d) The period of limitation for election is one year.

Which of the following is a leading case on ‘doctrine of .election’:

(a) Kapoor v Kapoor.

(b) Satyendra Nath Thakur v Nilkant Mishra.

(d) All of the above.

The farm of Sultanpur is the property of C and worth Rs. 80,000. A, by an instrument of gift professes to transfer it to B, giving by the same instrument Rs.1,00,000 to C. A dies before the election. B shall be:

(a) Entitled to get Rs. 20,000 from C.

(b) Entitled to get Rs. 80,000 from C.

(d) Not entitled to get any amount from any one.

Which section deals with apportionment of periodical payments as between the transferor and the transferee?

(a) Sec. 35.

(b) Sec. 36.

(d) Sec. 38.

When property is transferred, what is to be apportioned between the transferor and the transferee:

(a) Rents, annuities, pensions.

(b) Rents, annuities, pensions and dividends.

(d) None of the above.

A has let his house at a rent of Rs. 100 payable on the last date of each month. A sells house to B‘ on the 15^th of June. On 30^th June what will be apportionment?

(a) A will get a Rs. 100.

(b) B will get Rs. 100.

(d) The tenant will be exempted from payment of rent of that month.

Lec-9 Fraudulent transfer and part performance

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

What do you understand by Doctrine of part Performance”? What are the requirements of part performance?
Define fraudulent transfer?

Fraudulent Transfer

Fraudulent Transfer of Property and its effect

Introduction

Relevant Provisions

(i) Section 53 Transfer of Property Act 1882.

(ii) Cross reference Section 17 of Contract Act

Meaning of Fraud

A false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations, or by concealment of that which shall have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury.

Meaning of Transfer

Transfer means an act of the parties, or of law, by which the title to property is conveyed from one person to another.

Meaning of Fraudulent Transfer

A transfer of property the object of which is to defraud a creditor or hinder or delay him or to put such property beyond his reach is called Fraudulent Transfer.

6. Fraudulent Transfer of Property

Under Transfer of Property act, following points are important to explain of fraudulent transfer of property.

(i) Voidable at option of Defeated or Delayed Creditor

Every transfer of immovable property, which is made with intent to defeat or delay creditors of transferor, is voidable at option of any creditor, who is so defeated or delayed. For example, Bashir is indebted to Ahmad, and he attempts to sell his house, and is intentions to convert his house into cash to defeat Ahmad. And if Rasheed is aware of Bashir’s indebtness, but he purchases Bashir’s house, then such transfer is voidable at option of Ahmad.

(ii) Rights of Transfer In Good faith and for consideration

Transfer of immovable property, which is made with intent to defeat or delay creditors of transferor, does not affect rights of transferee in good faith and for consideration. For example, Bashir is indebted to Ahmad, and he attempts to sell his house, and his intention is to convert his house into cash to defeat Ahmad. And if Rasheed is not aware of Bashir’s indebtness, but he purchases Bashir’s house against a consideration of ten lakh rupees, then such transfer does not affect rights of Rasheed.

(iii) Law Relating to Insolvency

Transfer of immoveable property, which is made with intent to defeat or delay creditors of transferor, does not affect any law, which is in relation to insolvency and which is in force.

(iv) Institution of Suit

If a creditor institute’s suit to avoid a transfer on this ground that it has been made with intends to defeat or delay the creditors of transferor, it is considered that such suit is instituted on behalf of all creditors or for benefit of all creditors.

(v) Voidable at Option of Subsequent Transferee

Every transfer of immoveable property, which is made without consideration and which made with intent to defraud a subsequent transferee, is voidable at option of such transferee.

Conclusion

To conclude, it can be stated that two points are important as far as fraudulent transfer is concerned; first point is that transfer of property act has discussed fraudulent transfer only in respect of immoveable property. And second point is that person, who alleges fraudulent transfer, is under burden to prove fraudulent transfer.

Fraudulent Transfer

[r/w S.6(h)2 and r/w S.23 of ICA 1872]

Exception of S.6(h)(2) [Sec. 53]

If a prior transfer is a transfer with consideration

1. When the transferee is in good faith and with consideration(para 2)

2. In case of fraudulent election among the creditors.(Based on cases)

3. When the property has been transferred under the law of insolvency(para 3)

Exception

Para 4 [Representative suit]

Any of the creditor so defeated or delayed

The subsequent Transferee

Shall be voidable at the option of

Sec-53(2) To defraud a subsequent transferee

Sec-53(1) To defeat or delay the creditors of the transferor

Every transfer of immovable property made with intent

Exceptions

When the transferee is in If the prior transfer is a Transfer with consideration. Good faith and with

Consideration .

In case of fraudulent election among the creditors.

When the property has Been transferred under The law of insolvanncy.

What is Fraudulent Election?

In Re More (1887)
Musher shalu v.s Lala Haqun Lal (1915 P.C)
Abdul Shakur v.s Arzee Papa Rau (1963 SC)

In all the three cases a fraudulent transfer based on fraudulent election in favour of any of the creditor have been declared fully lawful and beyond subject of ambit of S.53

Part Performance[S.53A]

Concept

A person cannot be ejected on plaint of a person who has made a contract to transfer the property to the person in possession. If:-

1. He(defendant) has performed or ready to perform his point in the contract and

2. The contract has been made with due certainity as per law

History Of cases

Based on:- Maddison v.s Aldendon 1883.A.C( lord selbown)

In India

Essential Elements

There must be a contract of transfer of property.
The contract must be:-
In writing
Signed
Registered[sec 17(1-A) of reg. Act (1908)]
At the time of contract Plaintiff must be competent to transfer.
Defendant (Transferee):-
Either has taken possession already in possession done some act in furtherance of the contract.
He has performed or is willing to perform his part of the contract.

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

Pre QUESTIONS

Which section of T. P. Act deals with fraudulent transfers?

(a) Sec 53.

(b) Sec 52.

(d) Sec 55-A.

Every transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be:

(a) Void.

(b) Voidable.

(d) Irregular.

Under Section 53 of the Transfer of Property Act,’ 1882, every transfer of immovable property made with the intent to defeat or delay the creditors of the transferor is:

(a) Voidable at the option of any creditor of the transferor.

(b) Void and hence transfer of property is inoperative.

(d) Void if made in favour of any person without consideration.

Every transfer of immoveable property made to defraud subsequent transferee, the first transfer being without consideration is:

(a) Void.

(b) Voidable.

(d) Voidable at the option of transferor.

Section 53-A of T. P. Act deals with:

(a) Fraudulent transfers.

(b) Part-performance of a contract.

(d) Doctrine of election.

Mark the incorrect statement:

(a) The doctrine of part performance of contract is based on the general doctrine of prevention of fraud.

(b) It is meant to protect transferee, who have taken possession, spent money in further improvements, in reliance upon the documents which are ineffective as transfers for want of registration, etc.

(d) In India, the doctrine applies to oral as well as written agreements.

The doctrine of part performance as given in Sec. 53-A of T.P. Act is:

A statutory right.
An equitable right.
Available in defence.

Codes:

(a) 1 and 3.

(b) 1 and 2.

(d) 2 and 3.

Which is not the ingredient of Sect 53-A of T. P. Act?

(a) Agreement for transfer.

(b) Consideration.

(d) Moveable property.

An act of part performance must be an act in performance of:

(a) Crime.

(b) Tort.

(d) Will.

In which of the following cases, the Supreme Court held that: “In considering whether a person is willing to perform his part of the contract, the sequence in which the obligations under a contract are to be performed must be taken into account”:

(a) Perumal v Ramaswami.

(b) Ram Prasad v Ram Mohit.

(d) Sant Lal v Kamla Prasad.

The doctrine of part performance -cannot defeat the right of a:

(a) Transferee for value.

(b) Transferee for value and” without notice of the previous contract or of its part performance;

(d) Transferee for value if he has notice of the-contract or of its part performance.

Transferee of the part performance has right to protect his possession:

(a) Wrong.

(b) Right can accrue only after payment of full consideration.

(d) Delivery of possession is not necessary.

Mark the incorrect statement:

(a) Sec. 53-A furnishes a statutory defence to a person (transferee) who has no registered title-deed/or a valid instrument in his favour to maintain (or protect) his possession.

(b) Sec. 53-A creates no real right, but only a right of estoppel between parties.

(c) A transferee can be a plaintiff or a defendant, but his object must be to defend his right of possession, not to obtain it.

(d) The rights under Sec. 53-A can be used both as a shield as well as sword.

Lec-10 DOCTRINE OF PART PERFORMANCE (2)

DOCTRINE OF PART PERFORMANCE

The Doctrine of Past Performance, based on principle of equity, developed in England and was subsequently added to the Transfer of Property Act, 1882 via the Amendment Act of 1929. In law of contracts (for e.g., a contract for sale), no rights pass to another till the sale is complete But if a person after entering into a contract performs his part or does any act in furtherance of the contract, he is entitled to reimbursement or performance in case the other party drags its feet.

Section 53A says that if a person makes a agreement with another and lets the other person act on the behalf of the contract; such a person creates an equity himself that can not be resisted on the mere grounds of absence of formality in the evidence or contract of such a transfer. Thus, if the contract has not been registered or completed in the prescribed manner, the transferor can still not go against the transferee or anyone claiming under him. However, the deed should not be unsigned or unstamped. Nothing in this section affects the rights of a transferee for consideration even if he had no notice of contract of part performance.

Illustration: A contracts with B to sell his plot for X amount of money. A accepts the advance from B towards the sale of the plot and hands over the possession of the said plot to B. After some time, B is ready to pay the remaining sale amount but A refuses to accept the same. Further A asks B to hand over the plot back to him.

Here B is ready to perform his part of the contract but A is not. In such a case, B can bring a case requiring specific performance from A. It does not matter that the sale was not registered.

As per law, a transfer of immovable property valued over Rs. 100 has to be registered. But it was believed that strict compliance may lead to extreme hardships especially where one party has already performed his part in the confidence that the other party will honor the agreement. If such registration or other formalities have not taken place, the doctrine of part performance will be applicable. If such a transferee takes possession of the property, he can not be evicted due to an unregistered contract.

The section is a defense as well as a right that helps protect the possession against any challenge. It tries to prevent fraud on the mere basis of ineffective evidence of the transfer. The section does not confer a title upon the transferee in possession but it imposes a statutory bar on the transferor.

Equity looks to the intent rather than to the form

ESSENTIALS OF THE DOCTRINE OF PART PERFORMANCE
a) There must be a written contract for transfer of an immovable property signed by or on behalf of the transferor. The doctrine can not be applied if there is a void agreement or no agreement.
b) There must be consideration;
c) The contracts should give out the terms of the transfer with reasonable certainty;
d) The transferee must have taken possession as a result of this contract or continued in possession if he was already in possession of the property;
e) The transferee must have done some act in furtherance of the contract. Acts done prior to the agreement or independent of it can not be deemed to be part performance of the contract; and
f) The transferee should have performed his part of the deal or be willing to perform it.

WALSH vs. LONGSDALE and MADDISON vs. ALDERSON are two of the major cases that have helped develop the doctrine of part performance in England. In India, this doctrine has been enacted with a few modifications.

MADDISON vs. ALDERSON 1888
B was A’s servant. A had promised B a certain property as life estate, meaning B could enjoy the property during his life time. B served A for years upon this promised life estate. The will bequeathing such interest and property to B failed due to want for proper attestation. After A died, one of his heirs brought action to recover the property from B.
It was held that the act of part performance could not be proof of the contract since the performance was a condition precedent to the contract. The heir of A was able to recover the said property.

The rule laid down in Walsh vs. Longsdale is not applicable in India – as it did not constitute the doctrine of part performance.

Prior to the enactment of the Transfer of Property Act, 1882, the English law of Part Performance was applied. Before Section 53A was inserted in the Transfer of Property Act, 1882, there were different views upon such application. After the Transfer of Property Act, 1882 came into force, some thought that Sections 54 and 59 which required registered documents were necessary for sale of immovable property or regarding mortgage respectively. While others argued that requiring strict compliance would be detrimental to the rights of the impoverished masses of India who could be duped by scrupulous individuals taking advantage of the law.

The Privy Council in MOHD MUSA vs. AGHOR KUMAR GANGULI AIR 1914 PC 27 (30) held that doctrine of part performance is applicable in India. There were divergent views a few years later stating that doctrine can not be used to override statutory provisions. Finally in 1929, the Transfer of Property Act was amended and the English law of part performance became a part of Indian Laws though a little modified.

Equity on that as done as which ought to have been done.

Section 53A of the Transfer of Property Act, 1882

Part Performance – 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 where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore 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.

The proviso is an exception of sorts stating that the interests and rights of a subsequent transferee for consideration will be protected as long as he had no notice of the contract leading to the part performance due or the part performance thereof.

In India, the doctrine is used only as a shield and not to enforce rights as laid down by the Supreme Court in Delhi Motors case. But it must be noted that the aggrieved party can either be the plaintiff or the defendant in a suit as the case maybe.

ENGLISH AND INDIAN LAW

The English Law of Part Performance
1) The contract need not be written or signed by the transferor
2 The right under the doctrine is an equitable right
3) It can be used for enforcing the right as well as defending the right; and
4) It creates a title in the transferee.

The Indian Law of Part Performance

1) Section 53A deals with the Doctrine and state that the contract has to be written as well as signed by the transferor
2) It is a statutory right;
3) It can only be used to defend the possession of the transferee; and
4) It does not create a title in the transferee.

After 2001 amendment to Section 53A, the application of the section has seen dilution – it no longer serves as a ‘substitute’ for registration. It should still hold good for defects other than registration. But, registration of sale of immovable property is compulsory and Section 53A has been amended to incorporate the same.

Lec-11 Restraints on Transfer a peice

Restraints on Transfer.

Sec. 10. Condition Restraining Alienation

“Where property is transferred subject to a condition or limitation absolutely restraining the transferee or any person claiming under him from parting with or disposing of his interest in the property, the condition of limitation is void, except in the case of lease where this condition is for the beneﬁt of the less or or those under him: provided that property may be transferred to or for the beneﬁt of a woman (not being a Hindu, Mohammedan or Buddhist) so that she shall not have power during her marriage to transfer or charge the same for her beneﬁcial interest therein.”

This section lays down that where property is transferred subject to a condition absolutely restraining the transferee from parting with his interest in property, the condition (and not the transfer itself) is void. It may be noted .that ‘conditional transfers’ may incorporate a condition prior to the transfer or subsequent to the transfer. In former cases, it is only if the condition‘ is fulﬁlled that the transfer would take place, and if it is a condition that is either opposed to public policy or is unlawful or immoral, the transfers subject to such conditions would also become void(e.g. A agrees to transfer his house to B, on the condition that B must marry his daughter D, within two years. D dies within a month of this agreement without marrying B. The condition becomes impossible to perform, and the transfer would not take place). Sec. 10 speaks about a condition that is subsequent to the vesting of the interest in the transferee.

The general rule laid down in Sec. 10 is applicable despite there being an express contract to the contrary, and prevents-the transfer or from controlling the power of alienation of the transferee once the interest in the property is transferred. The underlying principles behind this rule are that of equity, justice good conscience, that prevent the transferors from incorporating conditions in the transfer deeds that are repugnant to the nature of interest that is created. Suppose A transfers his property to B with a condition that B shall never sell it. This condition is void and B may sell or not as he pleases. Similar would be the case when a husband settles property on his wife and provides in the settlement deed that she would have no power to sell the property without his consent.

The general economic principle is that the wealth should be in free circulation so as to get the greatest beneﬁt from it. The law favours alienation or transfer, rather than accumulation. A right of transfer is incidental to, and inseparable from, the ownership of the property. An absolute restraint is repugnant to the nature of the estate and is an exception to the very essence of the grant.

It may be noted that Sec. 8 of the T.P. Act also lays down that unless a different intention is expressed (or implied), a transfer of property passes forthwith to the transferee all the interests which-the transferor is then capable of passing in the property and in the legal incidents thereof.

Sec. 10 applies only to transfer made by the act of the parties and does not apply to Court sales.

Absolute and Partial Restrains

Under Sec. 10, absolute restraints are declared void; however, partial restraints may be allowed. In one English case, Jessel M.R. observed: “You may restrict alienation in many ways; you restrict alienation by prohibiting a particular class, of alienation, or you may restrict alienation by prohibiting it to a particular class of individuals, or you may restrict alienation by restricting it to a particular time.”

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 [Attwater v Attwater.]

Whether a condition amounts to a total or partial restraint depends upon the substance (i.e. the real effect of the condition) and not the form of words laying down the condition. If the effect is absolute, it would be struck off as bad howsoever clever language may have been used. Thus, if A transfers a land to B and incorporates a condition that B can sell it to anyone, but will have to pay 90 per cent of the consideration to A’s son, the practical effect would be that B would be substantially deprived of his power to transfer it according to terms that are beneﬁcial to him. This condition therefore would be void.

In Gayashi Ram v Shahabuddin (AIR 1935 All 493), the court observed: “In order to see whether there is absolute restraint or not, one has to examine the effect of all the conditions and ﬁnd whether for all practical purposes alienation is prohibited. The mere fact that there may be some remote contingency in which there may be a possibility of an alienation taking place would not necessarily take the case out of the prohibition contained in Sec. 10.”

Illustrations

(i) A condition that transferee shall not transfer the property by way of gift, is a partial restraint and thus valid.

(ii) Where the transferor stipulates that the property can be sold by the transferee only at a ﬁxed price speciﬁed by him before hand, or where he directs that the property should be transferred for no consideration, or that out of sale proceeds something has to be paid to a speciﬁc person or for a speciﬁc purpose like charity, it is any absolute restraint and thus void.

For instance, A sells a house to B for Rs. 10,000 with a condition, that if in future B wants to sell it, 50 per cent of the consideration, should be given to charity, or should be given to the transferor’s sister or any other relative. This condition is void. B may sell it to anyone and keep the entire consideration.

(iii) A condition that transferee shall not transfer the property for a period of 3 years, is a partial restraint and thus valid. However, if the restriction is for a period of 20 years, it was held to be an absolute restraint [Renand v Tourangean (1867) LR 2 PC4].

If the restraint is for a short period and is coupled with a beneﬁt to the transferor, such as an option of re-purchase, it is a valid restraint For instance, A sells a house to B for Rs. 5 lakhs with a condition that B would not sell it for ﬁve years; within that period if A could arrange the money he would have an option to re-purchase it for Rs. 6 lakhs, It is a partial restraint and is valid (Loknath Khound v Gunaram Kalita AIR 1986 Gau 52).

(iv) A condition that transferee shall not transfer the property to any member of a particular person’s family or to a particular person only, is a partial restraint and thus valid.

On the other hand, a condition that transferee shall transfer the property only to a particular person, then it will be an absolute restraint, as the name of that person might have been so selected as to render it reasonably certain that he would not buy the property at all.

(v) As to the condition that if property should be sold “only inside the family, it depends upon the facts and circumstances of the case whether the restriction is absolute or “partial. In England, such a condition has been upheld as ‘a partial restraint [In re: Macley (1875) 20 Eq 186]. In India, the Privy Council upheld this condition in Md. Raza v Abbas Bandi Bibi (AIR1932 PC 158).If the condition is that the transferee should not sell it outside his family or eyen community, then it will be valid condition provided both transferor and transferee are members of the same family or community. But, if the transferor himself sells the property to an outsider, he cannot put a condition that binds the transferee to sell the property only to members of the transferor’s family.

Where there are further conditions attached, it may become an absolute restraint e.g. a further condition of ‘selling below the market price; or a condition to transfer property only to transferor or his heirs and that too if they are willing to buy it and for a ﬁxed price only.

(vi) A condition in a deed of partition that if any coparcener were to sell his share in a residential house, other coparceners would be entitled to buy it was held to be valid. However, a condition that he is not to sell his share, if he remains childless and leave it for others is invalid.

A compromise by way of settlement of family disputes has been held to be valid, although it involves an agreement in restraint of alienation. In Mata Prasad v Nagesher Sahal (1925) 47 All 884, a dispute relating to succession between a widow and nephew was compromised on terms that the widow was to retain possession for life while the title of the nephew was admitted with a condition restraining him from alienating during her life -time. The compromise was held to be valid.

A provision in an agreement among the members of a joint Hindu family that they would only enjoy the income of joint family properties and would not claim partition was held void, though the partition is not alienation.

(vii) If A sells a property to B and B executes an independent agreement that if he wanted “to sell it, he ‘would only sell it to A, was held valid, because A, while transferring the property did not impose any condition. It was a special personal-agreement between the parties, not touching land (Devi dayal v Ghasita AIR 1929 All 607).

(viii) A sells a property to B.”One of the conditions of the sale is that should B wish to part with the property, he would sell it to A. The question then arises as to whether B would be entitled to the property to C without any reference to A?

Now, it will be seen that this is merely a covenant to secure A the right of pre-emption, i.e. to give him an opportunity for buying the property, and is therefore valid as it does not amount to an absolute prohibition. Therefore, B should ﬁrst make a reference to A. But, such a covenant cannot have effect for an indeﬁnite period. If the covenant for pre-emption prejudicially affects the power of free disposal, it would be void.

A stipulation in a sale-deed that the vendee could sell back the property to the vendor only, and to no one else, is more than a mere partial restraint, and therefore invalid.

LEADING CASE: ZOROASTRIAN COOP. HOUSING SOCIETY LTD. v

DISTRICT REGISTRAR, COOP. SOCIETIES (URBAN) [(2005) 5 SCC 632]

[A condition imposed in the byelaws that the property cannot be sold to a non- Parsi is valid.

When a person accepts membership in a cooperative society by submitting himself to its bye-laws and secures an allotment of a plot of land/building, and, places on himself a qualified restriction in his right to transfer the property by stipulating that the same would be transferred back to the society or with the prior consent of the society to a person qualified to be a member of the society, it cannot be held to be an ‘absolute restraint on alienation offending Sec. 10, T.P. Act.]

Facts and Issue- In this case, the Zoroastrian Cooperative Housing Society acquired certain lands from the State Government for the purpose of erecting houses for residential use of its members and to further the aims and objects of the Society. As per the bye-laws, the objects of the Society were to carry on the trade of building, and of buying, selling, letting and developing land in accordance with cooperative principles and to establish and ‘carry on social, re-creative and educational work in connection with its tenets (Parsis) and the Society was to have full power to do all things it deemed necessary or expedient, for the accomplishment of all objects speciﬁed in its bye-laws, including the power to purchasing property and to erect, pull down, repair, alter or otherwise deal with any building thereon. The qualiﬁcation for becoming a member- in the Society was that the person should be a Parsi and that the transfer of a share to him had to have the previous sanction of the Committee of the Society.

Respondent 2 (one of the members of Society) appears to have started negotiations with Respondent 3, a builders’ association, in violation of the restriction on sale of shares or property to a non-Parsi. The Society, in that context, ﬁled a case before the Board of Nominees for an injunction restraining Respondent 2from putting up any construction and from transferring the same to outsiders in violation of Bye-laws of the Society. Thereafter, Respondent 2 applied to the Society for permission to transfer his share to Respondent 3. The said application was rejected by the Society, since according to it the application was contrary to the Gujarat Cooperative Societies Act, 1961, Rules and the bye-laws of the Society. Respondents 2 and 3 challenged the rejection by way of an appeal before the Registrar of Cooperative Societies.

The Tribunal, in the revision ﬁled by the Society, took the view in an interim order that the bye-law restricting membership to Parsis was a restriction on the right to property and the right to alienate property and, therefore, was invalid in terms of Article 300-A of the Constitution. This order was challenged by the Society before the High Court. A learned Single Judge of the High Court dismissed the writ petition essentially holding that the restriction in a bye-law to the effect that membership would be limited only to persons belonging to the Parsi community, would be an unfair restriction; such a byelaw would amount to a restraint ion alienation and hence would be hit by Sec. 10 of the T.P. Act The Society challenged the said decision before a Division Bench, but remained unsuccessful.

Obsemations— Before the Supreme Court, learned Counsel for the appellants contended that under Article 19(1)(c) of the Constitution, Parsis had a fundamental right of forming an association and that fundamental right cannot be infringed by thrusting upon the association, members whom it does not want to admit or against the terms of tits bye-laws. He also contended that there was nothing in the Act or the Rules‘ which precluded a society from restricting its membership to persons of a particular persuasion, belief or tenet and the High Court was error in holding that membership could not be restricted” to members of the Parsi community for whose beneﬁt the very Society was got registered. He also submitted that there was no absolute restraint on alienation to attract Sec 10, T.P. Act and the restraint, if any, was only a partial restraint, valid in law. There was nothing illegal in certain persons coming together to form a society in agreeing to restrict membership in it or to exclude the general public at its discretion with a view to carry on its objects smoothly.

The learned Counsel for the respondents contended that Sec. 4 of the Act clearly indicated that no bye-law could be recognized which was opposed to public policy or which was in contravention of public policy in the context of the relevant provisions in the Constitution and the rights -of an individual under the laws of the country. A bye-law restricting membership in a cooperative -society, to a particular denomination, community, caste or creed was opposed to public policy and consequently, the authorities under the Act and the High Court were fully justiﬁed in rejecting the claim of the Society. He also contended that the High Court was light in holding that the bye-law concerned operated as a restraint on alienation and such a restraint was clearly invalid in terms of Sec. 10, T.P. Act.

The Apex ‘Court observed: So long as the approved byelaw stands and the Gujarat Cooperative Societies Act does not provide for invalidity of such a bye-law or for interdicting the formation of cooperative societies confined to persons of a particular vocation/community/ persuasion/ sex, it could not be held that the formation ‘of such a society under the Act would be opposed to public policy and consequently liable to be declared void.

The appellant Society was formed with the object of providing housing to the members of the Parsi community; it is open to that community to try to preserve its culture and way of life and in that process, to work for the advancement of members of that community by enabling them to acquire membership in a society and allotment-of lands or buildings in one’s capacity as a member of that society, to preserve its object of advancement of the community. There is nothing is the Gujarat Cooperative Societies Act which precludes the formation of such a society. There are cooperative societies of handicapped persons, cooperative societies of labourers and agricultural workers.

The court further observed: Sec. 10, T.P. Act cannot have any application to transfer of membership. Transfer of membership is regulated by the bye-laws. The bye-laws in that regard are not in challenge and cannot effectively be challenged in view of what we have held, above. Sec. 30 of the Gujarat Cooperative Societies Act itself places restriction in that regard; it restricts the right of ‘a member to transfer his share only in favour of the Society or to a member of the Society and when the committee has approved such transfer.

Sec. 10 relieves a transferee of immovable property from an absolute restraint placed on his right to deal with the property in his capacity as an owner thereof. As per Sec. 10, a condition restraining alienation would be void. The section applies to a case where property is transferred subject to a condition or limitation absolute restraining the transferee from parting with his interest in the property. The bye-laws provide that he should have the prior consent of the Society for transferring the property or his membership to a person qualiﬁed to be a member of the Society. These, are restrictions in the interests of the Society and its members and consistent with the object with which the Society was formed. It is also not possible to say that such a restriction amounts to an absolute restraint on alienation. The restriction, if any, is a self-imposed restriction. It is difficult to postulate that such a qualiﬁed freedom to transfer a property accepted by a person voluntarily, would attract Sec. 10. At best; it is a partial restraint on alienation. Such partial restraints are valid if imposed in a family settlement, partition or compromise of disputed claims [vide Mohd. Raza v Abbas Bandi Bibi AIR 1932 PC 158; Gummanna Shetty v Nagaveniamma AIR 1967 SC 1595].

The court concluded: Further, the fact that the rights of a member/allottee over a building or plot is attachable and saleable in enforcement of a decree or an obligation against cannot make a provision like the one found in the bye-laws, an absolute restraint on alienation to attract Sec. 10. Of course, it is property in the hands of the member on the strength of the allotment. It may also be attachable and saleable in spite of the volition of the allottee. We are, therefore, satisﬁed that the that the restriction placed on rights of a member of the society to deal with the property allotted to him must be deemed to be invalid as an absolute restraint on alienation is erroneous.

Decision— Respondent 3 is restrained from entering the property or putting up any construction therein on the basis of any transfer by Respondent 2 in disregard of the bye-laws of the Society without the prior consent of the Society]

Partition and Family Settlements

LEADING CASE: K. MUNISWAMY v K. VENKATA$WAMY

(AIR 2001 KARNT. 246)

[Sea 10, T.R Ad would not apply to the partition/family settlements, since there is no transfer of title contemplated in a partition. However, on the ground of sound public policy and total restraint on the right of alienation in respect of immovable property which prevents free circulation is void. Thus, a restriction, prohibiting the parents absolutely from transferring the property, amounted to an absolute restraint.]

Facts and Issue— In this case, the question arose whether a life interest created by a partition deed amounts to transfer of property absolutely or partially.

Pursuant to a partition, ‘A’ schedule property is given to the parents, ‘B’ schedule property is given to the plaintiff (son) and ‘C’ schedule property to the defendant (son). It is agreed that parties shall have to get their names mutated in khatas and pay the-taxes henceforth on their own and that they can enjoy the said properties allotted -to their shares in the manner they like and ‘A’ schedule property given to Kittappa and his wife (parents) shall be enjoyed during their life time and thereafter; the plaintiff and defendant shall share the said property equally. In other words, a condition in the partition deed provided that the parents were to enjoy the properties only during their lifetime and after their deaths, this property was to be partitioned equally between their sons (plaintiff and defendant). N0 similar condition was appended to the shares of the sons. This creation of life interest meant that the parents had no power to alienate the property during their lifetime.

However, during the year 1977, the parents sold the property under registered sale deed in favour of the respondent-defendant. After the demise of both the parents, the suit is ﬁled by the appellant-plaintiff seeking partition of half share in the property contending that the parents had no absolute right of alienation. The respondent contested the suit and claimed exclusive title in the property.

Observations- The Trial Court has referred to the ruling of this Court in Muddegowda Bakkappa v Mallikarjuna [ILR (1980) 1Kant 767] held thus: The creation of the absolute ownership in each one of the sharer in the properties allotted to him in the partition is a legal incident of partition. That being so, the recital contained in the partition deed that after the death of Doddabasappa his three sons should get the properties fallen to the share of Doddabasappa divided among themselves cannot at all interpreted to have had the effect of creating a limited estate without a right of transfer in Doddabasappa in the suit schedule properties which were allotted to him in the partition. Such an interpretation would be opposed to the legal concept of partition as understood in Hindu Law.

Similarly, in K. Venkatarammanna v K.B. Rammanna Sastrulu (1868-1869) 4 Mad HCR 345, the facts of the case discloses that in a partition by a separate agreement it was stipulated that any one of the parties to the agreement or their heirs dying leaving no issue should not sell or transfer as a but should on his death be divided by the shareholders In regard to the-said stipulation it is held thus: The obvious purpose of these stipulations was to frustrate indefinitely the right of alienation which was a legal incident of the absolute estate created by the partition in effect to convert the estate in the case of each sonless or issueless possessor into a mere life enjoyment.

Either in the family settlement or a partition by mutual consent a restrictive covenant partially proprietary could be agreed upon. But however, creating the absolute baragainst the alienation -is not said to be permissible even according to the tenets of Hindu Law. In Mohd Raza v Mt. Abbas BandiBibi (AIR 1932 PC 158), in a compromise in the family arrangement, property was to a widow with a condition that she would not alienate the property outside the family, held that: “The terms of the compromise were binding that the restriction as to alienation was only partial and that such a partial restriction was neither repugnant to law nor to justice, equity and good conscience.” “It seems clear that after the passing of the Transfer of Property Act in 1882 a partial restriction upon the power of disposition would not, in the case of a transfer intervivos, be regarded as repugnant In view of the terms of Sec 10,and in the absence of any authority suggesting that before the Act a different principle was applied by the Courts in India, their Lordships think that it would be impossible for them to assert that such an agreement as they are now considering was contrary to justice, equity, and good ‘conscience.”

In Channabassappa v Shankaraiah (1961 Mys LJ 443) it is held that when a partition takes place between two or more members of a Hindu joint family, it would be difﬁcult to regard ‘the partition as involving a “transfer” of any property from one co-sharer to another. All that a partition brings about is dissolution of the co parcenary property and it is transferred into more than one estate and each one of the persons who formed the Hindu joint family becomes entitled to one of such estates to be exclusively enjoyed by him as its sole proprietor Hence, a condition in a partition deed to which one of the parties agreed that he could not alienate certain properties but would enjoy them during his and his wife’s lifetime cannot be regarded as a void condition. As the partition did not result in a ‘transfer of property, Sec. 10 was inapplicable. The principle of Sec. 10 is that, if an absolute estate is created and after the creation of such estate a condition which brings about a diminution of that absolute estate is created, the condition so annexed amounting inevitably to a circumvention of the law and being repugnant to the very nature of the estate which was created is unenforceable and therefore void.

The court, in the present case, observed: It becomes explicit that per re the provisions of Sec. 10, T.P. Act would not apply to the partition and family settlements, since there is no transfer of title contemplated in a partition. However, on the ground of sound public policy any total restraint on the right of alienation in respect of immovable property which prevents free circulation is to be held void, but, any partial restraints or limitation would be valid and binding.

The character of the estate, whether limited or absolute, did not depend purely on the terms or expressions used to describe it, but have to be taken in totality, looking at the substance, and the intention of ‘i the parties. This has to he gathered by looking to the entire document as a whole In the instant case, the plain reading of the partition deed suggests that ‘A’, ‘B’ and ‘C’ Schedule properties are given to the shares of the respective parties-with an emphasis added that “each one of them should get their khata of the property mutated in their names and should enjoy the properties in the manner they like.” This would give us no doubt and difﬁculty to appreciate that what is granted is an absolute estate and not a limited estate. The restrictive covenants should be cautiously and carefully interpreted.

Decision- The court held that a restriction, prohibiting the parents absolutely from transferring the property, amounted to an absolute restraint on alienation and was therefore bad in eyes of law. This shows that had it been a creation of a limited estate in the ﬁrst place, only then could this condition have been operative.

Where the property was given by father to the son under a family arrangement with a condition that with respect of a portion of it, the son was prohibited from making any alienation during the life time of the father, it was held to be not an absolute restraint and therefore was valid and binding on the son (Ratanlal v Ramanuj Das AIR 1944 Nag 187). A condition that if any coparcener wanted to sell his share the other coparceners would have a right to buy it, is valid (Aulad Ali v Ali Athar AIR 1927 All 170).

Exceptions to Sec. 10

Lease— When the condition is for the beneﬁt of the lessor, it will be valid. The less or 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 less or may re-enter) is valid. Also, a condition in the lease deed that the lessee would compulsorily have to surrender the lease in the event the less or needs to sell the property is valid (Rama Rao v Thimappa AIR 1925 Mad 732).

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 or even her beneﬁcial interest therein. Thus a condition restraining alienation maybe imposed when the property is transferred to a married woman. If she is a widow or unmarried, no restraint can be imposed on her power of alienation.

Sec. 12. Condition making interest determinable on in solvency or attempted alienation

“When property is transferred subject to a condition or limitation an interest therein, reserved or to or for the, beneﬁt of any person, to cease on his becoming insolvent or endeavouring to transfer or dispose of the same, such condition or limitation is void. Nothing in this section applies to a condition in a lease for the beneﬁt of the less or or those claiming under him”.

Sec. 12 provides that a condition that the grantee shall cease to have any right on becoming insolvent or that he shall cease to have any interest on attempting to alienate property is void. However, a lessor is entitled to impose a condition terminating a lease in the event of the insolvency of the lessee or when the lessee attempts to sublet or assign the lease.

The reason for the exceptions made in this section is that it would be unjust that the grantee should enjoy and possess all the indicia of ownership of property and yet be deprived of the right of alienation incident to such ownership; and it is equally unjust that the creditors who may have made advances on the strength of the property should be prevented from recourse to the property transferred for, satisfaction of their, debts on account of a clause in the transfer, which they may know nothing about. The liability of the estate to be attached by the creditors on a bankruptcy or judgment is an incident of the estate which is transferred.

RESTRICTION ON FREE ENJOYMENT OF PROPERTY

Sec. 11. Restriction repugnant to interest created — “Where, on a transfer of property, an interest therein is created absolutely in favour of any person, but the terms of transfer direct that such interest shall be applied or enjoyed by him in a manner, he shall be entitled to receive and dispose of such interest as if there was no such direction.

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

One of the essential legal incidents of ownership of property is the right of free enjoyment of the thing owned. Sec. 11 lays down that any condition restraining the enjoyment of property which is transferred absolutely is void. The principle is that a condition will be void, if it detracts from the very completeness of the interest created. A full ownership confers upon its owner complete liberty of action with regard to its enjoyment, disposition and management, so that if a transfer of such interest were accompanied by a condition that the transferee should always let the land at the deﬁnite rent or cultivate it in a particular manner, the condition would be void on the ground of its repugnancy with absolute ownership.

When a property is transferred absolutely (e.g. sale, exchange or unconditional gift; but not a lease or a mortgage or a grant for life), 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 annexes to it, and thereby to abrogate the law by a private arrangement. Thus, the following restrictions are void –

A condition attached with transfer of an absolute interest in estate that the grantee will reside in a particular place in estate.
The transferee should always let the land at a deﬁnite rent or cultivate it in a particular manner.
A condition in a deed depriving the co-owner of his claim to partition in respect of common property: Similarly, a direction not to partition property until all the sons attained majority.
A transfers his house to B with the condition that B would not demolish it.
A gift restraining enjoyment.

Where A executes a lease of his house to B with a condition that he would live in it, and would not use it for commercial purposes, and B opens -a shop in the premises, A can sue B for violation of the lease deed and stop him from using the same for commercial purposes However, where A (owner of a house occupied by two tenants) sells it to B with a condition that B would not collect rent from the tenants or evict them, these conditions would not be binding on B, as they would be repugnant to the interest that is created in his favour by this absolute transfer.

Distinction between Sec. 10-and Sec. 11

Under Sec. 10, the restriction is directed against the transfer of the interest (large or small). While under Sec. 11, the restriction is directed against free enjoyment. However, where the interest is limited, the enjoyment of it will be also limited. For example, when a widow’s interest is created, a direction that she should enjoy only the usufruct without either encumbering the corpus or committing the acts of waste.

Sec. 1O is applicable to all transfers, whether limited or absolute, whereas Sec. 11 will not apply unless the transfer is absolute, and the condition/restriction is imposed by the ‘terms of the transfer’. Thus, where a man transfers his land-to another, reserving a right of residence to himself, and the terms of the transfer enjoin on the transferee that he shall not have the right to drive away the transferor, the condition will be valid, because the transfer is not made absolutely.

If an absolute interest is created by a deed of transfer, it takes effect, notwithstanding subsequent words in the deed restricting the right of full ownership. This, however, does not mean that the transfer or cannot reserve some right in his own favour during his life time. It is to be remembered that under Sec. 10, an absolute restraint is void, whereas under Sec. 11, only a restriction repugnant to the interest created by the transfer is void. Sec. 11 is practically a corollary to Sec. In other words, Sec. 10 relates to the power of the owner to alienate the property, and makes total restraint on it void, while Sec. 11 protects the power of the owner to enjoy the property in any manner whatsoever, without there being dictation from anyone.

However, both sections seek to restrain the owner of the property to unduly interfere with the rights of the owner of ‘the property once the property has passed to him along with all the rights.

Exception to Sec. 11

According to it (second para of Sec. 11), the transferor may impose conditions restraining the enjoyment of land if such conditions are for the “beneﬁt of his ‘(transferor’s) adjoining land” (rule laid in Tulk v Moxhay case). The transferor is competent to issue such direction if it has been made in respect of one piece of immovable property for the purpose of securing the beneﬁcial enjoyment of another piece of property, and he is also competent to enforce such direction or any remedy which he may have in respect of a breach thereof. Such conditions can been forced only by the transferor and not by the transferee of the other portion of the property (Leela v Ambujakshy AIR 1989 Ker 308).

The following illustrations may be noted in this regard:-

A makes an absolute gift of a house to B, and directs that B shall not raise it higher, so as “to obstruct the passage of light and air to A’s adjoining house, the direction will be valid.
A owns two properties X and Y and sells X to B and imposes a condition that B shall lay out money in building and repairing a drain passing over X adjoining Y The restriction is valid and enforceable.
A grants a lease of his zamindari to B, reserving to himself all the minerals and a few plots of land in the middle of his zamindari for working the mines and storing minerals, and directs B to allow passage to his mines to and from there served plots, the direction is binding.
A owns a land adjoining his house that 11¢ sells to B with a condition that B would the front lawn as a garden, as A himself had in his own house, so that both the houses do not appear dissimilar. The direction is binding.

Sec. 40. (Burden of obligation of imposing restriction on use of land)

According to Sec. 40, “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, a right to restrain the enjoyment in a particular manner of the latter property, such right may be enforced against a transferee with notice thereof or a gratuitous transferee of the property affected thereby, but not against a transferee for consideration and without notice of the right.”

When a person transfers his immovable property, the transferee is often required to enter into a covenant whereby the transferor imposes on the transferee conditions restraining the enjoyment of land transferred for the beneﬁt of adjoining land. The ‘conditions restraining’ are known as covenants. A covenant is an agreement in writing creating an obligation, which may be positive or negative in nature:-

Positive covenant (‘burden on land’)— It stipulates the performance of some act or the payment of money. Its enforcement necessitates compelling the covenant or to put his hand into his pocket. For example, a covenant that the transferee would form the strip of land (attached to the transferred property) into a road and would ever afterwards keep it in repair.
Negative covenant (‘beneﬁts of a covenant’)— A restrictive covenant which forbids the commission of some act e.g. not to erect buildings.

In determining whether there is a positive or negative covenant, it is the substance of covenant and not its form that matters. For example, if in a covenant, to build on it is allowed, but if sell any building the licencee would pay 1/4^thof the sale-price to the owner. The condition was negative and restrictive, it being in -substance a restriction on licencees’ selling the land (Prabbu Narain v Ramzan, 41 All 417).

Covenant running with the land

A covenant is said to run with the land, when either the liability to perform it, or the right to take advantage of it, passes to the transferee of the land For example, a covenant in a lease for renewal thereof is one running with the land, and may be enforced against all transferees. Similarly, a covenant for title runs with the land.

A covenant which runs with the land is one which binds the land in its inception, or which affects the nature, quality or value of the land; it must be one that touches or concerns the land, i.e. it must enhance the value of the land, or beneﬁt it in some other way. For example, a covenant to pay rent and right to have quiet enjoyment. Again suppose A grants sub-soil rights to a company and the company agrees to pay damages if the surface land caves in or subsides. This is a covenant running with the surface land.

All covenants are binding as between the transferor and transferee. Sometimes, they are enforceable even against the purchasers from the transferee and they are then said to “run with the land” (i.e. such covenant are attached to the land irrespective of who is the owner of such land).A negative or restrictive covenant always runs with the land, while a positive covenant never runs with the land.

A (owner of a house) sells the adjoining land to B with a condition that B would leave open some area for the seller’s beneﬁt A died and his successors sued the assigns of B to enforce the covenant, when he attempted to build upon it. They can do so as this covenant ran with the land [Rogers v Hosegood (1900) 2 Ch 288].

A combined reading of Sec. 11 and Sec. 40 will bring out the following points:—

By virtue of Sec. 11, the original transferee is bound by all covenants (positive or negative).
By virtue of Sec. 40, the subsequent transferee (a purchaser from the original transferee) is bound only by negative/restrictive covenant. A positive covenant cannot be enforced against a subsequent transferee [Haywood v Brunswick P.B.Building Society (1881) 8 QBD 403; Austerberry v Corpn.OfOldhan (1889) 29 cm) 750].

In the latter case, A conveyed land adjoining his own land to B with a condition that he would maintain and repair a road on it, to which B agreed. B later sold the land to C, and A sold his land to D. D sued C to enforce the covenant. It was held that he could not do so as a (positive) covenant i.e. a burden on land, can be enforced only if it amounts to either a grant of an easement, or a rent charge or an estate or interest in land.

To bound a subsequent transferee for a negative covenant, the covenant must be for the beneﬁt of adjoining land, and must be annexed to the covenantee’s land. Such transferee for consideration must have ‘notice’ of the said covenant.
A subsequent transferee for consideration and without notice is not even bound by a negative covenant.
A gratuitous transferee (a transferee without consideration)is bound by such covenant, whether he has notice of it or not
Exception— Between a lessor and lessee, even a positive covenant bind a transferee from lease, and the question of notice is immaterial.

Rationale — A ‘negative covenant’ is like the benefit of a covenant and thus runs with the land so that it can be enforced by the transferee to the person who has the beneﬁt of the covenant (i.e. covenantee). A ‘positive covenant’ is a burden of a covenant and thus even though it be annexed to the land, it will not -bind the transferees. The reason for this rule is: If a person sells land with a covenant he would not get full value. Why should a purchaser from him be then allowed to ignore the covenant and sell it free of covenant and get better value?

Illustrations

(a) If A has only one piece of land and sells it to B; a covenant (negative or positive) would not be binding on B.

(b) If A has two pieces of land and sells one to B with a covenant for the beneﬁcial enjoyment of another one, the covenant would bind B, whether it is positive or negative.

(d) If A sells the land to D, D will have all the rights of A and can enforce negative covenant against B.

LEADING CASE: TULK V MOXHAY [(1848) 2 PHILL 774]

In this case, X, the owner of vacant, land and several houses surrounding it (forming a square), had sold the vacant land to E, who covenanted that he would keep it in the same condition (i.e.unburdened with buildings) and thus maintain the ground (vacant)and square garden by carrying out sufficient and proper repairs. The ground passed by diverse intermediary conveyances with the same covenant. Finally Y purchased it, and he wanted to construct a building thereon, although he had notice of the covenant. X ﬁled a suit and an injunction restraining Y from building.

The position at common law was that since the covenant constituted a “burden” upon the land (positive covenant) it could not, therefore, bind Y. It was contended on Y’s behalf that the seconditions were enforceable only as between the parties to the contract and not against the subsequent purchasers for value.

This position was clearly unjust, since X had legitimate interest in preserving the amenities of the surrounding parts which he” had retained. Impressed by the justice of X’s claim, Lord Cottenham, L.C.- cast about to same reason for granting the injunction. He found himself able to do so by holding that since Y had notice, his conscience was affected by the covenant. In other words, the decision in favour of X amounted simply to this, that he had an equitable interest in the enforcement of the covenant. Thus a new class of equitable interest .was created in order to supply the deficiencies of the common law. This interest as deﬁned and modiﬁed by subsequent authorities has now become restrictive or negative covenant of modern law.

It was contended by the defendant that the vendee could not violate contract, but the purchaser from him may violate. The court observed that if this contention is accepted, it would be impossible for an owner to sell any part of his property without incurring the risk of rendering what he retains worthless. It was further contended by the defendant in this case that the covenant does not run with the land. The court observed that question is not whether the covenant does not rum with land, but whether the party be permitted to use the land in a manner inconsistent with the contract entered into. The court in this case, thus, laid down two rules:—

Gevenants between the transferor and the original transferee are always enforceable.
Negative covenants are binding on the subsequent transferee with notice.

It was held that no one purchasing with notice of an equity can stand in a different situation from that of the party from whom he purchased; and therefore, Y who was aware of the conditions in the contract, irrespective of their character, was bound by it.

Comments— The general rule of the T.P. Act is that the purchaser gets all the rights which the transferor had in that property. But, in the above case, the transfer was subjected (a condition imposed) to ‘beneﬁcial enjoyment’ of the transferor’s property. The rule inTulk v Moxhay forms an exception to Sec. 11 and also incorporated in ﬁrst para of Sec. 40.

lec-12 on Sale

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

What do you understand by Sale?
What is contract for Sale and How it is different from Sale?
Distinguish between sale and a lease /Mortgage/Exchange?
Define Sale?
What are the essentials of the sale?
What are buyer’s and seller’s rights and liabilities?

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

PRELIMINARY QUESTIONS

. …………….. is a transfer of ownership in exchange for a price paid or promised or part paid and part promised:

(a) Sale.

(b) Mortgage.

(d) Exchange.

Which section defines ‘sale’ in T. P. Act?

(a) Sec 53.

(b) Sec 53-A.

(d) Sec 55.

When the registration of sale is necessary:

(a) Movable property above Rs. 100.

(b) Immovable property above Rs. 100.

(d) Only (a) and (b).

Which of the following could be the subject matter of sale:

(a) A Right of re-entry.

(b) Easement.

(d) None of the above.

Which of the following could be the subject matter of sales as per the T. P. Act:

(a) Movable property.

(b) Immovable property.

(d) Intangible property.

Mark the incorrect statement:

(a) There need not be two parties to a sale; the seller could himself be the buyer.

(b) Without consideration a sale would be void.

(d) None of the above.

Which one of the following is NOT an essential element of sale?

(a) Parties.

(b) Subject matter.

(d) Payment of price in cash.

……………. itself does not create any ‘interest or charge’ on the property:

(a) Sale.

(b) Agreement of sale.

(d) Exchange.

A sale (mark the incorrect statement):

(a) Passes an absolute interest in the property to the purchaser.

(b) Conveys a legal title to the purchaser.

(d) Creates a right in personam.

In which of the following cases it was held that Sec. 54 is applicable to both Hindus and Muslims:

(a) Abdullah v Ismail.

(b) Gafruddin v Hamid Hussain.

(d) Raghubir v Kunj Bihari

Rights and liabilities of buyer and seller have been laid down in which section of the T. P. Act:

(a) Sec. 54.

(b) Sec. 55.

(d) Sec. 57.

What is the buyer’s right before sale:

(a) A charge on the property for the purcliase money paid by him and the interest on such purchase money.

(b) Benefits of any increase in the value of property and the rents and profits thereof.

(d) All of the above.

What is the buyer’s liability after sale:

(a) To bear any loss arising from destruction, injury or decrease in the value of property.

(b) To disclose to the seller any fact which materially increases the value of property.

(d) All of the above.

lec-13 notes on Actionable claim (1)

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

Define & explain “Actionable Claims”.

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

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

Accordingly, this mean, it excludes not only a claim to any immovable property for a debt but also a debt secured or any movable property in possession of the claimant. It follows, therefore that it is a claim for a simple debt or liability and which can be realized by a legal action.

An actionable claim is called, in English Law, a chose in action or a thing in action as against a chose or money in possession. It denotes incorporeal personal property of all disciplines and an interest in corporeal personal property not in possession of the owner which accordingly can only be claimed or enforced in action. Therefore, while the different types of movable property governed by the Sale of Goods Act can be called as chose in possession, an actionable claim is also a type of movable property called chose in action. It is also a movable property because a debt is a property and anything which is not immovable property is movable property.

Actionable claim as defined in Section 3 of the Transfer of Property Act, as a chose in action is different from two other such chooses in action namely the right or property by way of copyright, trade-mark, patent, or design, and also to stocks and shares or debentures of a limited Company or the negotiable instruments under the Negotiable Instruments Act, which also evidence a debt and which are recoverable by legal action.

Section 137 of the Transfer of Property Act clearly provides that sections 130 to 136 will not apply to stocks and shares or debentures or to instruments which are negotiable or to mercantile documents of title to goods. Marine Insurance claim is also excluded by Section 135 A of that Act and is dealt with in the Marine Insurance Act, XI of 1933. They are also governed by independent separate statutes passed in respect thereof and are not, therefore, governed by the Transfer of Property Act. That Act in Section 130 only provides for transfer of actionable claims as defined and circumscribed by the Transfer of Property Act. As to transfer of the earlier mentioned actionable claims separate provisions are made for transfer thereof by the statutes governing them.

Actionable claims within the meaning of Section 3 of the Transfer of Property Act, therefore, cover (i) claims to unsecured debts and (ii) claims to beneficial interest in moveable property not in possession actual or constructive whether present or future., conditional or contingent. Such actionable claims could be (a) a right to claim maintenance (b) a right to arrears of rent (c) a right to annuities (d) moneys payable under a contract for price or advance (e) a right to claim benefit of a contract (f) a partner’s claim for accounts and his share therein (g) insurance claim, other than marine insurance (h) salary in arrears (i) book debts (j) a fixed deposit receipt, etc. However, a mere right to sue is not assignable. Similarly, a decree is not assignable under this section, as no legal action is required to be taken to recover the claim. The decree itself can be executed. Similarly any other property which is not transferable, under Section 6 of the Transfer of Property Act is not assignable under Section 130 of the Transfer of Property Act. Marine Insurance Policy, negotiable instrument and documents of title to goods are specifically excluded by Section 135 A and Section 137 of the Transfer of Property Act as stated above.

PAHUJA LAW ACADEMY

PRELIMINARY QUESTIONS

A right to sue for damages is:

(a) An actionable claim.

(b) Not an actionable claim

(d) Transferable

Which of the following combinations are correctly matched

Mense profit – Actionable claim.
Claim of a Muslim wife for unpaid dower – Actionable claim.
Unsecured debt -Actionable claim
Profit under a “sale of goods contract – Actionable claim.

Select the correct answer using the codes given below:

(a) 2, 3 and 4

(b) 1, 2 and 3

(d) 1 and 4

Transfer of actionable claim has exception – u/s 130 of T.P. Act:

(a) It does not apply to transfer of life insurance policy

(b) It does not apply to the transfer of marine or fire policy

(d) None of the above policy applies

Lec-14 on MORTGAGE and Charge

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

What do you means by Mortgage? Also explain different types of mortgage.
A executed a registered mortgage deed on 20-8-1990 in favour of B in respect of certain property to secure an amount of Rs. 50,000/- advanced to him. The amount was re-payable within 3 years. It was a simple mortgage without possession. A did not exercise his right to redeem the mortgage within the stipulated time. B has filed a suit for declaration with consequential relief of possession, recovery of damages, mesne profits and permanent injunction. Decide.
A executed two registered deeds of mortgage by conditional sale for Rs. 5,000/- and Rs. 6,000/- in respect to 10 Katha of land, each with a condition to recovery if A returns the amount within 5 years, A returned the mortgage money within the time. But, B refused to re-convey the land and contended that it was out and out sale with condition of re-conveyance and not mortgage by conditional sale. Decide. Support your answer with case law. Refer to relevant provisions of T.P.A., 1882.

MORTGAGE OF IMMOVABLE PROPERTY

DEFINITION OF MORTGAGES

According to Sec 58(a) Transfer of Property Act – a ‘Mortgage’ is the transfer of an interest in specific immovable property for the purpose of securing-

(a) The payment of money advanced or to be advanced by way of loan.

(b) An existing or future debt, or

The person who takes loan under a mortgage, i.e. who transfers the interest in his immovable property is called Mortgagor. The person in whose favour, the property in mortgaged i.e. who advances loan, is called mortgagee. The sum of money taken as a loan under mortgage is called mortgage-money and the instrument of deed of transfer is called mortgage-deed.

ESSENTIAL ELEMENTS OF MORTGAGE

Following essential elements are necessary in mortgage :

There must be transfer of interest
The interest transferred must be of some specific immovable property.
The purpose of transfer of interest must be to secure payment of any debt or performance of an engagement which may give rise to a pecuniary liability.

Transfer of interest: In a mortgage there is transfer of some interest vested in the immovable property. There is no transfer of absolute interest or ownership. The interest is transferred in favour of the mortgagee, who advances the money as loan. lt is the interest in property which gives him (mortgagee) the right to recover his money from mortgagor’s property. However, mortgage is not a transfer of all the interest. After transferring this interest in favour of mortgagee, there still remains a vested remainder with mortgagor.

The first essential condition of a mortgage is that there must be a transfer of some interest in the property of mortgagor. The transfer of interest means transfer of property. Therefore, mortgage is transfer of property within the meaning of Section 5 of this Act. Accordingly, all the essential conditions for a valid transfer must be fulfilled also in mortgage, e.g., it must be between two living persons, to maintain such transfers rather it is sufficient if the deed means to suggest that there is transfer of interest, (property) by way of mortgage.

Specific immovable property: The property which is being mortgaged must be specific immovable property. The immovable property must be specifically mentioned in the deed. It must be mentioned in a reasonably certain manner so that it can be identified as to which property is being talked about, on the other hand where the property has been described in a manner that it can be ascertained without any doubt, the property is specific even though no particular details are given in the deed.

For example, my house and landed properties.

The purpose of mortgage: Consideration of mortgage the last essential element of mortgage is its purpose. The purpose of mortgage must be to secure a debt. Mortgage is a transfer of property supported with some consideration: the consideration of mortgage is to secure a debt. Mortgagor transfers the interest in his property to mortgagee in consideration of security for payment of some kind of loan taken by him. The loan may be in the from of

(i) Money advanced or to be advanced

(ii) An existence of further debt, or

(iii) The performance of any engagement giving rise to a pecuniary liability.

MORTGAGOR

The person who actually mortgages the property is mortgagor, but a new section 59-A introduced by the Amendment Act 20 of 1929, says that a mortgagor includes a person deriving title under the original mortgagor. This section really refers to such persons as heirs, executors, and administrators. who derive their title from the mortgagor for the purpose of section 68(a), however, the term mortgagor does not include the transferee of the mortgagor, for the transferee is not by the mortgagor’s personal covenant though in clause (c) of that section a subsequent purchaser would be included.

A mortgage by minor, who is incompetent to contract, is void. The creditor cannot recover money even under section 64 and 65 of Contract Act in case of mortgage by a minor.

MORTGAGEE

A mortgagee is a person in whose favour a mortgage is created. The term also includes, under the new section 59-A, a person deriving a title under the original mortgagee. Every mortgage deed must name some person as a mortgagee, otherwise it cannot be a mortgage. Thus, a security bond given to the court cannot be enforced as a mortgage, for the court is not a judicial person. A mortgage executed in favour of minor who has advanced the whole of the mortgage money is enforceable by his or by other person on his behalf.

MORTGAGE MONEY

The expression ‘mortgage-money’ means the principal money and interest of which payment is secured for the time being. Accordingly, a mortgagor cannot redeem the property on the repayment only of the principal money. He must also pay the interest there on because the interest is regarded as a charge upon the property just as much as the principal amount.

The parties are, however, free to enter into any contract to the contrary. But the mere fact that the mortgagor makes himself personally liable for the payment of interest is not compatible while the inter also forms a charge on the property.

KINDS OF MORTGAGES

Section 58 provides following kinds of mortgage:

A brief account of each kind of mortgage is given below :

(1) Simple mortgage Sec 58 (b) :Where the mortgagor promises to pay the mortgage — money (loan) without delivering possession of the mortgage-property and agrees expressly or impliedly that in case of non-payment of loan, the mortgagee shall have the right to cause the mortgage property to be-sold, the mortgage is simple mortgage. The key features are :

(i) The mortgagor retains the possession of the mortgaged property.

(ii) The mortgagor must personally under-take to pay the mortgage money.

(iii) The parties must expressly or impliedly agree that in the event of the mortgagor, failing to pay according to his contract, the mortgagee shall have right to cause the mortgaged property to be sold.

Simple mortgagee cannot foreclose, the real right transferred is right of sale (See note ‘mortgage’ and ‘right to cause the property to be sold’. under section 58)

The case of Papmma Rao vs. Prarap Korkonda (1896) 19 Mad 249, 23 IA 32 illustrates the impossibility of remedy of simple mortgage leading to a foreclosure, for when the court erroneously gave a remedy of a decree for possession against which the mortgagor did not appeal, the Privy Council held 15 years later that the mortgagee was in wrongful possession as mortgagor has right of possession. The remedy of sale is also available in some anomalous mortgages which involve the transfer of a right of sale.

Limitation for a suit for sale is under Article 62 of the Limitation Act 1963, i.e. 12 years from the time-when the mortgage money become due. If the net proceeds of the sale are insufficient, there will be a personal decree for the balance if the mortgagor is personally liable and if the personal claim is not barred by limitation. This is provided in Order 34, Rule 6 of the Code of Civil Procedure, but such an order may be made on a motion upon a consent decree even though the terms of the decree are silent as to the personal remedy.

Under the amended R 4 and 5 of Order 34‘of the Code of Civil Procedure there- are two decrees, a preliminary mortgage decree, followed in case of default by a final decree for sale.

(2) Mortgage by Conditional Sale: Sec. 58(c), In this form of mortgage, there is no personal liability on the part of the mortgagor to pay the debt. The remedy available to the mortgagee is by foreclosure only.-The mortgagee remains content with the property mortgaged, and cannot look to the other properties of the mortgagor, the latter not having any personal liability.

A mortgage by conditional sale is an ostensible sale, which is to ripen into an absolute sale on breach of the condition as to payment; in other words, on the breach of the condition, the contract executes itself, and the transaction is closed, and becomes one of absolute sale to be enforced in a particular manner, called foreclosure. A mortgage is foreclosed by obtaining a declaration from the court to the effect that the mortgagor will be debarred of his right of redemption. Such a declaration ripens the ostensible ownership of the mortgage into absolute ownership.

A mortgage by conditional sale is non-possessory (i.e., no delivery of possession is given under it), and therefore, the mortgagee does not have the advantage to repay himself, as is the case in a unsufructuary mortgage.

The right of a mortgagee (in this type of mortgage) is to close the transaction in case of default of repayment on the due date, and claim the property as an absolute owner. But this right can be enforced, not privately, but only by a suit for foreclosure. The mortgagee does not acquire any personal right against the mortgage or as in the case of a simple mortgage; nor is he entitled to the possession of the property. In fact, by virtue of this mortgage, he can only acquire ownership over the property which, however, will not vest in him in spite of a default of payment on the due date, until there is a decree for foreclosure.

(3) Usufructuary Mortgage Sec. 58(d) : The essential elements of usufructuary mortgage are as follows:

(i) Delivery of possession of the mortgage-property or an express or implied undertaking by mortgagor to deliver such possession.

(ii) Enjoyment or use of the property by mortgagee until his dues are paid off.

(iii)No personal liability of the mortgagor.

(iv) Mortgagee cannot foreclose or sue for sale of mortgage-property.

Delivery of possession : The characteristic feature of usufructuary mortgage is the transfer of possession of mortgage-property which is ‘security’ for payment of his money. Where the mortgagee is entitled under the mortgage deed to continue possession of property until payment of mortgage money, the transaction is usufructuary mortgage. It is not necessary that delivery of possession is made at the time of execution of the deed. The mortgagor may take an undertaking that he would deliver the possession on a future date. Such undertaking or promise may either be express or implied. Therefore, where under the terms of a mortgage-deed the possession is to be delivered to the mortgagee subsequent to the date of mortgage, the transaction is still a usufructuary mortgage. The mode of delivery of possession depends upon the nature of property. Where the mortgage property is a tenanted house the only way in which possession can be given to mortgagee is to give him the right to collect the rents and appropriate them towards the debt.

Enjoyment of rents and profits: In a usufructuary mortgage, the mortgagee has right to ‘use’ the property until the debt is fully paid. Generally, the mortgagee adjusts the interest out of the rents and profits from the mortgage-property.

No personal liability: in a usufructuary mortgage, there is no personal liability of the mortgagor. Mortgagee cannot sue the mortgagor personally for payment of his debt. He is entitled only to retain the possession of mortgage-property till his debt is fully paid.

No foreclosure or sale: The mortgagee is entitled to continue possession and enjoy it until the debt is fully paid off. He can neither sue the mortgagor personally nor can exercise his right of foreclosure under section 67 of this Act. This right is not available to usufructuary mortgagee.

(4) English mortgage: Sec. 58(e), An English Mortgage is a transaction in which the mortgagor binds himself to repay the mortgage money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a condition that the mortgagee will retransfer it to the mortgagor upon payment of mortgage money as agreed.

The three essentials of this form of mortgage, therefore, are

(i) that the mortgagor shall bind himself to repay the mortgage money on a certain day

(ii) that the property mortgaged shall be absolutely transferred to the mortgagee; and

(iii) that such absolute transfer shall be made subject to a proviso that the mortgagee will retransefer the property to the mortgagor on payment by him of the mortgage money on the day on which the mortgagor bound himself to repay the same. The chief characteristic of this mortgage is that the operative words should be the same as in an absolute conveyance.

4.1 English mortgage and simple mortgage – Distinction: In English mortgage, there is a transfer of ownership of the property with a promise to repay the debt on a certain date, the mortgagee is entitled to the possession of the mortgaged property and to enjoyment of the payment of mortgage money. Further a simple mortgagee can bring the property to sale through court.

4.2 English mortgage and mortgage by conditional sale- Distinction:

English mortgage contains a covenant to repay. This imports a personal liability on the part of the mortgagor. In a mortgage by conditional sale, the mortgagor has no personal liability.
The remedy of the English mortgagee is that of sale while the remedy of a mortgagee by conditional sale is foreclosure.
in an English mortgage, the ownership is transferred to the creditor but is defeasible by repayment of the debt. In conditional mortgage, a qualified ownership is bestowed upon the creditor which by foreclosure proceedings is transformed into an absolute title when the mortgage commits default.
The mortgagee in English mortgage has a right to possession but not a mortgage under a mortgagee by conditional sale.

4.3 Distinction between English Mortgage and Simple Mortgage

English Mortgage

What is transferred –

– in English mortgage property is absolutely transferred to mortgage, whereas in single mortgage only the right to sale is transferred.

Right is possession –

— in English mortgage, mortgagee being the owner of the property, has a right to enter into Immediate possession of it.

— whereas in simple mortgage the mortgagee has no right to enter into immediate possession of the property.

Under sale out of Court –

—in English mortgage mortgagee has in certain cases a right to sale7without intervention of court.

_ but in simple mortgage, ea right to sale-without; intervention of court isn’t confirmed.

Simple Mortgage:

Only the right of sale is transferred.
The mortgagee has no right to enter into immediate-possession of property
A right of sale without the intervention of the Court is not conferred on a simple mortgagee.

(5) Mortgage by deposit of title deeds (Enquitable mortgage) [Sec. 58(f)]

A mortgage by deposit of tile-deeds is popularly called an equitable mortgage on the analogy of similar expression used in English law. In England, this form of mortgage creates a mere equitable security, as distinguished from an actual mortgage, which is ordinarily called a legal mortgage and is, therefore, unenforceable against a bonafide purchaser for a legal estate without notice. But in India, it creates, not merely a right in personam, but a right in rem which cannot be defeated by any defence of bonafide purchaser without notice, consequently, it will operate also against a subsequent legal mortgage of the same estate. In England, this form of mortgage is rightly called an equitable mortgage, but in India, the later expression is a misnomer, because here, it is in fact a legal mortgage.

Characteristics of a mortgage by deposit of title deeds :

(i) It can be created in town of Calcutta, Madras and Bombay (and other town which may be notified in official Gazette). It can be created in such town by deposit of title deeds, even though the property is outside those towns.

(ii) It is not necessary that all the deeds should be deposited, it is sufficient that material documents are deposited. It is effected by deposit of material title deeds.

(iii) No delivery of possession of property takes place.

(iv) It is made to secure a debt – or advances made, or to cover future advances,

(v) No registration is necessary, even if there is writing recording the deposit.

(vi) It prevails against a subsequent transferee who takes under a registered instrument.

(vii) It prevails- against all who are not bonafide purchasers for value without notice.

6) Anomalous mortgage Sec.58(g) : An anomalous mortgage is a transaction which is, in fact, a mortgage (as defined in the Act), but is not any of types of mortgage considered above. In other words, it is a mortgage other than those categorically defined in the section.

Instances of such mortgages are Kanam, Ottiand Peruartham mortgages of Madras and the San mortgage of Gujarat.

Characteristics of anomalous mortgage:

It would include a simple mortgage, usufructuary mortgage and a usufructuary mortgage by conditional sale.
Possession may or may not be delivered.
lf for Rs. 100 or upwards, it must be registered; if below Rs. 100. it may be registered or by deliver of possession.

Sub Mortgage : A mortgage – debt being an immovable property, the mortgagee can assign its interest in the mortgage property. A mortgage by the mortgagee of his interest under the original mortgage is called a sub mortgage; A sub mortgagee is entitled to a decree for sale of the mortgage rights of his mortgage.

A puisne mortgage arises where A mortgages his property to B by a legal mortgage and then mortgages it again of C either by an equitable mortgage or by creating a charge on the same property.

Rights and Liabilities of Mortgagor

Right of mortgagor : The right of mortgagor are given in section 60 to 65A. Mortgagor’s rights are as under :

(i) Right to redeem the mortgage

(ii) Right of inspection and production of documents relevant to the transaction of mortgage.

(iii) Right to redeem the mortgage separately or simultaneously.

(iv) Right to appropriate accession if any, to the mortgaged property.

(v) Right to appropriate improvements, if any, to the mortgaged property.

(vi) Right to renewal of lease where the mortgaged property is leasehold.

(vii) Right to effect lease of the mortgaged property.

According to above Rights, we can discuss further the most important point.

Right of Redemption:

Right to redeem is the right to recover something by making certain payments. Mortgagor’s right of redemption means mortgagor’s right to recover or get back the property after making payment of loan. Mortgage is a transfer of an interest in immovable property for securing the loan. By way of security, the mortgagor transfers an interest in his immovable property. If the loan has been paid, the interest so transferred must revert back to the mortgagor.

Mortgagor’s right to redeem the mortgage property after repayment of loan is a right which rests in him by virtue of his residuary of ownership in the property. Immovable property is bundle of several interest and out of all such interests only, ‘an interest is transferred to mortgagee as security for repayment of loan. After creating an interest in favour of mortgagee, the mortgagor still has the remaining interests. The remaining interest is called residuary ownership in the mortgage property.

In England, the right to redeem a mortgaged property by application to the chancery court-was known as “equity of redemption” A mortgagee who wish to get rid of the equity of redemption could do so only by obtaining from the court of chancery ‘an antidote’ invented by itself, i.e a decree for foreclosure.

Under the Indian law, the terms “right to redeem” and “equity of redemption” are synonymous. There is no distinction between the legal right of redemption. The mortgagor’s right to redeem, even after the expirty of the date fixed for payment, is not an equity, it is a statutory right recognized by sec. 60 of The Transfer of Property Act.

Once a mortgage always a mortgage :

The right to redeem is a natural incident of mortgage. Notwithstanding any stipulation to the contrary, a mortgagor, at any time after the principal money has become payable and before his equity of redemption has been actually foreclosed, has on payment of his debt, the right to get back his property free of all conditions or liens. The right of redeeming the mortgagor’s property is an indefeasible right, and cannot be taken away from him by any law or contract. The right of redemption cannot be detached from the mortgage. This rule is well expressed by the maxim “Once a mortgage always a mortgage”.

The mortgage may be redeemed at any time after the principal money has become due. Therefore, unless the money becomes due, the mortgagor cannot insist on redeeming his property, nor can the mortgagee attempt to foreclose. Again, the right of redemption subsists until the mortgage is actually foreclosed, that is till a decree is passed in foreclosure suit. So, generally, these two rights accrue at the same time and subsist upto the same time, and this incident is often described by saying that the right of redemption and foreclosure are co-extensive. This maxim, of course, assumes the absence of any valid stipulation (express or implied) to the contrary.

The maxim, “once a mortgage, always a mortgage“ may be applied to explain following two situations:

(i) First, where at transaction is intended by the parties to be a borrowing transaction under a mortgage, though it is carried out in the form of a sale, equity will not allow the mortgagor to be deprived of his right of redemption. A mortgage is always considered as redeemable even though there is an express agreement between the parties that it cannot be redeemed after the due date.

(ii) Secondly, equity does not permit any clog on redemption. A clog on redemption means any stipulation or provision in the mortgage-deed which restricts the mortgagor’s right of redemption. Any contract or agreement or provision incorporated in the mortgage to prevent mortgagor’s right of calling back the property on payment of loan is a ‘clog’ on the equity of redemption. A ‘clog’ on redemption is void. A stipulation which amounts to a ‘clog’ on redemption is void and cannot be enforced as being contrary to the very nature of mortgage.

Clog on redemption:

Clog on redemption means condition or stipulation which prevents the mortgagor from reclaiming the mortgage-property on re-payment of the loan.

The right of redemption is not-voidable in the sense that it cannot be denied to the mortgagor even though he may have by express contract abandoned his right to redeem the property. Equity in its insistence upon the principle that a mortgage is intended merely to afford security to the lender, has held an agreement which prevents redemption as void. The section (Sec. 60) is not prefaced by any such words as in absence of a contract to the contrary. The right of redemption is therefore a statutory right which cannot be fettered by any condition which impedes or prevent redemption. Any such condition is void as a clog on redemption. A mortgagee’s suit for sale was compromised on terms that the mortgagor should take possession as usufructuary mortgagee; and that thereafter the mortgagor should have a right to redeem at any time taking out execution. The Madras High Court held that this term of consent decree was invalid as it had the effect of reducing the time of redemptions from 60 to three years. On appeal to the Privy Council, the point did not arise as their lordships held that on a proper construction of the decree it did not exclude the mortgagor’s right by suit. A mere agreement between the mortgagor and the mortgagee by which the mortgagor agree to convey certain lands to the mortgagee in satisfaction of the mortgage does not extinguish the mortgage.

The Supreme Court has held that the right of redemption under a mortgage deed can come to an end only in a manner known to law. Such extinguishment of the right can not take place by a contract between the parties, by a merger or by a statutory provision which debars the mortgagor from redeeming the mortgage. A mortgagee in possession of the property will have to deliver possession to the mortgagor when a suit of redemption is filed, unless he is able to show that the right of redemption has come to an end or that a suit is liable to be dismissed on some other valid ground.

The mortgagor’s right of redemption is exercised on payment or an offer of payment to the mortgagee at the proper time and at the proper place,‘ of the mortgage money. When it is extinguished by the act of the parties, the act must take the shape and observe the formalities which the law prescribed. The expression ‘Act of parties’ refer to same transaction subsequent to the mortgage and standing apart from mortgage transaction. Under 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 clog on redemption. The legislature has quite advisedly not used any such words as “in the absence-of a contract to the contrary’ in sec. 60, with a view to prevent the mortgagor from counteracting himself out of his right of redemption at the time of mortgage. lt is therefore, manifest that the right cannot be clogged. What is a clog on equity of redemption is a matter of act in each case.

Some instances of clog on redemption

Condition of sale in default.
Postponement of redemption for long term.
Condition postponing redemption in default on a certain date.
Restraint on alienation.
Collateral benefits to mortgagee.
Penalty in-case of default.

Now, we discuss the instance of clog on redemption in details :

Condition of Sale in default: A condition which makes mortgage a sale in default is a’ clog on redemption. Stipulation entered into on date and time of mortgage and included in the deed that in default of repayment of loan within the fixed date, the mortgagee shall be deemed to be purchaser of the mortgage property is a ‘clog’ on redemption. Such stipulation converts mortgage into a sale.

In Gulab Chand Sharma vs. Saraswari Devi AIR 1977 SC 242, there was a mortgage by conditional sale. The mortgagor was given time of four years for repayment of the loan. The mortgage property was on lease. The deed provided that in case the mortgagee received any notice from any public authority for breach of covenants of lease within four years, the mortgagee shall become owner of the property. The Supreme Court held that this stipulation in the mortgage-deed was a clog on mortgagor’s right of redemption and as such it cannot be enforced. Similarly, where a document contained an agreement that if the mortgagor could not pay the amount on due date the document is to be treated as sale, the agreement was held to be a clog on equity of redemption and the document was treated as mortgage}-I deed.

In case of Meherhan Khan vs. Makhan, 57 IA 168 Court held that, if one of the terms mortgage contains a term that the mortgaged property shall not be alienated by the mortgagor continuance of the security even for the purpose of paying of the mortgage, it is void as a clog on redemption. A right of redemption is not only confined to the mortgage, but the mortgagor shall redeem by paying the money out ofhis own pocket and not by raising a loan on the security of the mortgaged property or by sale it is inequitable and incapable of enforcement;

Postponement of redemption for long term: The postponement of right of redemption for a long period is not necessarily a clog on redemption. This is so because in certain cases postponement of right of redemption for a long term may be convenient for both the parties.

In Gangadhar vs. Shankarlal, It was held by the Supreme Court of India that the term in the mortgage that it will-not be redeemable until the expiry of 85 years was not a clog in the circumstances of the cases. Delving the opinion of the Court, Sarkar J. observed.

“the rule against clogs on the equity of redemption no doubt involves that the courts have the power to relieve a party from his bargain. If he has agreed to forfeit wholly his right to redeem in certain circumstances, that agreement will be avoided. But the courts have gone beyond this. They have also l relieved mortgagors from bargains whereby the right to redeem has not been taken away but restricted. The Court’s jurisdiction to relieve a mortgagor from his bargain depends on whether it was obtained by taking advantage of any difficulty or embarrassment that there might have been in when he borrowed the money on the mortgage. Was the mortgagor oppressed? Was he imposed upon? If he was, then he may be entitled to relief. We then have to see if there was anything unconscionable in the agreement that the mortgage would not be redeemed for 85 years. Is it oppressive? Was he forced to agree to it because of his difficulties? Now this question is essentially one of fact and has to be decided on the circumstances of each case.

Accordingly, the rule is that if the length of the term is found oppressive, redemption would be allowed before the expiry the term. Har Dayal Singh vs. Raja Ram Singh, (1933) 9 Luck. 151. In Fateh Mohammad vs. Ram Dayal vs. Ram Dayal. (1 92 7) 2 Lick. 588 I. C. 160, a period of 200 years was held to be oppressive and unreasonable and a clog on redemption.

Conditional postponing redemption in default on a certain date: The condition or stipulation which postpones the mortgagor’s right of redemption in case of default in payment at certain date, is regarded as .a clog on redemption.

In Mohammed Sher Khan vs. Seth Swami Dayal AIR 1922 PC 1 7, the mortgage was for a term of five years. There was a stipulation in the deed according to which if mortgagor could not pay the money the mortgagee was entitled to take possession of the mortgage-property. The stipulation further provided that mortgagee shall remain in possession for twelve years during which the mortgagor cannot redeem the mortgage. It was held by the Privy Council that the stipulation was a clog on mortgagor’s right of redemption because it hindered (restricted) an existing right of redemption. The stipulation was, therefore, held void and not enforceable. It is to be noted that right to redeem the mortgage-property can be exercised by mortgagor just from the date on which the mortgage-money becomes payable. Accordingly, any stipulation postponing the right of redemption beyond this period bars mortgagor’s right of redemption and is clog.

Restraint on Alienation: If the mortgage contains a term that the mortgaged property shall not be alienated by the mortgagor during the continuance of the security even for the purpose of paying off the mortgage, it is void and a clog on redemption. A right of redemption is not only confined to the mortgagor but it can also be exercised by the assignees (Section 91). Obviously, therefore, a stipulation that the mortgagor shall redeem by paying the money out of his own pocket and not by raising a loan on the security of the mortgaged property or by sale is inequitable and incapable of enforcement.
Collateral benefit to mortgagees: Collateral benefits to mortgagees are not necessarily clog on redemption. Under a mortgage he is entitled to get back his money together with interest at usual rate. In a usufructurary mortgage, the mortgagee has right of possession and taking rents and benefit of the property which he adjust against interest. These benefits are inherent benefits of a mortgagee. Such benefits are not collateral benefits. Collateral benefits are those benefits or advantages which are given to a mortgagee in addition to above-mentioned benefits. That is to say, an advantage which is in addition to mortgage money with interest, is a collateral benefit.

In order to say that collateral benefits to mortgage may be ‘clog’ on redemption, it is necessary that:

(a) The collateral benefits given to the mortgagee are unfair and unconscionable, and

(b) The collateral benefits to mortgagee are part of the transaction of mortgage; not an independent benefit.

The Biggs Case (1898) 2 Ch. 307

The owner of a hotel mortgaged it to a brewer. In the deed there was contained a provision that during the continuance of the security which was fixed at 5 years, the mortgagors would buy from the mortgagee exclusively all beer to be sold on the premises. The mortgagors, after 2 years, ceased to buy beer from the mortgagees and claimed to be entitled to redeem the hotel. Romer, J ., held that they were entitled to neither the one thing nor the other. They acquiesced in his decision as to the continuance of the security, but appealed on the other point. The court of Appeal affirmed Romer, J. ’s judgment, granting to the mortgagee an injunction to restrain the mortgagors from buying beer elsewhere in breach of the promise in the deed.

The Noakes Case (1902) A.C. 24. In 1897,one Rice a licensed victuller bought a public house under a lease expiring in 1923. Not being in a position to provide all purchase money he took a loan of 4,800 pounds from Noakes and Co. on mortgage of the public house. It was agreed that for the whole of the remainder of the lease he would sell no beer on the premises except what was bought from the mortgagee. In 1899 Rice wished to pay off the debt. Noakes & Co. were willing to accept the repayment and recover the public house, but not to release the covenant binding Rice not to sell in the beer not purchased from Noakes and Co. Rice thereupon brought an action for a declaration that he was entitled to a reconveyance with a release from the covenant. It was held that mortgagor on payment of all that was due upon the security was entitled to a reconveyance of the property free, from the said covenant.

The Kreglinger’s vs. New Patagonia Meat etc. C0., (1914) A.C. 25

The dissenting opinions of Lords Shand and Lindley, quoted above, had an influence in Kreglinger’s case. The facts were: A firm of wool-brokers lent 10,000 pounds to a Company which carried on business as meat preservers, the agreement being that the Company might pay off the loan at any time by giving a month’s notice. The loan was not secured by an ordinary mortgage but by an analogous security called a floating charge. (This form of security is a charge upon the property of the Company, but it does not prevent the Company from dealing with its property in the ordinary course of the business). It was further agreed between the parties that for a period of five years from the date of the loan, the Company should not sell sheep skins to any person other than the lenders, so long as the mortgagees were willing to pay the best price offered by any other person. It was also agreed that the mortgagees would not demand repayment before five years had elapsed. The loan was repaid within two and a half years. The point that fell to be decided by, the House of Lord was :

(1) whether the option on the sheep skins continued to exist in favour of the mortgagees after repayment of the loan, or (2) whether it was void as a clog on, or repugnant, to the equity of redemption. It was held that the mortgagees were entitled to an injunction restraining the mortgagor from selling sheep: skins during the remainder of the five years period to any person other than the mortgagees. Lord Haldane, L.C. and Lord Parker both came to the conclusion that the option to purchase was valid because it was not a term of the mortgage at all. Lord Parker observe:

“There is now no rule in equity which precludes a mortgagee. . .from stipulating from any collateral advantage, provided, such collateral advantage is not either (i) unfair and unconscionable; or (ii) in the nature of a penalty clogging the equity of redemption, or (iii) inconsistent with the legal or equitable right to freedom”.

In English Law, the tendency seems to be to follow Kreglinger’s case and treat the earlier authorities distinguishable.

In India, however, the Kreglinger’s case has not generally been followed, Thus in Ambu Nair vs. Kelu Nair (1930) 53 Mad. 805. The Madras High Court pointed out that the relaxation of the rule of equity in Kreglinger’s case does not affect the construction of a statutory enactment such as Section 60 and the right of redemption cannot be extinguished otherwise than by act of parties which must necessarily be subsequent to and dependant of the mortgage or by a decree of the court. This case has been criticized on the ground that collateral benefits do not affect the construction of Section 60 unless they are of such a nature that they are oppressive or hinder the right of redemption. However, it is settled law in India that the collateral benefit, whether it affects the land or not, cannot extend beyond the period of redemption.

Penalty in Case of default: An agreement which amounts to penalty in case of non-payment of debt is a clog on redemption. Such agreement cannot be given effect. Accordingly, any stipulation which may be-oppressive, by way of punishment to mortgagor if he fails to pay the loan on due date, is invalid as being clog on equity of redemption. In Sarfarj Singh vs. Udwiit Singh AIR 1925 Oudh. 30, the stipulation in a mortgage provided that in case of default in payment of loan on due date, the mortgagor was liable to pay one nurra of rice for every one rupee of debt. The Oudh Chief Court held that the stipulation was clog as being so unreasonable that it amounted to penalty in default. Whether the terms and conditions are penalty or merely -enhanced interest, is to be ascertained by the courts on the basis of facts and surrounding circumstances; Stipulation which provides merely for an enhanced rate of interest in case of non-payment of debt on due date, is not a clog on equity of redemption.

But where the interest is already a compound interest (enhanced rate -of interest) and the stipulation provides for still higher interest in default of payment, the stipulation is penalty and therefore a clog. It cannot be enforced, against the mortgagor.

Exercise of the right of redemption: A mortgagor may exercise his right of redemption in any of the following cases:

(a) By paying or tendering the mortgage money to the mortgagee :The payment of the mortgage may be paid directly to the mortgagee or his agent. Tendering means making unconditional offer for the payment of debt in such manner that mortgagee gets the money. When there are two or more joint mortgagee payment of mortgage-money to only one of the mortgagees does not discharge the debt against the remaining mortgagees.

The mortgagor has a right to redeem the mortgage at any time after the principal money has become due.

(b) By depositing the mortgage money in the Court : The second mode of redemption is deposit of mortgage money in the Court. As soon as it is deposited in the Court, the Court shall cause a notice to mortgagee that such a deposit has been made.

(c) By filing a suit for redemption : The mortgagor may file a suit for redemption in a Court of law. Such a suit would lie only after the right of redemption accrue to him i.e. after the principal money has become due. The suit must be filed during the subsistence of mortgagor’s right of redemption.

Effect of Redemption: After redemption the mortgagor becomes entitled to the following rights:

(a) He will claim back the mortgage deed and all the documents relating to mortgage if they are in possession of the mortgagee. The mortgagee is bound to return not only the mortgage deed but all such documents which are in his possession or power.

(b) He is entitled to get back the possession of the property. Since usufructuary mortgage requires delivery of possession of the mortgage property, the effect of redemption in such case would be to compel the mortgagee to give back the possession to him and the mortgagee will be bound to deliver the possession.

(c) He is entitled to compel the mortgagee to retransfer the mortgaged property. Such a right is available in an English mortgage; as such a mortgagor binds himself to transfer property, which was transferred to the mortgagor. Thus in English mortgage the mortgagor on redemption acquires the right to compel mortgagee to retransfer the property absolutely to him.

Who can sue for redemption?

Section 91 provides that besides mortgagor following other persons are entitled to redeem the mortgage:

Any person (other than the mortgagee of the interest sought to be redeemed) who has any interest in, or charge upon the mortgaged property or upon the right of redemption.
Any surety for the payment of the mortgage debt or, any part thereof.
Any creditor of mortgagor who, in a suit for an administration of his estate has obtained a decree for sale of the mortgaged property.

Subrogation

Subrogation means substitution. It is the right of a person to stand in the place of creditor. When a mortgagee transfers his mortgage-debt, his assignee become vested with all his rights, i.e. his assignee is substituted or subrogated in the place of the mortgagee. In order to be entitled to subrogation, a person must pay of the entire amount of a prior mortgage, because subrogation takes place by redemption.

Sec. 92 makes it very clear that the doctrine of subrogation cannot be invoked unless the prior mortgage is discharged as a-whole. The principle of this rule is that there cannot be subrogation without redemption. Therefore a partial payment of the mortgage debt cannot give rise to a claim for a partial subrogation.

“ In Bissewar Prasad vs. Lala Sharma Singh (1910) 6 Cal. L. 134, the nature and scope of the doctrine of subrogation was explained in the following words:

“the doctrine of subrogation is a doctrine of equity in jurisprudence. It does not depend upon the privity of contract, expressed or implied, except in so far as equity may be supposed to be imported into transaction and thus raise a contract by implication. It is founded on the facts and circumstances of each particular case and as the principle of natural justice.”

Kinds of Subrogation: Subrogation is of two kinds :

(i) Legal Subrogation

(ii) Conventional Subrogation

(i) Legal Subrogation : Legal Subrogation takes place by operation of law. Any person-(except the mortgagor) who has an interest in the mortgage property or in the equity of redemption is entitled to- be subrogated in place of mortgagee. Such persons have legal or statutory right of being substituted in place of mortgagee for purposes of redemption, foreclosure of sale.

Legal Subrogation may occur in four ways:

(i) A subsequent mortgagee may redeem a prior mortgage.

(ii) A co-mortgagor may redeem his mortgage

(iii) The mortgagor’s surety may redeem the mortgage.

(iv)The purchaser of the equity of redemption may redeem the mortgage.

Conventional Subrogation :Conventional Subrogation is also sometimes called subrogation by agreement. Conventional subrogation takes place when a person being stranger to mortgagee, advances money to the mortgagor under an agreement that he would be subrogated to the rights of mortgagee. An agreement is express or implied that he would be subrogated to the rights and remedies of the mortgagee who is paid off. The provision regarding conventional subrogation requires that such agreement must be in writing and registered.

The last paragraph of Sec. 92 provides that the doctrine of subrogation cannot be applied unless the prior mortgage is discharged as whole. In case of partial redemption there is no subrogation. In order to avoid confusion and complication in respect of apportionment of claims, which may arise due to partial subrogation, it is necessary that redemption and subrogation both must be of the entire mortgage. Thus, subrogation does not take place unless the whole debt is discharged.

LIABILITIES OF MORTGAGOR

The liabilities of mortgagor are incorporated in Sec. 65 and 66. Under section 65 the liabilities arise out of covenants whereas, under section 66 there is only one liability which does not arise out of contract. Liabilities of mortgagor are as under :

(i) Liability to guarantee his title in the mortgaged property.

(ii) Liability to defend his title in the mortgaged property in case it is in danger.

(iii)Liability to make payments of public charges e.g. revenue, taxes etc. if the property is in his possession.

(iv)Liability to pay rents if the mortgaged property is leasehold and mortgagor is a lessee.

(v) Liability to discharge prior encumbrances on the mortgaged property, if any.

(vi) Liability not to commit waste on the mortgaged property. This liability does not arise out of covenant.

RIGHTS OF MORTGAGEE

The rights of mortgagee are laid down in section 67 to 73 of this Act. Mortgagee’s rights are given below

(i) Right to foreclosure or sale of the mortgaged property in default of non-payment of debt.

(ii) Right to sue mortgagor for the necessity of mortgage money.

(iii) Right to exercise power of sale given under the mortgage-deed.

(iv) Right to get a receiver appointed.

(v) Right to accession to mortgaged property.

(vi) Right to have the benefit of renewed lease if mortgage property is leasehold.

(vii)Right to spend money in preserving the property, defending mortgagor‘s title or in renewal of lease if the property is in his possession.

(viii)Right to receive proceeds of revenue sale (or compensation on acquisition) of the mortgaged property.

RIGHT OF FORECLOSURE

Right of foreclosure is the most important topic in the mortgage so we will discuss it, in detail-Foreclosure means closing or withdrawing the mortgagor‘s right of redemption. Foreclosure is a legal.term which means that equitable relief given to mortgagor against the forfeiture of the security is withdrawn.

This right implies that when the time fixed for repayment of the mortgage money has expired, and the mortgagor‘s right to redeem has become complete, and he has failed to avail himself thereof, the mortgagee has the right to institute a suit for a decree that the mortgagor be absolutely debarred of his right to redeem the property. It must be remembered that the right to redeem and right to foreclose are co-extensive.

The general principle as to redemption and foreclosure is that in the absence of any stipulation, express or implied, to the contrary, the right to redeem and the right to foreclose are co-extensive and that where there is a stipulation to pay a mortgage debt within say, ten years, the mortgagor cannot redeem at an earlier date.

It may be noted that the right of redemption cannot be modified by agreement between the parties, but such is not the case with the right of foreclosure.

Mode of Foreclosure : Sec 67 provides following two remedies to a mortgagee :

(i) Foreclosure, and

(ii) Sale

The above two remedies are available to mortgagee, however, which can be exercised depends upon the mode of mortgage.

In Simple Mortgage:

A simple mortgagee cannot foreclose. His remedy is to bring a suit for sale of the mortgaged property in order to realize the mortgage-debt. It may be noted that a simple mortgagee may also sue on the personal covenant and obtain a simple money decree against the mortgagor. Both remedies are independent of each other because they arise out of different causes of action.

In usufructuary mortgage:

A usufructuary mortgagee is transferee of a right of possession only and he retains possession unless the debt is paid off from usufruct. He cannot, therefore, sue either for sale or for foreclosure.

In a mortgage by conditional sale:

In a mortgage by conditional sale, the mortgagee works itself out into a sale in the event of default in payment. Accordingly, the appropriate remedy in this mortgage is to deprive the mortgagor of the right of redemption so that he might not be able to redeem the mortgaged property. .

In an English Mortgage:

Before the Amending Act of 1929, an English mortgagee could sue either for forclosure or for sale. But now he can only bring a suit for sale of the mortgaged property.

In a mortgage by deposit of title-deeds:

A mortgage by deposit of title deeds stands on the same footing as simple mortgage and the mortgagee’s right is thus limited to one for a decree for sale.

In an anomalous mortgage:

In an anomalous mortgage, the right of the mortgagee depends upon the terms of the deed and he may have both or only one of two relief of foreclosure or sale.

Where mortgagor is trustee for the mortgagee [67(b)]:

This clause prohibits a mortgagor, who holds the mortgagees right as trustee from instituting a suit for foreclosure, and thus becoming in effect a trustee of his own property. The proper remedy in such a case is a sale.

Mortgage for public works [67(c)]:

This clause prohibits a mortgagee of railway canal or other public utility undertaking from instituting a suit for foreclosure of sale. The appropriate remedy in such a ease is the appointment of a receiver of the mortgaged property charged with the duty of realizing the earning of the undertaking as a going concern.

Partial foreclosure of sale:

The last paragraph of Section 67 is an illustration of the rule of indivisibility of mortgage. The rule isthat one of the several mortgagees cannot foreclose or sell in respect of his share unless several mortgageeshave, with consent of the mortgagor, severed their interests under the mortgage. The reason for this ruleis to protect the mortgagor from being harassed by a multiplicity of suits where the severance of interestsof the mortgagee has taken place without the consent of the mortgagor. Accordingly all the co-mortgageemust join together and file one suit in respect of the whole mortgage-money.

DIFFERENCE BETWEEN FORECLOSURE AND SALE

Foreclosure is allowed only in the case of mortgage by conditional sale and an anomalous mortgage,-if under its terms, the mortgagee is entitled to foreclose. A suit for sale can be brought in the case of a simple mortgage. (an equitable mortgage) in English, mortgage (in which the mortgagor makes a personal covenant to pay the mortgage-money on a certain date), and in anomalous mortgage, (if a power of sale can be implied from the terms of the mortgage).
Foreclosure is possible only by a suit. Sale is possible either out of Court or by a suit.
Foreclosure absolutely discharge the mortgage-debt. The mortgagee cannot, thereafter, proceed against the mortgagor on the personal covenant. In the case of sale, the mortgagee can recover the balance amount if the sale-proceeds are not sufficient to satisfy the mortgagee-debt.

LIABILITIES OF MORTGAGEE

The liabilities of mortgagee are given in Section 76. His liabilities arise only where he is in possession of the mortgaged property. The duties of mortgagee in possession of property are as under.

(i) Liability to manage the property with ordinary prudence.

(ii) Liability to collect rents and profits with due diligence.

(iii)Liability to pay the government-dues in case there is no contract to the contrary.

(iv) Liability to spend money for necessary repairs of the mortgaged property.

(v) Liability not to commit waste on the mortgaged property.

(vi) Liability to apply the insurance money, if received, to re-instate the mortgaged property.

(vii) Liability to debit to himself the interest which, from time, becomes due to him and in case of any surplus, in reduction of the mortgage money.

(viii)Liability to account for the gross receipts in case he retains possession after the mortgagor tenders or deposits the mortgage money in court.

MARSHALLING (SECTION 81)

Doctrine of Marshalling is defined under 81 of Transfer of Property Act. Marshalling means arranging things. It is a right of Puisne (Subsequent) mortgagee to demand from a prior mortgagee that he should Satisfy his debt first out of the property not mortgage to former.

The right arises when the owner of two or more properties mortgages them to one person and then mortgages one or more of them to another person. The subsequent mortgagee is entitled, unless there is a contract to the contrary, 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 so as to prejudice the rights to the prior mortgagee or any other person who has for consideration, acquired an interest in any of the properties. Further, the exercise of this right does not depend on the later mortgagee having notice of the prior mortgage.

The principle of the doctrine of Marshalling has been thus stated in the leading English case Aldrish vs. Cooper (8 Ves. 382) : “if there are two creditors who have taken securities for their respective debts, and the security of the one is confined to both, and the security of other is confined to one of those funds, the Court will arrange or marshal the assets, so as to throw the person who has two funds liable to his demand on that which is not liable to be debt of the second creditor, i.e., it shall not depend upon the will of-one creditor to disappoint another.”

Marshalling applies only when-

There is a common debtor.
Two or more properties of the debtor have been first mortgaged to one person and subsequently one (or more) of the some properties is (or are) mortgaged to another person.
It does not prejudice (i) the prior mortgagee or (ii) third party claming as purchaser; and
There is no contract to the contrary.

So we can understand above application with an illustrative example-A mortgages properties X and Y to B. Later, he mortgages X to C. C obtains a sale-decree for X and purchases it himself. B then obtains an order for sale on his mortgage. Under these circumstances, C is entitled to require B to bring Y to sale first and realize his security as far as possible out of Y.

The principle of marshalling does not apply-

So as to prejudice the prior mortgagee. If the property not mortgaged to the subsequent mortgagee is not sufficient to satisfy him (the first mortgagee) he can proceed against the other property as well.
So as to prejudice the interest of a third person who has, for consideration, acquired an interest in any of the properties. Thus, when property is not comprised in the security of the second mortgagee, who can exercise the right of marshalling. It is mortgaged to or purchased by, third party, a subsequent mortgagee cannot marshal to the prejudice of third party C
Unless the same person is liable to both the creditor and is also the owner of the properties.
Unless the first mortgagee has equal rights over the two properties mortgaged to him. Thus he has a charge on a property but on the other hand he has a right of set off, there can be no marshalling, as the securities are not equal.
Where only a portion of the property already mortgaged is subsequently mortgaged to another person i.e. it is not considered as different fragment of the same property to constitute different properties.

CONTRIBUTION (SECTION 82)

Doctrine of Contribution : Marshalling settles the right of competing mortgages while ‘Contribution’ settles the right of mortgagors of several properties or several shares in one property. Marshalling requires that the creditor who has the means of satisfying his debt out of several funds shall so exercise his right as not to take from another creditor the funds which forms his security only. According to the principle underlying this section, a property, which is equally liable with the other property to pay a debt, must not escape only on the ground that the creditor has been paid out of that other property. It follows, therefore, that such of the mortgaged properties as have been sold for the realization of mortgage money and have thus contributed to the mortgage-debt are not liable to a claim for contribution; and that such a claim can only be advanced by the owners of those properties which have contributed more than their reteable share of the debt, and against those portions of the mortgaged property only which have not contributed to the mortgaged debt and have benefited by the sale of the property of the claimants for contribution.

Illustration

Three brother A, B and C mortgaged their joint property first to D, and then to E. A, B and C affected a partition of the property into three shares. D brought a suit for sale on his mortgage and realized the amount by the sale of A’s share. A obtained a decree for contribution against the share of B and C. Thereafter B and C redeemed the puisne mortgage to E and claimed contribution from A. Held, that they had no right to contribution as A‘s share had been sold to satisfy the prior mortgage debt.

The first paragraph enacts the general rule that if several properties whether of one or several owners are mortgaged for one debt they shall contribute rate-ably to its discharge, after deducting from each property the value of any prior encumbrance to which it may be subject. As the mortgage debt is indivisible, the mortgagee may realize the whole debt out of only one parcel of the property mortgaged and in that case it is only fair that the other should be liable to contribute.

The Privy Council in Kamra Singh is vs. Chaturbhuj Singh. 1934 ALJ 462: 38 GWN 575 observed that the suit for contribution is maintainable when the whole of the mortgage debt has been paid out of the parts of the mortgaged property and it is not necessary that the whole of the debt is paid out of the properties of the plaintiff alone.

The second paragraph is an illustration of the first and assumes that payment of the prior encumbrance has been made in which case the amount of the encumbrance is deducted from the value of that property in ascertaining its rateable contribution.

Illustration :

Property X is mortgaged for Rs. 200 to A; properties X and Y are mortgaged for Rs. 400 to B. Then if X and Y are each worth Rs. 500 and are sold, X to C and Y to D, the contribution of C and D to the mortgage of Rs. 400 is in the ratio of3OO to 500. and C is liable for Rs. 150 and D for Rs. 250 As a consequence of this rule the person who has paid in excess of his share or who has discharged the whole debt for Rs. 400 from C’s property, would be entitled to recover Rs. 250 from D by a suit for contribution.

Redeem Up Forcelose Down

Section 94 gives a mesne mortgagee the right of foreclose to subsequent mortgagees and also to the mortgagor himself. An intermediate mortgagee can enforce this right against all the mortgagees posterior (subsequent) to him and ultimately against mortgagor. Mortgagee’s right is counterpart of his right to redeem prior mortgagees under section 9l(a). Any mesne mortgagee is entitled to redeem the prior mortgagees until he reaches the first mortgagees before him and can foreclose all the mortgagee after him. Redemption by a mesne mortgagee is upwards (prior) and foreclosure is downwards (subsequent). Section 91(a) and 94 taken together, the rights of mesne mortgagee -in respect of redemption and foreclosure of mortgage is very well expressed in the doctrine of redeem up or foreclose down.

Mesne mortgagee’s rights to redeem up and foreclose down may occur only in case of successive mortgages. When a property is mortgaged one after the other to several mortgagees, there may be a mortgagee who stands in between two or more mortgagees. One or more mortgagees are prior to or above him and some are subsequent or below him. Such mesne or intermediate mortgagee can always redeem the prior mortgagees but, cannot redeem his subsequent or later mortgagee except by consent. On the other hand, this mesne mortgagee cannot enforce foreclosure against prior mortgagee. He is entitled to enforce right of redemption upwards and foreclosure downwards. The rule may be explained with the help of following illustration.

Illustration :

(i) A mortgages X to B Redeem

(ii) A mortgages X to C Mesne mortgage

(m)A mortgages X to D Foreclose

In this illustration since C stand in between two mortgagees B and D. Therefore C is entitled to redeem B. Similarly D is also a later mortgagee. D can also redeem C or B or both. But C cannot redeem D. Similarly B cannot redeem C or D.

On the other hand, C can foreclose mortgagee D who is posterior (below or later) to him. Similarly B can foreclose C and D who are below B. The rule is that in case of successive mortgages, the latter can always redeem the earlier but the earlier cannot redeem later except by consent. As regards foreclosure, the rule is that earlier can foreclose against latter but the later cannot foreclose earlier. Charges (Ss. 100 & 101)

When immovable property of one person is made security for the payment of money to another person, and the transaction does not amount to mortgage, a charge is said to be created on the property. (This can take place either by act of parties or by operation of law).

All the provisions, which apply to a simple mortgage, also apply to a charge.

The above principle does not, however, apply to the charge of a trustee on the trust-property, for expenses properly incurred by him in executing the trust.

It is also to be noted that a charge cannot be enforced against property in the hands of a person who is a transferee for consideration, without notice of the charge.

No merger in certain eases (Sec. 101):

A mortgagee of immovable property.-(or any transferee from him) can purchase that property, without causing the mortgage to be merged as between himself and any subsequent mortgagee of the same property.

Summary

(The same rules apply to a person having a charge on immovable property) Also, a subsequent mortgagee (or charge-holder) cannot foreclose or sell such property without redeeming the prior mortgage or charge.

Distinguish between Mortgage and Charge

Mortgage

Charge

A mortgage is security for the payment of a debt.

A charge is a security for the payment of any money.

A mortgage may be a security for the

performance of an act giving rise to a pecuniary

liability.

Not so, in the case of a charge.

A mortgagee may contain a covenant to pay.

There is no covenant to pay in the case of charge.

A mortgage involves a transfer of an interest in specific immovable property.

A charge does not transfer any interest the

mm property.

A mortgage arises only by an act of parties.

A charge can arise (i) by act of parties, or(ii)

by operation of law.

A mortgage gives rise to a right in Rem.

A charge does not create any right in rem

A mortgagee can follow his security in the hand

of a third person.

A charge holder cannot do so.

A mortgagee can follow a bona tide purchaser

for value without notice.

A charge-holder cannot do so.

The defence of bona fide purchase without notice

cannot be set up against a mortgagee.

The defence of bona fide purchase without notice is a good defence against a charge.

CHARGES

Section 100 of T.P. Act defines charge. According to this section, charge is defined as-

“Where immovable property of one person is by act of parties or operation of law made for the payment of money to another, and the transaction does not amount to the mortgage, the latter person is said to have a charge on the property; and all the provisions hereinafter contained which apply to a simple mortgage shall, so far as may be, apply to such charge.

Nothing in this section applies to the charge of a trustee on the trust property; for expenses properly incurred in the execution of his trust, and save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.”

“Charge” when immovable property of one person .,is made security for the payment of money to another and the transaction does not amount to mortgage, the latter person is said to have a charge on the property. Thus charge is always on immovable property in order to secure payment of money. If the payment is not made by the person who is liable for such payment, it is made out of the property, charged for this purpose.

A charge may look like a mortgage. But in essence it is not mortgage. Mortgage is wider than a charge. In every mortgage there is a charge, but every charge is not a mortgage. A charge does not involve a transfer of an interest in property.

Charge and Mortgage Distinction Between : The difference between a charge and mortgage has been explained in Section 58. In a Patna case, Das, J., said— “The charge only gives right to payment out of particular fund or particular property without transferring that fund or property; a mortgage is in essence a transfer of an interest in specific immovable property”. A Mortgage is a jus in rem, a charge is a jus ad rem and the practical distinction is that a mortgage is good against subsequent transferees and a charge is only good against subsequent transferees with notice.

In the case of a mortgage as well as in a charge, the property of another person made security for a loan or debt; but whereas a mortgage is a transfer of an interest in a property, a charge does not involve the transfer of any interest in property.

Security for the Payment of Money : In order to create a charge, it is not necessary to employ any technical or any particular form of words. All that is required is that there must be clear intention to make a particular property a security for the payment of money. Where the property is not intended to serve as security there can be neither a mortgage nor a charge.

Property Must be Specified : It is not necessary that the properties charged should be described with that amount of definiteness as is necessary in case of mortgage. There should be some expression to signify what properties exactly are to be charged. A general description of the property would be sufficient if from the facts and circumstances the property to be charged can be ascertained. Where the description given is too vague and indefinite, the charge will be void as uncertainty.

Kinds of Charge : There are two kinds of charges, viz., A

1) Charges created by act of parties.

2) Charges arising by operation of law

1) Charge Created by Act of Parties : For creating a charge on immovable property, no particular form of words are needed. However, the deed must disclose an intention to create charge on the property or fund.

An agreement which gives immovable property as security for the satisfaction of a debt, or for the payment of maintenance allowance in perpetuity, without transferring any interest in the property or an agreement by which an owner of a share in a village receives in lieu of his share a lump sum out of income, constitutes a charge on the property and is not a mortgage.

A charge created by will or a compromise decree is a charge created by act of parties. But a charge created by award of the arbitrator is outside the scope of section 100 of Transfer of Property Act

2) Charge by Operation of Law : The words “by operation of law” are more extensive than the word “by law” and a charge created by operation of law includes a charge directly created by the provisions of an act as well as other charges created indirectly a legal consequence of certain conditions.

Extinction of Charge : A charge may be extinguished in the same manner as a simple mortgage. Thus, it is extinguished by-

Act of parties
Novation;

Merger

No Merger in Case of Subsequent Encumbrance : Any mortgagee of, or person having a charge upon, immovable property, or any transferee from such mortgagee or charge-holder, may purchase or otherwise acquire the rights in the property of the mortgagor or owner, as the case may be, without thereby causing the mortgage or charge to be merged as between himself and any subsequent mortgage of, or person having a subsequent charge upon, the same property; and no such subsequent mortgage or charge-holder shall be entitled to foreclose or sell such property without redeeming the prior mortgage or charge, or otherwise than subject thereto.

Extinction of Mortgage Security : A mortgage security can be extinguished by any of the following ways-

1) By a decree of foreclosure, or by a decree for sale after the sale is confirmed (Section 60).

2) By payment of the mortgage debt by the mortgagor or by a person under covenant to pay such a payment extinguishes the mortgage and does not operate as an assignment (Section 92);

when the mortgage debt is paid by one of the several co-mortgagors it is extinguished as to his share and assigned to him as the shares of the other co-mortgagors (Section 95); when the mortgage debt is paid out by puisne mortgagee the mortgage is not extinguished but assigned to the puisne mortgagee (Section 92); when the mortgage debt is paid by the purchaser of equity of redemption, the question of extinction of the mortgage depends upon the existence of a subsequent encumbrance. (Section 92).

3) By merger.

4) By novation.

Service or Tender on or to Agent (Section 102) : Where the person on or to whom any notice or tender is to be served or made under this Chapter does not reside in the distinct in which the mortgaged property or some part thereof is situated, service or tender on or to an agent holding a general power of attorney from such person or otherwise duly authorized to accept such service or tender shall be deemed sufficient.

Where no person or agent on whom such notice should be served can be found or is known to the person required to serve the notice, the latter person may apply to any court in which a suit might be brought for redemption of the mortgage property, and such court shall direct in what manner such notice shall be served, and any notice served in compliance with such direction shall be deemed sufficient-

Provided that, in the case of a notice required by Section 83, in the case of a deposit the application shall be made to the Court in which the deposit has been made.

Where no person or agent to whom such tender should be made can be found or is known to the person desiring to make the tender, the latter person may deposit in any Court in which a suit might be brought for redemption of the mortgaged property the amount sought to be tendered, and such deposit shall have the effect of a tender of such amount.

Notice, etc., to or by Person Incompetent to Contract : Where, under the provisions of this Chapter, a notice is to be served on or by, or a tender or deposit made, or accepted or taken out of Court by, any person incompetent to contract, such notice may be served on or by or tender or deposit made, accepted or taken, by the legal curator of the property of such person; but where there is no such curator, and it is requisite or desirable in the interests of such person that a notice, should be served or a tender or deposit made under the provisions of this Chapter, application may be made to any Court in which a suit might be brought for the redemption of the mortgage to appoint a guardian ad litem for the purpose of serving or receiving service of such notice or making or accepting such tender, or making or taking out of Court such deposit, and for the performance of all consequential acts which could or ought to be done by such person if he were competent to contract— and the provisions of Order XXXII in the First Schedule to the Code of Civil Procedure, 1908 (5 of 190$) shall, so far as may be, apply such application and to the parties thereto and to the guardian appointed thereunder.

A tender under .Section 60 or a notice under Section 69 or 83 cannot be made or served on a guardian ad litem until such a person is actually appointed. The words “incompetent to contract” must be read in light of Sections 11 and 12 of the Contract Act.

Power to Make Rules (Section 104) : The High Court may, from time to time, make rules consistent with this Act for carrying out, in itself and in the Courts of Civil Judicature subject to its superintendence, the provisions contained in this Chapter.

This section does not make it obligatory for the High Court to make rules. No rule inconsistent with Civil Procedure Code can be made under this section and a rule which is inconsistent with this Act would be ultra vires. The rule-making power is limited to things in Chapter iv of the Transfer of Property Act.

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

Pre Questions

What is true in relation to ‘right of redemption’:

(a) It is a statutory right which cannot be fettered by any condition or agreement between the parties.

(b) it is a natural incident of a mortgage; it cannot be detached from the mortgage (‘Once a mortgage always a mortgage’).

(c) Any condition contained in mortgage-deed, which obstructs the right of redemption, will be considered as a clog or fetter on redemption, and will be null and void.

(d) All of the above.

‘Right of redemption is a statutory right which cannot be fettered by any condition or agreement between the parties. This was laid down in:

(a) Raghunath Singh v Mst. Hansraj

(b) Noakes v Rice.

(d) Subhash v Ganga Prasad.

‘Once a mortgage always a mortgage’. This was held in:

(a) Noakes & Co. v Rice.

(b) Kreglingers case.

(d) All of the above.

Which of the following is an example of ‘clog’ on redemption:

(a) Possession to be always remaining with the mortgagee.

(b) Hard terms of mortgage.

(d) All of the above.

Which of the following is a ‘clog’ on redemption:

(a) Condition of sale in default.

(b) Restraint on alienation.

(d) All of the above.

‘A long term of mortgage is not necessarily a clog on redemption’. It was held in:

(a) Gangadhar v Shankar Lal

(b) Subhash v Ganga Prasad

(d) Pratap Bahadur v Gajadhar

The ‘Doctrine of Consolidation’ which is based on the maxim ‘He who seeks equity must do equity’ is laid down in which section of the T.P. Act:

(a) Sec. 61.

(b) Sec. 62.

(d) Sec. 64.

A mortgagor who has executed two or more mortgages in favour of the same mortgagee, in absence of l a contract to the contrary:

(a) Is bound to redeem all such mortgages together.

(b) Is not entitled to redeem any one such mortgage separately.

(d) Be entitled to redeem any one such mortgage separately, or any two or more of such mortgages together.

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

(a) Foreclosure.

(b) Redemption

(d) Apportionment.

The right of foreclosure which is available to a mortgagee is mentioned in which section of the T. P. Act:

(a) Sec. 66.

(b) Sec. 67.

(d) Sec. 69.

The right of foreclosure is when available:

(a) After the mortgage-money has become due.

(b) Before redemption.

(d) All of the above.

Remedy of ‘foreclosure’ is available in which one of the following mortgages?

(a) Usufructuary mortgage.

(b) Simple mortgage.

(d) English mortgage.

Which is correct answer in the following?

(a) Sec. 60 of T.P. Act is enforceable on mortgage decrees.

(b) Sale or purchase agreements are saleable properties and liable for attachment.

(d) Motor pump which is used in irrigation is liable for attachment.

Mark the incorrect matching:

(a) Renewal of mortgaged lease: Sec. 64.

(b) Liabilities of the mortgagor: Sec. 65.

(d) None of the above.

Right to appointment of receiver under the T. P. Act is available to:

(a) Mortgagor.

(b) Mortgagee.

(d) Court.

A mortgagee has a right to .sale without the intervention of court under Sec.______ T.P. Act:

(a) Sec 60.

(b) Sec 69.

(d) Sec 63.

Which one of the following sections of T.P. Act deals with doctrine of ‘substituted security’?

(a) Section-68.

(b) Section-70.

(d) Section-73.

The principle under which two mortgagees could be united and the intermediate mortgage could be squeezed out is laid down in Sec. 79, T. P. Act and is known as:

(a) Marshalling.

(b) Tacking.

(d) None of the above.

Doctrine of Marshalling (‘It shall not depend upon the will of one creditor to disappoint another’) has been provided in which of the following sections of the T.P. Act?

(a) Sections 56 and 81.

(b) Sections 56 and 82.

(d) Sections 81 and 82.

The principle of the doctrine of Marshalling has been explained in which of the following cases:

(a) Aldrish v Cooper.

(b) Walsh v Lonsdale.

(d) Woods v Townley.

Doctrine of Contribution has been provided in which of the following sections of the T.P. Act?

(a) Sec. 80.

(b) Sec. 84.

(d) Sec. 82.

Mark the correct statement:

(a) By marshalling, a creditor having several securities is so to exercise his right as not to injure the right of another creditor on some of those securities.

(b) By contribution all the securities are to contribute equally and the whole liability is not thrown on one security only.

(d) Only (a).

The ‘doctrine of subrogation’ is provided for in which section of the T. P. Act:

(a) Sec. 91.

(b) Sec. 92.

(d) Sec. 94.

Legal subrogation may occur in which of the following ways:

(a) A subsequent mortgagee may redeem a prior mortgage.

(b) A co-mortgagor may redeem a mortgage.

(d) All of the above.

The rights of a mesne (‘puisne’) mortgagee well summed up in the maxim ‘Redeem up, foreclose down are laid down in which section of the T. P. Act: –

(a) Sec. 93.

(b) Sec. 94.

(d) Sec. 96.

Mark the incorrect statement:

(a) A mortgagee can assign his interest in the mortgaged property (Sub-mortgage).

(b) If a mortgage-deed is not registered, it becomes invalid and the mortgagor cannot sue for redemption, but he can sue for possession on his offering to repay the loan.

(d) None of the above.

Where an immoveable property of a person is made security for the payment of money to another and the transaction does not amount to a mortgage, it is called as:

(a) Exchange.

(b) Gift.

(d) Lien.

Right to retain the possession of the property until the due amount is paid, is also known as:

(a) Lien.

(b) Charge.

(d) Marshalling.

Charge has been defined in which section of the T. P. Act:

(a) Sec. 100.

(b) Sec. 101.

(d) Sec. 103.

The doctrine of Merger is laid down in which section of the T. P. Act:

(a) Sec. 100.

(b) Sec. 101.

(d) Sec. 105.

Lec-15 Doctrine Of Lis Pendens

MAINS QUESTIONS

What is the validity of transfer of property if the there is a pendency of litigation in the court of competent jurisdiction?

Lis Pendens

Of the original owner

Essentials

Based on the case

Bellany v.s Sabina 1857

Turner LJ

Based on the Maxim:-

“Pendent Lite nitil inniveiter”

Case:- Jaiyaz Hussain v.s Prag Narain 1960 P.C

The transfer will ot be void, but it will be subject to judgment og the court.

Sec-52[Lis-Pendens]

Doctrine Of Lis Pendens :: A Critical Evaluation

INTRODUCTION

The broad principle underlying S. 52 of the Transfer of Property Act is to maintain the status quo unaffected by the act of any party to the litigation pending its determination-even after the dismissal of a suit, a purchaser is subject to lis pendens, if an appeal is afterwards filed-if after the dismissal of a suit and before an appeal is presented, the ‘lis’ continues so as to prevent the defendant from transferring the property to the prejudice of the plaintiff-no reason to hold that between the date of dismissal of the suit plainly be impossible that any action or suit could be brought to a successful termination if alienations pendent lite were permitted to prevail-The doctrine of lis-pendens is founded in public policy and equity and if it has to be read meaningfully such a sale until the period of limitation for second appeal is over will have to be held as covered under S. 52 of the TP Act.[1]

The principle of the maxim pendente lite nihil innovetur is incorporated in this section. The section provides that during the pendency of any suit in which right to immovable property is in question, neither party to the litigation can transfer or otherwise deal with such property so as to affect the rights of the opponent. The Explanation makes it clear that lis shall be deemed to commence from the date of the presentation of the plaint 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.[2]

In Jayaram Mudaliar v. Ayyaswami[3] Supreme court held that the purpose of Section 52 of the Act is not to defeat any just and equitable claim, but only to subject them to the authority of the court which is dealing with the property to which claims are put forward. This court in Hardev Singh v. Gurmail Singh[4] Section 52 of the Act does not declare a pendente lite transfer by a party to the suit as void or illegal, but only makes the pendente lite purchaser bound by the decision in the pending litigation. The principle underlying Section 52 is clear. If during the pendency of any suit in a court of competent jurisdiction which is not collusive, in which any right of an immovable property is directly and specifically in question, such property cannot be transferred by any party to the suit so as to affect the rights of any other party to the suit under any decree that may be made in such suit. If ultimately the title of the pendente lite transferor is upheld in regard to the transferred property, the transferee’s title will not be affected. On the other hand, if the title of the pendente lite transferor is recognized or accepted only in regard to a part of the transferred property, then the transferee’s title will be saved only in regard to that extent and the transfer in regard to the remaining portion of the transferred property to which the transferor is found not entitled, will be invalid and the transferee will not get any right, title or interest in that portion. If the property transferred pendente lite, is allotted in entirely to some other party or parties or if the transferor is held to have no right or title in that property, the transferee will not have any title to the property.

Object of the Doctrine

The object of S. 52 is to subordinate all derivative interests or all interests derived from parties to a suit by way of transfer of pendente lite to the rights declared by the decree in the suit and to declare that they shall not be capable of being enforced against the rights acquired by the decree-holder. A transferee in such circumstances therefore takes the consequence of the decree which party who made the transfer to him would take as the party to the suit. The principle of lis pendens embodied in Section 52 being a principle of Public Policy, no question of good faith or bona fide arises. Such being the position, the transferee from one of the parties to the suit cannot assert or claim any title or interest adverse to any of the rights and set interests acquired by another party under the decree in suit, the principle of lis pendens prevents anything done by the transferee from operating adversely to the interest declared by the decree.[5]

Lis Pendens

‘Lis’ means an action or a suit. ‘Pendens’ is the present principle of Pendo, meaning continuing or pending, and the doctrine of lis pendens may be defined as the jurisdiction, power, or control that courts have, during the pendency of an action over the property involved therein.[6]

Basis of the Doctrine

The section incorporates the well-known doctrine of lis pendens which, to quote Turner, L.J.,[7] rests on the foundation. “That it would plainly be impossible that any action or suit could be brought to a successful termination, if alienations, pendente lite were permitted to prevail.”The doctrine of restitution which the section incorporates is based on the principle that the acts of the courts should not be allowed to work injury on the suitors.[8] The principle contained in this section is based on the English common law maxim ut lite pendente nihil innovator i.e. during litigation no new rights should be introduced.[9] It prohibits alienation of property when a dispute relating to the same is pending in a court of law awaiting disposal by the same.[10]

The rule contained in S. 52 is also called the rule of lis pendens and makes transfers pendente lite, subject to the decision of the Court. As a principle of equity, justice and good conscience, this rule applies even where the Act does not apply.

It is a doctrine common to the courts both at law and Equity, and rests…upon this foundation that it would plainly be impossible that any action or suit could be brought to a successful termination, if alienation pendente lite were permitted to prevail. The plaintiff would be liable in every case to be defeated by the defendant’s alienating before the judgment or decree, and would be driven to commence his proceedings de novo subject again to be defeated by the same course of proceedings. If any decree or order is passed in such proceedings, any transfer of rights during inter regnum shall be determined as non est in the eyes of law.[11]It is based on the principle that the person purchasing property from the judgment debtor during the pendency of the suit has no independent right to property to resist, obstruct or object execution of a decree.[12]

Doctrine Of Lis Pendens:A Critical Evaluation

The basic ingredients of the doctrine of lis pendens are:[13]

(i) A litigation should be pending in a court of competent jurisdiction;

(ii) The suit must be relating to a specific immovable property;

(iii) The suit should not be collusive;

(iv) The suit should relate to a right in this specific property;

(v) Property should not be transferred or otherwise dealt with;

(vi) By any party to the suit;

(vii) So as to affect the rights of any party thereto;

(viii) Till the final disposal of the case.

APPLICATION OF SECTION 52

For the application of the Section 52 the following conditions have to be satisfied:

A suit or a proceeding in which any right to immovable property is directly and specifically in question, must be pending;
The suit or the proceeding shall not be a collusive one;
Such property during the pendency of such a suit or proceeding cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the right of any other party thereto under any decree or order which may be passed therein except under the authority of Court.[14]

For invoking the doctrine of lis pendens under S. 52 T.P. Act, the question whether the subsequent transferee was a party to the suit or not is not material.[15] Where the entire plots were in dispute, the transferee of even one third share in the plots was held bound by the result of the litigation in respect of all the plots then in dispute.[16] Section 52 imposes a prohibition on transfer or otherwise dealing with any property during the pendency of a suit provided the conditions laid down in the Section are satisfied.[17]

Any transfer of suit property or any dealing with such property during the pendency of the suit is prohibited except under the authority of the court, if such transfer or otherwise dealing with the property by any party to the suit or proceedings under any order or decree which may be passed in the said suit or proceeding.[18]There is statutory bar on alienation by the parties to the proceedings in respect of the suit property. If anybody wants to alienate, he can do so only with the permission of the Court. The intention of the legislature is that no party to the litigation can defeat the claim of other in case he succeeds in the litigation.[19]

The doctrine of lis pendens embodied in Section 52 is intended to prevent a party to a suit from making an assignment inconsistent with the rights which may be established in the suit and which might require a further party to be impleaded to make effectual the Court’s decree. The effect of Section 52 is not to wipe out a sale pendente lite altogether but to subordinate it to the rights based on the decree in the suit.[20]

NON-APPLICABILITY OF DOCTRINE

It is not the law that the doctrine of lis pendens would be applicable in every case. Rather there are many instances where this doctrine does not apply. Following are the instances:

(a) A private sale by a mortgagee in exercise of power conferred by mortgage deed is not affected by the doctrine of lis pendens embodied in the section and the sale is valid, though made during the pendency of a redemption suit filed by the mortgagor.[21]

(b) To cases of review.

(d) To an order passed against an intervenor in execution proceedings as the proper remedy in such cases is a suit under O. 21, r. 63 of the Code of Civil Procedure, 1908.

(e) To a friendly suit.[23]

(f) Where the proceedings are collusive.[24]

(g) To yearly leases and such other acts as are either the necessary or the ordinary reasonable incidents of an interim beneficial enjoyment.[25]

(h) To a transfer pending suit by a person who is not a party to such suit.[26]

(i) To personal property other than the chattel interests in land.[27]

(j) To the interval that lapses between dismissal of a suit and a fresh suit on the same cause of action.

(k) Where the parties to the transfer are ranged on the same side.[28]

(l) To transfer affected by order of the court in which suit or proceedings is pending.[29]

(m) Where there is misdescription of the property in the plaint.[30]

(n) Where alienations are not inconsistent with the rights which may be established by the decree in the suit.[31]

(o) The doctrine of lis pendens does not apply to the case of a person who, during the pendency of a mortgage suit obtains a mortgage of the property, in consideration for money paid by him and used by the mortgagor to pay off the suit mortgage.[32]

CRITICAL EVALUATION

Status of the transfer

The language of the section is prohibitive in nature. Section 52 uses the phrase ‘the property cannot be transferred or otherwise dealt with’. At the same time, the transfer pendente lite is not void,[33] but is only subject to the outcome of the litigation.[34]The transfer is thus voidable at the instance of the affected party,[35] except to the extent that it may conflict with rights decreed under the decree held to be valid and operative as between the parties.[36] The transferee only takes the title of the transferor subject to the result of pending legislation.[37] The rule does not annul the conveyance but only renders it subservient to the rights of the parties to the action, as determined by the decree.[38] The doctrine does not defeat any just and equitable claim, but only subjects them to the authority of the court dealing with the property to which claims are put forward.[39] The Apex Court has held[40]

“The effect of Section 52 is not to wipe it(transfer) out altogether but to subordinate it to the rights based on the decree in the suit. As between the parties to the transaction, however, it was perfectly valid and operated to vest the title of the transferor in the transferee.”

Right of alienee pendente lite to be pleaded as a party to the lis

The predominant view is that a transferee pendent lite cannot seek impleadment when transfer was affected during the pendency of appeal without the permission of the court[41] and with full knowledge that the status quo order was in existence.[42] The petitioner in the suit would be dominus litus, and if he wants to take a calculated risk, the court may not exercise its discretion to implead him,[43] and he cannot contend that he has any independent right over the suit property over and above the right of the seller who is a party to the lis.[44] The reason being that a person who violates the law can never be treated as holding a legal enforceable right[45] and thus a resistance at the instance of a transferee of judgment debtor during the pendency of the proceedings cannot be said to be resistance or obstruction by a person in his own right and he is therefore not entitled to get his claim adjudicated.[46] The Apex Court has explained the position in the following words:[47]

Where a party does not ask for leave, he takes the obvious risk that the suit may not be properly conducted by the plaintiff on record; yet he will be bound by the result of the litigation even though he is not represented at the hearing unless it is shown that the litigation was not properly conducted by the original party or he colluded with the adversary.

On the other hand, some High Courts[48] have expressed the opinion that after affecting a transfer of the property, the transferor would invariably not pursue the litigation as vigorously as he might have been doing previously. Since he obtains consideration, his interest in the litigation and also the property would diminish. He may even collude with the other party and the interest of the alienee would be adversely affected. Since due to the application of doctrine of lis pendens, the interests of the party to the lis are already protected, no harm would be done to him if the alienee is impleaded as a party. Rather in the interests of justice, both the parties should be given a fair chance at the trial. Thus the Orissa High Court held that a transferee pendent lite can be impleaded as a party to litigation.[49]

Right of any other party under the decree

The doctrine does not apply merely to actual transfers or rights which are the subject matter of litigation but to other dealings with it ‘by any party to the suit or proceedings, so as to affect the right of any other party thereto.[50] ‘Any other party’ means a person between whom and the party alienating there is an issue for decision, which might be prejudiced by the alienation.

The rule of lis pendens is enacted for the benefit of the third party, and not for the party making the transfer.[51] This statutory right is given to the party to the suit other than the alienating party, to have an alienation set aside so far as it is necessary for the protection of his own rights.[52]

Recommendation by Supreme Court

The Supreme Court also gave its recommendations to the Law Commission of India and

the Parliament recommending change in law in the following terms[53]:

It is necessary to refer to the hardship, loss, anxiety and unnecessary litigation caused on account of absence of a mechanism for prospective purchasers to verify whether a property is subject to any pending suit or a decree or attachment. At present, a prospective purchaser can easily find out about any existing encumbrance over a property either by inspection of the Registration Registers or by securing a certificate relating to encumbrances (that is copies of entries in the Registration Registers) from the jurisdictional Sub-Registrar under Section 57 of the Registration Act, 1908. But a prospective purchaser has no way of ascertaining whether there is any suit or proceeding pending in respect of the property, if the person offering the property for sale does not disclose it or deliberately suppresses the information. As a result, after parting with the consideration (which is many a time the life time savings), the purchaser gets a shock of his life when he comes to know that the property purchased by him is subject to litigation, and that it may drag on for decades and ultimately deny him title to the property. The pendente lite purchaser will have to wait for the litigation to come to an end or he may have to take over the responsibility of conducting the litigation if the transferor loses interest after the sale. The purchaser may also face objections to his being impleaded as a party to the pending litigation on the ground that being a lis pendens purchaser, he is not a necessary party. All these inconveniences, risks, hardships and misery could be avoided and the property litigations could be reduced to a considerable extent, if there is some satisfactory and reliable method by which a prospective purchaser can ascertain whether any suit is pending (or whether the property is subject to any decree or attachment) before he decides to purchase the property.

It is of some interest that a solution has been found to this problem in the States of Maharashtra by an appropriate local amendment to section 52 of the Act, by Bombay Act 4 of 1939. Section 52, as applicable in the Maharashtra and Gujarat, It is wished that the Law Commission and the Parliament considers such amendment or other suitable amendment to cover the existing void in

title verification or due diligence procedures. Provision can also be made for compulsory registration of such notices in respect of decrees and in regard to attachments of immoveable properties.[5]

CONCLUSION

The right contemplated under Section 52 no doubt can be used both as a sword and a shield, depending on such facts as to (i) what rights or interest is transferred, (ii) who the affected party is, (iii)how and in what manner, the transfer is likely to ‘affect’ any party to the pending ‘proceedings’. It can be used as a shield in a subsequent or the same proceeding between the same parties. Any person who would like to use it as sword, must however, first establish his right to do so when, in any subsequent proceeding an objection is taken to his claim to do so. Indeed if the transfer was not avoided by any of the parties to the earlier proceeding likely to be affected by such transfer, the transferee is not prevented from claiming that the right to avoid the transfer was lost and that nothing survived to be enforced.

In order that a transfer may be void as hit by the provisions of Section 52, it has to be established that it has affected the rights of any other party to the suit. If a party challenges a transfer on the basis of doctrine of lis pendens, it has to establish that the transfer was made with a view to affecting and defeating the rights of the plaintiff under a decree or order which may be passed in the case and that it has been defeated. By this doctrine, it is intended to strike at attempts by the parties to a suit to curtail the jurisdiction of the Court by private dealings which my remove the subject-matter of litigation from the power of the court to decide a pending dispute and frustrate its decree.

lec-16 on Lease

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

MAINS QUESTIONS

What do you understand by lease? What is difference between lease & licence?
A leased out certain property to B for rent for a period of 5 years with a condition that he would be entitled to take the possession of the property, in case rent was not paid by the lessee for a continuous period of three months. There being default on the part of the lessee, A issued a notice terminating the lease, in terms of the written agreement between the parties and asking B to vacate the premises and deliver the possession of the same. A, thereafter, files a suit for direction to the lessee to deliver vacant possession of the premises along with other relief.” B, the lessee disputes the claim of A since the requirements of Section 106 of the Transfer of Property Act, 1882 were not complied with by the lessor. Decide.
A lets a house to B and reserves power to revoke the lease if; in the opinion of a specified surveyor, B should make a use of it detrimental to its value. Afterwards, A thinking that such a use has been made, lets the house to C. decide, whether the transfer to C is valid and under what conditions.

A lets a house to B for five years. B under lets the house to C at a monthly rent of Rs. 2000.00. The five years expire, but C continues in possession of the house and pays the rent to A. Decide upon the status of C as lessee

LEASE OF IMMOVABLE PROPERTY

Chapter V of T.P. Act, 1882 deals with leases of immovable property. It contains Section 105 to Section 117. Section 105 defines lease.

Definition of Lease: According to Section 105 of this Act- “A lease of immovable property is a transfer of a right to enjoy property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

“Lessor”, “Lessee”, “Premium” and “Rent” Defined : The transferor is called the lessor, the transferee is called the lessee, the price is called the premium and the money, share, service or other thing to be so rendered is called the rent.

This chapter of leases applies to all leases except agricultural leases. Although, the Transfer of Property Act does not apply to agricultural leases the definition of lease under Section 105 applies to these also.

A lease is the outcome of the rightful separation of ownership and possession. Before the lease the owner had the right to enjoy possession of the land but the lease he excludes himself during its currency from that right. A lease is, therefore, not a mere contract, but is a transfer of an interest in land. It creates a right in rem. The transferee must have been put in possession of the demised property. A licensee has no right in the property, not to speak of any right to the exclusive possession of the property and animus of possession always remains with the licensor, the licensee gets possession only with the consent of the licensor and is liable to vacate when so asked.

Essentials of Lease : The following are the essentials of lease-

1) Parties – Lessor and lessee.

2) Property-immovable.

3)Period – Any period, day, week, month or year or perpetual.

4) Premium -Money or any other valuable.

5) Partial transfer i.e., Demise or transfer of only right to enjoy.

A lease being a transfer of an ‘interest’ in immovable property’, it is a transfer of property within the meaning of Section 5. A lease like a sale and a mortgage is a transfer of an interest in specific immovable property but that interest extends only to the enjoyment of the property.

A lease conveys only a limited estate in the property to the transferee. Such estate is called a leasehold and the estate remaining in the lessor called a reversion. It is called leasehold because it is held by the transferee only till lease stands.

A valid lease cannot be granted by a person not in possession of the land leased. The transfer of bare right of possession without the right to the usufruct IS not a lease. There must be a transfer of the exclusive right of possession of the leased property in order to constitute a lease.

ln order to prove tenancy or sub tenancy two ingredients must be established-

1) The tenant must have exclusive right of possession or interest in the premises in question, that the right must be in lieu of payment of some compensation or rent

2) The essential of lease is that the right to enjoy the property must be transferred for a certain time, express or implied or in perpetuity.

The interest of the lease transfers only from the date of execution. The period need not be ﬁxed at the time of making the lease, its duration may accordingly be determined either by express limitation or by reference to some event which will on its happening fix its exact length.

A permanent lease can, likewise, be created by express words or by implication. Where no words are used to import tenancy, the conduct of the parties and the circumstances of the case may show that the lease is a permanent one. A continued long possession of the lease-hold property though by itself is insufficient to prove permanency as the only presumption from the long possession is a yearly tenancy, and where the origin of the tenancy is known, ‘it has been held that long possession coupled with payment of a regular rent does not prove the permanency unless a custom to the contrary is proved.

What a lease required is a transferor and a transferee and a transfer of immovable property on the terms and conditions mentioned in Section 105. A person cannot grant a lease to outcast his own interest.

A lease by minor is void but a lease granted by the guardian of minor in excess of the authority is not void and may be ratified after attaining majority. It is well-settled that tenancy right are heritable and devolve upon all the heir is of the deceased irrespective of the question as to whether some of them are in occupation of the-demised premises or not.

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

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

This section enacts a rule for duration of leases in cases not governed by local law, contract or usage. This section applies to a case where no period is agreed between the parties. The presumption under this section is that the lease is from year to year, month to month according to the nature of the property, and is terminable by six months notice or ﬁfteen days’ notice, as the case may be. Where a lease is executed for agricultural or manufacturing purposes, it is deemed to be a lease from year to year.

The expression ‘manufacturing purpose’ has not been defined in the Act, but the Supreme Court has considered the question and has laid down the principles and tests for determination, of what can be said to be “manufacturing purpose” within the meaning of the Act.

In the case of Idandas v Anant Ram, the Supreme Court laid down the following test for determining whether a lease is for purpose of “manufacturing purpose” within the meaning of Section 106 of the act. The tests are-

1) that it must be proved that a certain commodity was produced;

2) that the process of production must involve either labour or machinery;

3) that the end product which comes into existence after the manufacturing process is complete, should have different name and should be put to a different use .

A notice to be valid under Section 106 must definitely and unequivocally terminate the tenancy of the tenant after the expiry of the notice. What is necessary is that a notice to quit should indicate in substance and with the reasonable clarity the intention on the part of the person giving it to determine existing tenancy at a certain time.

In Budh Sen v Rahiman, the Allahabad High Court, while holding the notice valid, observed that if an intention to terminate the tenancy can be clearly discerned by construing the words used in the notice as a whole, the mere fact that the expression that the tenancy was being terminated is not used, would not render the notice invalid.

In the case of Dipak Kumar Ghosh v Mira Sen the Supreme Court held that notice to quit must not be vague and uncertain; all that is required is that there must be a clear indication in the notice to quit of the tenant’s intention to vacate the premises.

Duration in the Notice : In the case of periodic leases, the common law rule as to‘ quit is that a reasonable notice must be given to determine the tenancy. In the case of yearly a half-year’s notice to quit at the end of same year of the tenancy has from early times been held to be sufficient. In the case of other periodic tenancy reasonable notice appears to be notice equal to the length of the period, so that a month’s notice is sufficient to determine a monthly tenancy.

The section fixes six months for yearly and ﬁfteen days for monthly tenancies created by implied demise. The month is reckoned according to the calendar by which the tenancy is regulated.

Section 106 provides, inter alia, that in the absence of a contract between the parties, a lease of immovable property for manufacturing purposes shall be deemed to be a lease from year to year terminable by six months’ notice. Where from the findings of a case it is clear that the lease in question was not from year to year or for a period exceeding one year, even though the lease may be for a manufacturing purpose, since the lease is not from year to year.

The notice must terminate the tenancy at the end of the year or the month of the period of the lease. It should expire on the last day of that period, otherwise it is invalid. Thus, if the tenancy is a monthly tenancy beginning with the first day of each month, a notice by the tenant on the 7^th of June that he would leave in a month’s time is invalid, for although it gives more than 15 days’ notice it did not terminate the tenancy at the end of the month. Notice toquit may be given by the lessor or by the lessee.

Service of Notice to Quit : Notice to quit may be served (1) personally, or (2) by post, or (3) at residence, or (4) being affixed to the property demised. A notice to quit is necessary under this section before a suit for ejectment can be brought only where the defendant is a tenant of the plaintiff.

Lease How Made : Section 107 deals with how a lease may be made. A lease of immovable property from year to year, or for any term exceeding one year; or reserving a yearly rent, can be made only by a registered instrument.

All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by‘ delivery of possession.

Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee-

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

Where the Act applies, no lease can be created except in one of the manners specified by this section mere acceptance of rent cannot create tenancy.

Fact of life tenancy must be supported by some evidence; mere fact that rent has been paid is not sufﬁcient in this regard.

In the case of Rajendra Pratap Singh v Rameshwar Prasad, it was held that a lease of immovable property for the time exceeding one year credited a registered instrument, cannot be said to be invalid merely because the said instrument was not signed by both the lessor and lessee.

It has been held that in view of Section 107 T.P. Act and Section 17 of the Registration act, a lease for year to year requires registration and in absence of registration, the document cannot be admitted in evidence.

Section 107 of the Transfer of Property Act, 1882 provides that a lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered document. It further provides that all other leases of immovable property must be either by a registered instrument or by oral agreement accompanied by delivery of possession.

Liabilities of Lessee : The rights and the liabilities under this section are made subject to a contract or local usage to the contrary. The first three clauses of Section 108 specify the liabilities of the lessor. The liabilities of the lessor are only three, namely-

1) duty to- disclose any material defect in property with reference to its intended use;

2) duty to put the lessee in possession at his request; and

3) covenant for quiet enjoyment.

1) Duty of Disclosure : According to clause (1)(a) of Section 108. The lessor must disclose to the lessee only those defects which are material with reference to its intended use by the lessee, and at the same time which cannot be discovered with ordinary care. It extends only to those defects of which lessor is aware.

This section does not declare that the omission to disclose material defects must be fraudulent [Section 55(1)]. But still it seems the omission may be “a good ground for avoiding the lease on the basis of constructive fraud” [Section 18(2), Indian Contract Act]. The lessee may also-sue for damages sustained by him as a result of the omission.

2) Duty to give Possession : This clause imposes a statutory obligation on the lessor to deliver possession to the lessee. What amounts to delivery of possession in any particular case depends on the nature of the property leased.

Duty of a lessor to deliver possession of the leased premises to the lessee arises only when the lessee makes a request to that effect. This obligation is absolute. If the lessee is not put in Possession of the entire land leased to him, there is a breach of the covenant, and his cause of action arises from the date of the lease, or on a future date if so agreed to by the parties to the contract.

3) Covenant for Quiet Enjoyment : According to clause (1)(c) of Section 108, it is a provision importing a covenant for quiet enjoyment. The lessor should see that not only possession is delivered to the lessee but also that the lessee is not disturbed in his possession by himself or anybody else claiming under him during the continuance of the lease. This clause secures the lessee the benefit of an unqualified covenant for quiet enjoyment.

The rule is now firmly settled that like the express covenant the implied covenant protects the lessee against all disturbances by the lessor whether lawful or not, save under a right of re-entry, but as against other persons it protects the lessee only against lawful disturbance. The covenant for quiet enjoyment would operate even if the lessee fails to perform any of the conditions of the lease, unless, of course, any such condition is expressly made a condition precedent.

Rights of the Lessee [Clauses (e) to (j)] : Clauses (e) to (j) of Section 108 (2) relate both to the rights and liabilities of a lessee. The following are the rights of the lessee-

1) Right to avoid the lease in case of any destruction by fire, tempest, etc. ,

2) Right-to repair the property when lessor fails to do so and to deduct the cost of repairs from rent.

3) Right to make such payments which are obligatory on the lessor and to deduct that amount from rent.

4) Right to remove the fixtures made by him during tenancy.

5) Right to have the benefit of crops growing on the land sown or planted by him.

6) Right to assign his interest in the leased property.

1) To Avoid the Lease in Case of Destruction Etc. : According to clause (2)(e) of Section 108, a lessee is not responsible for the consequences of fire unless he had definitely taken that burden upon his shoulders by his covenant or unless negligence is proved against him. The lease does not become ipso facto void but becomes voidable at the option of the tenant and on that option being exercised it becomes void.

lt is necessary that the destruction must be due to natural causes. Provided that the loss or destruction is not due to lessee or his agents wrongful act or default. ln a case where the property leased is not destroyed or substantially or permanently unfit, the lessee is not entitled to avoid the lease A notice under this clause avoiding the lease on the ground of destruction of leasehold property by irresistible force takes effect immediately on service. Section 106 has no application to such a notice.

2) To Repair in Default of the Lessor : According to clause (2)(f) of Section 108, there is no general rule of law that a lessor is bound to keep the demised A property in good repair or to expend any money on the property. Neither under this clause nor under clause (m)- it is competent for the. lessee or the lessor as the ease may be, to compel rebuilding or re construction

The lessee can deduct from rent expenses of only those repairs which the landlord was bound to execute either by an express stipulation in the lessee or on account of local usage; but the lessee must first give notice to the lessor to do the repairs before he can make the repairs himself. The Act imposes no obligation on the landlord to repair.

3) Deduction of Taxes : According to clause (2)(g) of section 108, generally a tenant is not entitled to claim adjustment of all payments made by him on behalf of the landlord even though he is interested in such payment, against rent payable by him. A tenant may sue the landlord for re-imbursement of the money which he had to pay in order to save his own interest and may recover the money so paid. Such adjustment cannot be made by the tenant alone without the concurrence of the landlord Where as notice is necessary in cases of repairs, no notice to the lessor is necessary under this clause.

4) Removal of Fixtures : According to clause (2)(h) of Section 108, a lessee under this clause is entitled to remove any trees or fixtures planted or set up by him on the leased property. But while removing the fixtures he must see that the property is left in the same condition in which he has received it.

5) To Remove the Crops : According to clause (2)(i) of Section 108, a lessee has a right to remove the corps after the termination of the lease on any count excepting by his own default and for the purpose, he is entitled to have a free ingress to an egress from the property. This clause applied to leases of uncertain duration such as a lease from year to year or terminable on the happening of some event.

6) Right of Transfer: According to clause (2)(j) of Section 108. A lessee can assign his interest in any lawful manner. Such interest being itself an immovable property can as such be validly assigned. For instance he can validly transfer by sub-lease even a part of his interest in the property. It is open to lessor to incorporate any such condition in the lease by agreement with the lessee will thereby be prevented from dealing with his interest altogether.

Liabilities of the Lessee : Clause (k) to (q) of Section 108 (2) prescribe the liabilities of a lessee. They are-

duty of disclose a fact materially increasing the value of the lease-hold;
duty to pay rent;
duty to keep and restore the property in a good condition;
duty to give notice to the lessor of any proceeding to recover the property or any encroachment upon it if he comes to know of it;
duty to use the property reasonably;
duty to not to erect any permanent structure without the lessor’s consent except for agricultural purposes; and
duty to restore possession to the lessor on the determination of the lease.

Duty to Disclose :According to Section 108 (2)(k). The lessor should disclose a fact materially in increasing the value of the lease hold. The failure to disclose here, however, is not fraud. Therefore, the lessor on such failure cannot sue to set aside the lease. His only remedy is to sue for damages.
Duty to Pay Rent : According to Section 108 (2)(l). A duty to pay rent is a necessary incident of every lease and the amount to be paid as such is usually stated in the lease. Such duty begins not from the date of the execution of the lease but from the date the lessor puts the lessee in possession, and the lessee must pay it without any demand from the lessor.
Duty to Keep and Restore the Property In Repair : According to Section 108 (2)(m). Clause(m) casts on the tenant a liability of a limited nature in the matter of the repair of the demised premises.

Unless there is contract to the contrary in every lease, it is implied that a lessee is to maintain the property in the same condition in which he received it and to restore the same to the lessor on the termination. of the lease. This duty may involve repairs to the property and the lessee is bound to do them.

Duty to Inform on the Title Being Jeopardy : According to Section 108 (2)(n). This clause puts a duty upon the lessee to give notice to the lessor so that the lessor may protect his interest. A lessee is further bound to inform the lessor, when he becomes aware, of any proceeding to recover the property or any part thereof or of any encroachment made upon or any interference with the latter’s right concerning such property.
Duty to Use the Property Reasonably : According to Section 108 (2)(o). Leased property as a person of ordinary prudence would use them if they were his own. He must not use or permit another to use the property for a purpose other than that for” which it was leased. Where a professional man who-takes a house for residential purpose, but carries on some professional work in the house during the spare time, Section 108(0) does not prevent him to do so.
Duty not to Erect Permanent Structures : According to Section 108 (2)(p), the clause prohibits a lessee from erecting any permanent structures on the leased property except with consent of the lessor. If he does, then this becomes a ground for ejectment. If the property be agricultural, he can erect structures of agricultural purposes and no consent of the landlord is necessary.

In judging whether the structures were permanent or not the following factors should be taken into consideration—

a) intention of the party who put up the structure;
b) this intention was to be gathered from the mode and degree of annexation;
c) if the structure cannot be removed without doing irreparable damage to the demised premises then that would be certainly one of the circumstances to be considered while deciding the question of intention. Likewise, dimensions of the structure; and
d) its removability had to be taken into consideration. But these were not the sole tests;
e) the purpose of erecting the structure is another relevant factor;
f) the nature of the materials used for the structure; and
g) lastly, the durability of the structure. These were characterised as the broad tests.

Duty to Restore. Possession : According to Section 108 (2)(q). This clause enacts the well settled rule that tenant must on the expiration or on the determination of his tenancy deliver up to his landlord possession of the demised property. It is one of the obligations of a contract of tenancy that the tenant will, on determination of the tenancy, put the landlord in possession of the property demised unless possession is delivered to the landlord before the expiry of the period of the requisite notice, the tenant continues to hold premises during he period as tenant.

Exclusion of Day on Which Term Commences (Section 110) :Where the time limited by a lease of immovable property is expressed as commencing from a particular day, in computing that time such day shall be excluded. Where no day of commencement is named, the time so limited begins from the making of the lease.

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

Option to Determine Lease : Where the time so limited is expressed to be terminable before its expiration, and the lease omits to mention at whose option it is so terminable, the lessee, and not the lessor, shall have such option.

Determination of Lease : According to Section 111 of T.P. Act, a lease of immovable property may be determined by any of the following methods-

1) by efﬂux of the time limited thereby;

2) where such time is limited conditionally on the happening of some event—by the happening of such event;

3) 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;

4) in case the interests of the lessee and the lessor in the whole of the property become vested at the same time in one person in the same right;

5) 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;

6) by implied surrender;

7) 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;

8) 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.

1) Determination by Efflux of Time : According to Section 111 clause (a) a lease may be determined by end of time. This clause hardly needs any explanation. A lease created for a certain time naturally determines on the last day of the term without any formality such as notice on either side. Such a lease does not terminate if the parties die during the term, the reason being that the interest transferred on a lease is a heritable interest.

The lessee cannot dispute the title of the lessor as a ground for refusing to give up possession at the expiry of the lease; for if he has been let into possession by the lessor, he cannot deny the title under which he entered without first surrendering possession. if the lessee has not surrendered possession, the estoppel continues even after the termination of the tenancy.

Where the lease is fixed for twenty year and there is expiry of lease by efflux of time, creation of new tenancy cannot be inferred by mere increase in rent by landlord because of increase in taxes. The landlord is entitled to decree for possession and also for mesne profits from the date of expiry of lease.

2) Conditional Term : According to Section 111 clause (b), if the term of a lease is conditional on the happening of a certain event, the lease determines when the event happens and if any part of the term otherwise fixed remains unexpired, it is of no consequence. A lease for life determines on the death of lessee. A lease for-the duration of war determines when peace is declared. Service tenancy under which tenant holds land on condition that if he refused to render service lease will determine, may fall within the clause.

3) Termination of Lessor’s Interest : According to Section 111 clause (c), operates where the lessor has only a limited interest or power to grant a lease, and the lease is determined with that interest. For example- A lease granted by a mortgagee in possession and extending beyond the term of the mortgage determines on redemption. Such a lease is not automatically determined, but the mortgagor is entitled to exercise his right to determine the lease.

4) Determination by Merger : According to Section 111 clause (d), the leasehold is the lesser estate, for it is carved out of the estate of the owner, which is the reversion. The lesser estate is merged, that is sunk or drowned in the greater, and the lease is determined, for it sinks into reversion. The interest of the lessor and the lessee in the whole of the property should become vested at the same time in one person in the same right. It is necessary that the interests of lessor and lessee in whole of the property become vested in the same person and in the same way.

5) Determination by Surrender : According to Section 111 clause (e), the lessee may with the consent of the lessor expressly surrender or yield up his entire interest in the lease to the lessor. Delivery of possession is essential for this purpose unless there is an agreement to surrender at some time in future. In case of an express surrender, no formality is needed. The lessee must express his intention to surrender, and the lessor must agree to it, and the delivery of possession must immediately follow. A mere relinquishment or abandonment by the lessee of holding without acceptance on the part of the lessor is not a surrender.

6) Determination by Implied Surrender : Section 111(f) of the Transfer of Property Act provides for the determination of a lease of immovable property by implied surrender. Implied surrender or surrender by operation of law occurs-

a) by the creation of a new relationship, or
b) by relinquishment of possession.

There is an implied surrender if the lessor grants a new lease to his lessee to take effect during the continuance of the existing lease. When during the continuance of the lease, a lessee executes afresh lease, this operates in law as surrender of the original lease.

Relinquishment of possession operates as an implied surrender, if there is (1) a yielding up by the lessee, and (2) an acceptance of possession by the lessor. There must be a taking of possession, not necessarily a physical taking but something amounting to a virtual taking of possession.

7)Determination by Forfeiture : According to Section 111 clause (g), forfeiture is another mode in which a lease is determined, and the case where a lease can be forfeited as stated in the clause are-

a) in case the lessee breaks an express condition which provides that on breach thereof the lessor may re-enter;
b) in case the lessee renounces his character as such by setting up a title in third person or by claiming title in himself; and
c) where the lessee is adjudicated an insolvent and the lease provides that the lessor may re-enter on the happening of such event.

8) Determination by Notice to quit : According to Section 111 clause (a) deals with determination of case by notice. This is the last mode in which a lease is terminated when a notice to quit or to determine the lease expires. Such notice is necessary only in cases of periodic tenancy such as a tenancy from year to year or from month to month under Section 106. Where the term is fixed, the lease would determine by efflux of time under clause (a) of the section. Where the tenancy is permanent no question of determining it ever arise. Where it is a tenancy-at-will, it is determinable at the will of either party by the tenant giving up possession, or by a demand for possession-by the landlord, or by the death of either party. A tenancy-at-sufferance does not need any determination and the landlord can straightway sue the tenant for eviction.

The question as to what constitutes a valid notice for the purpose of determining a tenancy is to be decided with reference to Section 106 and decided cases —

1) Though it is not necessary to state any ground for the notice-to quit, the notice must expressly convey the intention to terminate the tenancy as a whole.

2) The notice must specify the date on which the tenancy should expire.

Waiver of Forfeiture : According to Section 112, a forfeiture under Section 111, clause (g), is waived by acceptance of rent which has become due since the forfeiture, or by distress for such rent, or by –any other act on the part of the lessor showing an intention to‘ treat the lease as subsisting—

Provided that the lessor is aware that the forfeiture has been incurred—

Provided also that, where rent is accepted after the institution of a suit to eject the lessee on the ground of forfeiture, such acceptance is not a waiver.

The concept of waiver is in essence based on agreement of landlord to waive the forfeiture. The Courts always lean against forfeiture. A lessor is not bound to forfeit the lease even if he gets an opportunity for it under any of the sub-clauses of Section 111. The forfeiture is meant entirely for his benefit and it is for to enforce it or to abandon it. lf he elects to enforce it, he must give a notice in writing to the lessee of his intention to determine the lease.

This section specifies three ways for waiving a forfeiture—

1) by acceptance of rent accrued due since forfeiture; or

2) by distress for such rent; or ,

3) by any other act on the part of the lessor showing an intention to treat the lease as subsisting.

Waiver of Notice to Quit : A notice given under Section 111, clause (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.

illustrations-

a) A, the lessor, gives B, the lessee, notice to quit the property leased. The notice expires. B. tenders and A accepts, rent 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.

The section will not apply when the landlord claims to treat the tenant as a tenant from year to year but he latter asserts a permanent tenancy. 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 facts enabling him to take effectual action for the enforcement.

Section 113 consists of two parts-

a) The express or implied consent of the person to whom notice is given;
b) The act of the person giving notice showing the intention to treat the lease as subsisting.

in order to constitute a waiver, both the parts must concurrently operate.

Relief Against Forfeiture for Non-Payment of Rent : According to Section 114, when a lease of immovable property has determined by forfeiture for non-payment of rent, and the lessor sues to eject the lessee, if,-at the hearing of the suit, the lessee pays or tenders to the lessor the rent in arrear, together with interest thereon and his full costs of the suit, or gives such security as the Court thinks sufficient for making such payment within fifteen days, the Court may, in lieu of making a decree for ejectment, pass an order relieving the lessee against the forfeiture; and thereupon the lessee shall hold the property leased as if the forfeiture had not occurred.

Relief Against Forfeiture in Certain Other Cases : Where a lease of immovable property has determined by forfeiture for a 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.

Nothing in this section shall apply to an express condition against the assigning, underletting, parting with the possession, or disposing, of the property leased, or to an express condition relating to forfeiture in case of non-payment of rent.

This section merely defines form under which notice under section 111(b) is to be issued in cases where breach of condition is capable of being remedied and single notice is sufficient. The section which was inserted by the Amending Act, 20 of 1929 provides for relief against forfeiture in certain other cases besides non-payment of rent, e.g., for breach of covenant to repair or for breach of covenant to insure.

The section does-not apply to a breach of covenant to pay rent for that falls under Section 114. The section also does not apply to forfeiture for disclaimer. The Section 114-A was added by the Amendment Act of 1929. Section.114-A is general and is designed to cover all cases in which notice is required under Section 111(9). The principle of the section applies to agricultural, property.

Effect of Surrender and Forfeiture on Under-Leases : According to Section 115, the surrender, express or implied, of a lease of immovable property does not prejudice an under-lease 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 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-lessees, or relief against the forfeiture is granted under Section 114.

A lessee cannot give to a sub-tenant what he does not possess himself. This section merely brings under-lessees into direct contract with lessor except, where the surrender is made for the purpose of obtaining a new lease.

Effect of Holding Over : According to Section 115, if a lessee or under-lessee of property remains in possession thereof after the determination of the lease granted to the lessee, and the lessor or his legal representative accepts rent from the lessee or under-lessee, or otherwise assents to his continuing in possession, the lease is, in the absence of an agreement to the contrary, renewed from year to year or from month to month, according to the purpose for which the. property is leased, as specified in Section 106.

ilIustrations-

a) A lets a house to B for five years. B underlets the house to C at a monthly rent of Rs. 100. The five years expire, but C continues in possession of the house and pays the rent to A. Cs lease renewed from month to month.
b) A lets a farm to for the life of C. C dies, but B continues in possession with A’s assent. B’s lease is renewed from year to year.

Section 116, Transfer of Property Act deals with the effect of holding over. If a lessee or under-lessee remains in possession after determination of the lease or his legal representative accepts rent or otherwise assents to his continuing in possession, in the absence of an agreement to the contrary, the lease is renewed from year to year or month to month according to the purpose for which the property is leased as specified in Section 106-

1) hat in absence of agreement to the contrary, lease is renewed as to all terms , except duration of lease, and

2) ‘That duration of renewed lease is from year to year orb from the effect of holding over month to month according to purpose for which property is leased as specified in Section 106.

Acceptance of the rent by the landlord after the expiry of the lease is treated to be an assent. By reason of Section 116, the possession of a tenant after cessation of the tenancy is protected. Such possession is juridical.

According to Section 116 there should be an offer on the part of the lessee to take a renewed or fresh lease evidenced by the lessee’s continuing in possession and the definite assent of the landlord evidenced by receipt of rent otherwise.

Where the contract of tenancy has expired but the tenant continues in possession by way of statutory protection, it cannot be said to be an offer on the part of the tenant to take a renewed or fresh lease simply by continuing in possession.

Doctrine and the Section : In Ganga Dutt v Kartik Chandra Dass, the Supreme Court considered the principle underlying Section 116 and ruled that where a contractual tenancy has expired by efflux of time or by determination by notice to quit and the tenant continues in possession of the premises, acceptance of rent from the tenant by the landlord after the expiration of determination of the contractual tenancy will not afford ground» for holding that the landlord has assented to a new contractual tenancy.

Where a tenant merely holds over without the consent of the landlord there is no tenancy of any kind at all. If in such a case, the tenant continues in possession without landlord’s consent he becomes what in English law is called a tenant-by-sufferance. This is no tenancy at all in the strict sense and requires no notice to determine it.

Tenancy-at-Will : A tenancy-at-will is determinable at the will either/of the landlord or the tenant. A tenancy-at-will arises by implication of law in cases of permissive occupation when a person is in possession of premises with the consent of the owner, or it may arise expressly by an agreement to let for an indefinite term for a compensation accruing from day to day -so long as both parties please.

Exemption of Leases for Agricultural Purposes (Section 117) : None of the provisions of this Chapter, apply to leases for agricultural purposes, except in so far as the State Government may by notification published in the Official Gazette, declare all or any of such provisions to be so applicable in the case of all or any of such leases, together with, or subject to, those of the local law, if any, for the time being in force.

Such notification shall not effect until the expiry of six months from the date of its publication.

PAHUJA LAW ACADEMY

TRANSFER OF PROPERTY ACT

PRE QUESTIONS

A lease of immovable property is a transfer of a tight to enjoy such property for a certain time or in perpetuity in consideration of ________ to be rendered periodically:

(a) A price or premium.

(b) Money, share of crops, service, or any other thing of value (Rent).

(d) Only (b).

The transferor in the lease of immovable property is called as;

(a) Lessor.

(b) Vendor.

(d) Donor.

The transferee in the lease of immovable “property is called as:

(a) Vendee.

(b) Bailee.

(d) Donee.

Which section of the T. P. Act defines ‘lease’ of immoveable property:

(a) Sec 105.

(b) Sec 106.

(d) Sec 103.

Mark the incorrect statement in relation to lease:

(a) The duration of lease should be specific or for perpetuity.

(b) A lease could be given to oneself.

(d) The lessee must accept the transfer.

Under Section 105 of the Transfer of Property Act, 1882, which one of the following is not an essential element of a lease?

(a) A right to enjoy the movable property.

(b) Duration of such enjoyment.

(d) The acceptance of the transfer by the transferee.

Mark the incorrect statement in relation to lease:

(a) Sec. 105 is inapplicable to leases relating to agricultural land and Rent control Act.

(b) The leased property should not be used in such a way so as to change its character.

(d) In a lease, there is not a partial but a complete transfer.

In absence of contract or local law or usage to the contrary, a lease of immoveable property shall be deemed to be:

(a) Month to month.

(b) Bimonthly.

(d) Biannual.

A lease of immovable property from year to year, can be made by:

(a) Oral agreement.

(b) Oral agreement accompanied by delivery of possession.

(d) Only by a registered instrument.

A lease of immovable property from year to year or exceeding one year can be made:

(a) Only before Notary.

(b) Valid if executed before Magistrate.

(d) Only by a registered instrument.

Where a lease of immovable property is made by a registered instrument, such instrument shall be executed:

(a) By lessor only.

(b) By lessee only.

(d) By both the lessor and the lessee.

Mark the incorrect matching:

(a) Rights and liabilities of lessor and lessee: Sec. 108.

(b) Determination or termination of lease: Sec. 111-113.

(d) None of the above.

A lease of immovable property from year to year is terminable, on the part of either lessor or lessee, by:

(a) One month.

(b) Six months.

(d) Sixty days. (notice expiring with the end of a year of the tenancy.)

Termination of lease of immovable property shall be in the following manner:

(a) By oral intimation.

(b) By written notice.

(d) By telephonic intimation.

In which of the following cases, ha lease of immovable property does not determine?

(a) By efflux of time limited thereby.

(b) By express or implied surrender.

(d) By forfeiture.

‘A’, the lessor gives ‘B’ the lessee, notice to quit the property leased. The notice expires. ‘B’ tenders and ‘A’ accepts rent which became due in respect “of the property since the expiration of the notice. The notice is:

(a) Valid.

(b) Waived.

(d) Voidable.

‘A’ the lessor gives ‘B’ the lessee, notice to quit the property leased. The notice expires, and ‘B’ remains in possession. ‘A’ give to ‘B’ as lessee» a second» notice to quit. The first notice is:

(a) Irregular.

(b) Valid.

(d) Waived.

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PAHUJA LAW ACADEMY

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MAINS QUESTIONS

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LECTURE-1

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Topic -10

Doctrine of Acceleration

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6. Fraudulent Transfer of Property

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