Revisiting Section 51 of Transfer of Property ACT: From The Lens of Baini Prasad V. Durga Devi (2023)

Revisiting Section 51 of The Transfer Of Property ACT: From The Lens of Baini Prasad V. Durga Devi (2023)

INTRODUCTION

The Transfer of Property Act of 1882 (referred to as the ‘TP Act’), a pivotal legislation governing property transactions, incorporates Section 51 as a significant provision.[1] This section addresses a specific scenario involving immovable property transfers, focusing on the actions of bona fide transferees who make improvements under the sincere belief of absolute entitlement.[2] If subsequent eviction occurs due to someone with a superior title, Section 51 comes into play to safeguard the rights of such improvers.[3] It introduces a framework for redressal, allowing compensation or securing an interest in the property, irrespective of the value of the improvements undertaken.[4] This provision plays a crucial role in harmonizing the interests of parties engaged in property transactions while upholding the principles of justice and equitable treatment.[5]

A recent legal case, Baini Prasad v. Durga Devi,[6] decided on 2 February 2023 has brought the application of Section 51 into sharp focus. The case involved an appeal against the Himachal Pradesh High Court’s verdict, revolving around possession of encroached land. The court’s analysis reaffirmed the stringent prerequisites for invoking Section 51, emphasizing that the status of a bona fide “transferee” is pivotal for its applicability. The court underscored that the doctrine of estoppel are inherently incompatible with the foundation of Section 51, thereby setting clear boundaries for its utilization.

This project conducts a comprehensive analysis of the principles elucidated by the court in a significant 2023 judgment. The focal point of this analysis is to gain a profound understanding of the underlying principles and nuances associated with Section 51 of the Transfer of Property Act. Through a meticulous examination of the court’s findings, this project aims to shed light on the intricate legal framework that governs the application of Section 51 and its implications for property transactions.

UNPACKING SECTION 51 TP ACT AND ITS RAMIFICATIONS

Bare Provision

51. Improvements made by bona fide holders under defective titles.[7]—

When the transferee of immoveable property makes any improvement on the property, believing in good faith that he is absolutely entitled thereto, and he subsequently evicted therefrom by any person having a better title, the transferee has a right to require the person causing the eviction either to have the value of the improvement estimated and paid or secured to the transferee, or to sell interest in the property to the transferee at the then market value thereof, irrespective of the value of such improvement. The amount to be paid or secured in respect of such improvement shall be the estimated value thereof at the time of the eviction. When, under the circumstances aforesaid, the transferee has planted or sown on the property crops which are growing when he is evicted therefrom, he is entitled to such crops and to free ingress and egress to gather and carry them.

Definition

The Transfer of Property Act of 1882 serves as the cornerstone for regulating various transactions between property transferors and transferees. One of its pivotal sections, Section 51, delves into a specific scenario involving immovable property transfers. This section addresses the situation wherein a transferee, acting in good faith and under the belief of absolute entitlement, undertakes improvements on the property.[8] If this transferee is subsequently dispossessed by an individual possessing superior title, Section 51 establishes a framework to protect the rights of the improver.[9]

In such circumstances, the Section stipulates that the evicted transferee possesses the right to demand redress from the party causing the eviction.[10] This redress can take two forms: first, the value of the improvements made by the transferee must be assessed and either paid in monetary compensation or secured for the benefit of the improver; second, the individual causing the eviction can be compelled to sell their interest in the property to the transferee at the property’s existing market value.[11] This valuation is irrespective of the value of the improvements undertaken.[12]

The assessment of compensation or security for improvements is to be based on their estimated value at the time of eviction. Furthermore, if the transferee, in the circumstances described, has cultivated crops on the property that are still growing upon eviction, they are entitled to those crops. Additionally, the transferee has the right to unrestricted access to gather and transport the crops.[13]

Illustratively, consider a scenario where X owns an immovable property and leases it to Y. Unbeknownst to Y, X mortgages the property to Z. As a result of this mortgage, Z becomes entitled to the rent that Y pays. In such a case, Y is not required to pay the rent again. This provision safeguards tenants who, in good faith, pay rent in advance to a party no longer authorized to receive it. However, this protection does not extend to amounts advanced as loans, which are treated differently under the law.

In essence, Section 51 of the Transfer of Property Act aims to protect the rights of transferees who, acting in good faith, enhance the value of immovable property they believe they are rightfully entitled to.[14] This provision serves to balance the interests of all parties involved in property transactions and upholds the principles of justice and equitable treatment in such situations.[15]

Necessary Conditions

i. Immovable Property Transaction: The fundamental requirement is that the interaction between the transferor and transferee pertains to immovable property. This implies that the subject of the transaction must be land or another type of immovable asset.[16]

ii. Absolute Benefit to Transferee: The property transfer should be entirely advantageous for the transferee. The transfer must confer absolute ownership or rights upon the transferee, signifying a complete and unambiguous transfer of property.[17]

iii. Good Faith Belief: A crucial element is the genuine belief of the transferee that they possess the rightful authority to carry out improvements. The transferee’s conviction that they have the legal competence to enhance the property becomes a pivotal factor.[18]

iv. Additions to the Property: Another essential aspect is that the transferee must have undertaken actions such as planting crops, sowing seeds, or introducing enhancements to the land. These activities should demonstrate tangible efforts to ameliorate the property’s value.[19]

v. Eviction by Superior Title Holder: The transferee’s claim is activated when they are forcibly ousted from the property by someone who holds a superior title. This denotes that the party evicting the transferee possesses stronger legal entitlements to the property.[20]

vi. Compensation Right of Transferee: The core principle is the transferee’s entitlement to compensation for their improvements. This compensation can be pursued either by reclaiming the monetary amount spent on improvements or by asserting a claim to an interest in the property itself.[21]

These conditions form the bedrock of Section 51’s applicability. The transaction should encompass immovable property, confer absolute benefit to the transferee, be undertaken in good faith, involve physical enhancements, lead to eviction by a superior title holder, and grant the transferee the right to seek recompense for their improvements.[22] Each of these requisites plays an integral role in shaping the circumstances under which Section 51 of the Transfer of Property Act comes into effect, safeguarding the interests of those who have made bona fide improvements to immovable property.

Principles of Application

Applicability and Notice

This provision, Section 51, comes into play specifically under certain conditions. It operates when the transferee remains unaware of any defects in the title of the property being transferred.[23] In addition, the transfer must occur in good faith to a recipient who lacks the authority to accept it. Should these conditions not be met, the transaction can be deemed as tainted with bad faith and thus wouldn’t receive the protective cover of this section. An illustrative case underscoring this principle is Das Bansilal Rathod v. Sumberlal Surajmal Gandhi.[24] In this context, it becomes imperative to note that any notice imparted to the transferee or tenant, whether actual or inferred, renders them accountable to make the payment again, thus emphasizing the impact of knowledge.[25]

Options and Crop Rights

When a transferee, acting on a defective title, makes enhancements to the property, Section 51 confers two choices upon them.[26] They can opt to safeguard the funds expended for these improvements, or they can elect to procure a specific interest in the property from the original owner at its current market value.[27] Furthermore, if the transferee has cultivated crops on the property from which they are being ousted, they retain the right to harvest those crops at any point.

Equity Principle and Application

The application of this section finds its basis in the legal maxim ‘he who seeks equity must do equity.’[28] This mandates that the individual causing the eviction refrain from appropriating the advantages stemming from property improvements and instead, compensates the individual who, in good faith, carried out the enhancements.[29] The provision extends its ambit solely to scenarios where the improver genuinely believes in their absolute ownership and competency to effect changes.[30]

Availability of Compensation Claim

In the case of Harilal Ranchhod v. Gordhan Keshav,[31] a significant precedent emerges. Here, a minor’s property was sold by their guardian to Ram without the necessary court approval. Acting in good faith, Ram undertook property renovations, presuming ownership. Upon the minor coming of age, Ram was evicted. The court sided with the minor, yet concurrently required compensation to be extended to Ram.

Belief and Transfer

The doctrine exclusively finds application when there exists a conviction of absolute entitlement amid the involved parties, rather than a mere apprehension of such entitlement. In instances where the transferee persists in making improvements with knowledge that the property’s ownership doesn’t vest in them, is subject to litigation, or is precluded by a prior sale, compensation under this provision does not hold.

Transfer Scope and Court Sales

Moreover, it’s crucial to comprehend that this rule governs transfers occurring between parties, not encompassing court sales. To clarify, if an individual procures property rights through a judicial auction and subsequently faces eviction, the law mandates compensation regardless of whether their conviction of absolute rights was present.

Defining “Transferee”

The term “transferee” designates an individual who firmly believes themselves to be the rightful possessor of the concerned immovable property.[32] They hold a genuine conviction that they possess the legal competence to effect improvements on said property.[33]

However, the classification of “transferee” does not extend universally.[34] For instance, a recipient who is allotted a plot by governmental authorities but mistakenly undertakes improvements on a distinct parcel of land, or someone who either personally enhances the property or procures it from the improver, cannot access the advantages of improvement or the protection accorded by this doctrine.[35] Their status as genuine transferees is thereby invalidated. Correspondingly, an individual found in unauthorized possession of a property is considered a trespasser, and as such, does not possess the status of a transferee and is consequently deprived of any entitlement to protection under this section. Judicial precedent in Ganga Din v. Jagat[36] firmly asserted that “Construction of valuable buildings on another’s land by mere trespass does not confer the right to retain possession.”

Conversely, an individual who legitimately acquires possession of land through a grant does indeed qualify as a transferee. It remains paramount to understand that the privilege of seeking protection under this section hinges solely on being a lawful transferee who satisfies the array of fundamental prerequisites outlined by this doctrine.[37]

Moreover, it is imperative to highlight that the scope of this doctrine is limited to cases of outright transfers. This encompasses instances where all the rights in the property are transferred to the transferee, as opposed to the transfer conferring a mere interest in the property.[38]

In essence, within the context of this doctrine, the term “transferee” signifies an individual who embodies the essence of legitimate possession and ownership, encompassing the full spectrum of property rights. This criterion stands as a pivotal condition for invoking the protective provisions delineated in Section 51. It ensures that those who genuinely improve and invest in immovable property with the belief of absolute entitlement are granted equitable consideration and shielded under the purview of the law.

Defining “Enhancements”

The concept of enhancements as perceived within the context of defective title holders goes beyond routine modifications or operational adjustments to an existing property. It encompasses alterations that amplify the property’s value and contribute to its marketability. Therefore, enhancements do not derive solely from the monetary expenditure incurred by the individual effecting the improvements on the property.[39]

The evaluation of the value associated with the improvements performed by an individual is necessitated at the juncture of eviction. It is imperative to note that the quantum of expenditure on the enhancements does not singularly determine the property’s market value at which it is to be divested.[40]

In essence, “enhancements” underlines changes that transcend mere superficial modifications and substantially augment the property’s worth, constituting it as a more appealing and valuable asset in the market. The essence of enhancements pertains to their capacity to enhance the property’s overall value, extending beyond the immediate monetary input.[41]

Exemplifying through Illustrations

1. Guardian’s Alienation: X serves as the legal guardian of Y, a minor. X proceeds to transfer Y’s property to Z, who, believing in their absolute ownership, makes enhancements to the property. Upon Y reaching adulthood, they demand Z’s eviction. In this scenario, Z can legitimately invoke the protection bestowed by this doctrine and is entitled to seek either compensation from the true proprietor or an interest in the property itself.

2. Court Auction and Renovation: A acquires a house through a court auction and undertakes substantial renovations, significantly boosting its market value. Subsequently, A is served with an eviction notice and is denied compensation, with the argument that A was well aware of the eviction prospects. Nonetheless, A cannot be deprived of compensation in this context.

3. Unauthorized Colony Construction: An expanse of land had remained barren and unused for a decade. X, without any authorization, proceeds to erect a residential colony on it. The government initiates eviction proceedings, asserting X’s trespass. Under such circumstances, X cannot lay claim to the benefits of this doctrine.

4. Rent and Mortgage Conflict: X rents out their property to Y for a monthly stipulated amount. Later, X mortgages the same property to Z. Unaware of this, Y continues paying rent to X. It is imperative to note that X cannot be compelled to remit the rent again to Z. X’s actions were undertaken in good faith, thereby being shielded under this doctrine.

These examples underscore the application of this doctrine in various scenarios.[42] They illustrate how the principle of protection extends to instances involving guardianship, property acquisition through court auction, unauthorized construction, and rent conflicts, ensuring that individuals who act in good faith and genuinely improve properties are safeguarded under the law.[43]

DISSECTING BAINI PRASAD V. DURGA DEVI

Introduction

The present case[44] revolves around an appeal launched against the verdict and ruling of the Himachal Pradesh High Court. The High Court had rejected the review petition put forth by the appellant. In their analysis, Justices B.R. Gavai and C.T. Ravikumar found no trace of legal flaw, erroneous interpretation, distortion of facts, or blatant illegality within the High Court’s conclusions concerning substantial legal queries. These conclusions favored the respondent, leading to the High Court’s decision to overturn the judgment and decree issued by the initial Appellate Court. Subsequently, the High Court reinstated the judgment and decree previously passed by the Trial Court.

Factual Background

At the heart of the matter, the respondent (originally the plaintiff) initiated legal proceedings seeking possession of a specific piece of land, coupled with a permanent prohibitory injunction intended to prevent the appellant (originally the defendant) from interfering with the disputed land and its associated areas. These areas were under the ownership of the respondent.

In due course, the court rendered a verdict in favor of the respondent, affirming her status as the rightful owner of the encroached land. Subsequently, the first Appellate Court engaged in a modification of the judgment and decree. This alteration was based on the principle of acquiescence, resulting in the determination that the respondent’s entitlement to regain possession of the land post-demolition of erected structures was negated.

In an ensuing turn of events, the High Court intervened by allowing a second appeal. This action culminated in the overturning of the judgment and decree furnished by the first Appellate Court, which had contemplated compensating the respondent in lieu of allowing possession recovery. In lieu of this, the High Court restored the Trial Court’s decree, mandating demolition and the return of encroached land’s possession. In reaction to this, the appellant launched a review petition within the context of the second appeal. However, the High Court dismissed this review petition. Consequently, the appellant has instituted the current appeal, challenging the High Court’s decision.

Issues In The CAse

1. Does the High Court’s reversal of the modification introduced by the initial Appellate Court warrant intervention under the purview of Article 136 of the Indian Constitution?

The appellant contended that the constructions he carried out were under the genuine belief that he was enhancing his own property, thus seeking refuge under Section 51 of the TP Act, 1882.

However, the Court found this assertion to be fundamentally erroneous, as the foundation of Section 51, TP Act and the principle of estoppel laid down in Section 115 of the Indian Evidence Act, 1872,[45] are diametrically opposite and cannot coexist.

The Court, after a thorough examination of Section 51, TP Act, expounded that the invocation of the ‘right to require’ outlined in the provision necessitates being categorized as a ‘transferee’ within the TP Act’s scope and intent. In essence, Section 51’s applicability hinges on being a bona fide transferee who, in good faith, augments a property while believing themselves to be its absolute proprietor. The appellant, however, failed to substantiate their classification as a “transferee” as per the TP Act’s criteria, specifically for Section 51.

The Court delineated three prerequisites for Section 51’s activation:

i. The occupant must have possessed the land under the guise of rightful ownership.

ii. The possession should be adverse to the legitimate owner’s title, not merely subservient to it.

iii. The possessor must genuinely believe they hold a valid title to the property and are its rightful owner.

In the present case, the appellant failed to establish these essential requisites. Consequently, the Court held that the appellant’s constructions were executed at their own risk upon encroaching upon the land, disregarding any claim of ownership. This led to the conclusion that the appellant could not be categorized as a ‘transferee’ within the scope of Section 51, TP Act.

Hence, the Court determined that the appellant cannot avail themselves of the provisions within Section 51, TP Act to request the reinstatement of the alteration made by the first Appellate Court concerning demolition and possession. Notably, the appellants refrained from pursuing the claim of adverse possession. Given the appellant’s ineligibility as a transferee for Section 51, TP Act, they lack the legal prerogative to demand the respondent either compensate for the improvements and regain ownership or sell the property at its market value, irrespective of the improvements’ value.

2. Whether the appellant has pleaded and proved his plea of estoppel?

The appellants contended that non-framing of the question of estoppel as an issue is not fatal in the facts and circumstances as also in view of the evidence available on record, in the case on hand.

Principle of Estoppel

The Court reiterated that to invoke the concept of estoppel the appellant/defendant must specifically plead each and every act or omission that constitutes representation from the respondent/plaintiff.

The Court took note of Pratima Chowdhury v. Kalpana Mukherjee,[46] wherein it was held that “the doctrine of estoppel would apply only when, based on a representation by the first party, the second party alters his position, in such manner, that it would be unfair to restore the initial position”, and on B.L. Sreedhar v. K.M. Munireddy,[47] wherein it was held that “when rights are invoked estoppel may with equal justification be described both as a rule of evidence and as a rule creating or defeating rights.” The Court noted that in the said decision it was clarified that a legal status expressly denied by a statute could not be conferred based on estoppel.

Principle of Acquiescence

The Court said that being the party propounding the application of the principle of acquiescence it was the burden of the appellant to establish the fact that the respondent had acquiesced in the infringement of his legal right and still stood by and allowed the construction.

The Court referred to Abdul Kader v. Upendra,[48] wherein it was held that in the case of acquiescence the representations are to be inferred from silence, but mere silence, mere inaction could not be construed to be a representation and to be a representation, it must be inaction or silence in circumstances which require a duty to speak and therefore, amounting to fraud or deception

Pacing reliance on R.S. Maddanappa v. Chandramma,[49] the Court said that the appellant had encroached upon land belonging to the respondent and without bona fides effected constructions. The object of estoppel, as held in Madanappa’s case (supra), would be defeated if the said illegality is recognised and allowance is granted.

Further, it said that in a case where the owner of the land filed suit for recovery of possession of his land from the encroacher and once he establishes his title, merely because some structures are erected by the opposite party ignoring the objection, that too without any bona fide belief, denying the relief of recovery of possession would tantamount to allowing a trespasser/encroacher to purchase another man’s property against that man’s will.

Taking note of Bodi Reddy v. Appu Goundan,[50] the Court said that in the absence of any misrepresentation by an act or omission, the mere fact that after making objection the plaintiff took some reasonable time to approach the Court for recovery of possession cannot, at any stretch of imagination, be a reason to deny him the relief of recovery of possession of the encroached land on his establishing his title over it.

Court’s Decision

In light of the intricate legal considerations and the examination of the presented arguments, the Court aligned with the High Court’s rationale.[51] By scrutinizing the appellant’s claim in light of the principles enshrined in Section 51 of the Transfer of Property Act, the Court found no basis for intervention.[52] Therefore, the High Court’s judgment and order were upheld, with the Court emphasizing the importance of the specific circumstances of the case. The careful analysis of the principles delineated in Section 51, TP Act, revealed that the appellant’s reliance on this provision was misplaced. Consequently, the Court maintained the integrity of the High Court’s conclusions, which were rooted in both legal principles and the factual context of the case.[53]

CONCLUSION

The significance of Section 51 within the framework of the Transfer of Property Act cannot be overstated. This provision encapsulates a crucial remedy for bona fide transferees who, acting in good faith, make improvements to a property they believe to be their rightful possession. The law, recognizing the potential for injustice in cases of dispossession after such improvements, offers a protective shield through Section 51. This doctrine encapsulates the essence of equity and fairness, serving as a legal mechanism that not only acknowledges the efforts of improvers but also aims to rectify any potential imbalances arising from evictions.

The recent legal development exemplified by the Baini Prasad v. Durga Devi case reaffirms the meticulous scrutiny of Section 51’s prerequisites. The courts’ interpretation underscores the indispensability of fulfilling the criteria of a bona fide “transferee” for the provision’s activation. This critical analysis solidifies the provision’s role in preserving the interests of those who genuinely believe in their absolute ownership of the property, while concurrently respecting the rights of superior title holders.

In essence, Section 51 of the Transfer of Property Act, 1882, stands as a testament to the Act’s overarching objective of maintaining fairness and justice in property transactions. It stands as a safeguard against potential exploitation and dispossession, allowing for the rightful compensation or securing of an interest in the property for bona fide improvers. This equitable doctrine not only upholds the rights of the parties involved but also contributes to the broader principles of balance, integrity, and equity that underlie property law.

Note:-

[1] Transfer of Property Act, 1882, § 51, No. 4, Acts of Parliament, 1882 (India).

[2] 6 Dr Avtar Singh, Textbook on the Transfer of Property Act (Lexis Nexis, 2019).

[3] Id, at 6.

[4] 6 Mallika Taly, Vepa P. Sarathi’s Law Of Transfer Of Property (Eastern Book Company, 2017).

[5] Supra, note 2 at 6.

[6] Baini Prasad v. Durga Devi, 2023 SCC OnLine SC 101.

[7] Supra, note 1 at 6.

[8] 2 Amar Pal Singh and Ashish Kumar Srivastava, Property Laws (Eastern Book Company, 2023).

[9] Id, at 7.

[10] Supra, note 8 at 7.

[11] Alisha Luthra, Improvements made by bona fide title holders under defective titles – Law Times Journal, Law Times Journal, https://lawtimesjournal.in/improvements-made-by-bona-fide-title-holders-under-defective-titles/ (last visited Aug. 17, 2023).

[12] Id, at 8.

[13] Supra, note 8 at 7.

[14] 13 Dr. Poonam Pradhan Saxena, Mulla’s The Transfer Of Property Act (Lexis Nexis, 2018).

[15] Id, at 8.

[16] Supra, note 14 at 8.

[17] 21 Dr. R.K. Sinha, The Transfer Of Property Act (Central Law Agency, 2021).

[18] Supra, note 14 at 8.

[19] Supra, note 8 at 7.

[20] Supra, note 2 at 6.

[21] Supra, note 14 at 8.

[22] Supra, note 8 at 7.

[23] Supra, note 2 at 6.

[24] Das Bansilal Rathod v. Sumberlal Surajmal Gandhi (1973) 75 Bom LR 678.

[25] Section 51 TPA, Law Guide (Mar. 12, 2021), https://www.lawguide.in/2021/03/section-51-tpa.html (last visited Aug. 17, 2023).

[26] Id, at 10.

[27] Supra, note 25 at 10.

[28] “He who seeks equity must do equity.”, TheFreeDictionary.com, https://legal-dictionary.thefreedictionary.com/”He+who+seeks+equity+must+do+equity.” (last visited Aug. 17, 2023).

[29] Id, at 11.

[30] Supra, note 28 at 11.

[31] Harilal Ranchhod v. Gordhan Keshav (1927) 29 BOMLR 1414.

[32] Transfer of Property Act, 1882 – Everything You Need to Know, India Law Offices LLP, https://www.indialawoffices.com/knowledge-centre/transfer-of-property (last visited Aug. 17, 2023).

[33] Id, at 12.

[34] Supra, note 32 at 12.

[35] Supra, note 14 at 8.

[36] Ganga Din v. Jagat AIR 1914 All 90.

[37] Supra, note 32 at 12.

[38] Supra, note 14 at 8.

[39] Ruchika Mohapatra, Important Terms Under Transfer of Property Act, CLATalogue (Mar. 16, 2023), https://lawctopus.com/clatalogue/clat-pg/important-terms-under-transfer-of-property-act/ (last visited Aug. 17, 2023).

[40] Id, at 13.

[41] Supra, note 39 at 13.

[42] Nature and Scope of Transfer of Property Act, 1882 – Law Wire, Law Wire, https://lawwire.in/nature-and-scope-of-transfer-of-property-act-1882/ (last visited Aug. 17, 2023).

[43] Id, at 15.

[44] Supra, note 6 at 6.

[45] Indian Evidence Act, 1872, § 115, No. 1, Acts of Parliament, 1872 (India).

[46] Pratima Chowdhury v. Kalpana Mukherjee (2014) 4 SCC 196.

[47] B.L. Sreedhar v. K.M. Munireddy (2003) 2 SCC 355.

[48] Abdul Kader v. Upendra 40 CWN 1370.

[49] R.S. Maddanappa v. Chandramma (1965) 3 SCR 283.

[50] Bodi Reddy v. Appu Goundan 1970 SCC OnLine Mad 101.

[51] Section 51 of the Transfer of Property Act applies on transferee who makes improvements in good faith on a property, believing himself to be its absolute owner: Supreme Court, SCC Blog (Feb. 18, 2023), https://www.scconline.com/blog/post/2023/02/18/section-51-tp-act-applies-on-transferee-who-makes-improvements-in-good-faith-on-a-property-believing-himself-to-be-its-absolute-owner-supreme-court-legal-research-legal-news-upd/ (last visited Aug. 17, 2023).

[52] Id, 51 at 19.

[53] Supra, note 51 at 19.