Transfer of Property Act is a general law related to transfer of property. It generally deals with immovable property only.
Basic objective of this act is to formulate rules, regulations and procedures for transfer of property.
Scheme of the Act
Transfer may take effect by 2 different ways
1. Transfer by Act of Parties.
2. Transfer by Operation of Law.
This act does not define the term Immovable Property but section 3 of this act provides for some exclusion as follows
“Immovable Property does not include standing timber, growing crops and grass”
As term Immovable Property is not defined in this act exhaustively thus it can be interpreted with the help of other laws as follows:-
As per General Clause Act 1897, Immovable Property means & includes
2. Benefits arises out of Land
Anything attached to the earth means
1. Things rooted in the earth.
2. Embedded in the earth.
Examples of Immovable Property
1. Right to collect rent of immovable property.
2. A right to way.
3. The interest of mortgagee.
4. Right to collect lac from trees.
5. Right to fishery.
Followings are not covered by the term “Immovable Property”.
1. Right of Worship
2. Government promissory notes.
4. Right to recover maintenance allowance.
6. Decree of arrear of rent.
7. Machinery which is not permanently attached to the earth.
Transfer of Property (Section 5)
An act by which a living person convey property in present or in future to one or more other living persons.
Living person includes company or association or body of individuals.
Transferable Property (Section 6)
General rule:- Property of any kind may be transferred from one person to another
Exception to the general rule
1. The chance of an heir-apparent succeeding to an estate, the chance of a relation obtaining a legacy on the death of a kinsman, or any other mere possibility of a like nature, cannot be transferred.
2. Right of Re- Entry on leased property for breach of conditions.
3. Easement cannot be transferred. (Easement means interest in land owned by another)
4. An interest in property restricted in its enjoyment to the owner personally cannot be transferred by him.
5. Right to sue cannot be transferred.
6. Public Office or Salary of public officer cannot be transferred.
7. Stipend allowed to Military, Naval, Air Force and civil pensioners of the government and political pension cannot be transferred.
Who can transfer the property? (Section 7)
Every person competent to contract and entitled to transferable property, or authorised to dispose of transferable property not his own, is competent to transfer such property either wholly or in part, and either absolutely or conditionally, in the circumstances, to the extent and in the manner, allowed and prescribed by any law for the time being in force.
Formalities of transfer
Movable property can be transferred by means of delivery or by registration. While immovable property can be transferred as per the provisions of this act.
Generally immovable property may be transferred through registered instrument only but if value of tangible immovable property is less than rupees hundred than registered instrument is not required.
A person who sign the documents of transfer is called executant Or a person who execute the transfer by affixing signature on document is called executant. A illiterate person who cannot sign may direct some literate person to sign the documents on his behalf and the illiterate person may put his thumb impression only.
Formalities of transfer may be construed as follows :-
When an interest is created on the transfer of property subject to fulfillment of a condition by the transferee, the transfer is known as a conditional transfer.
Such Conditions may be Condition Precedent or Condition Subsequent. For Example If Mr. A is agreed to sale his house to Mr. B if Mr. B completed a particular assignment. This condition is condition precedent.
Condition Subsequent means which is to be fulfilled after execution of transfer deed. For Example :- Mr. A is agreed to sale his land to Mr. B but after such sale within 2 month Mr. B will complete a particular assignment. This is condition precedent.
Following type of conditions are invalid
Those conditions which are impossible to fulfill.
Those conditions which are not tenable as per law or forbidden by law or defeat any provision of law.
Doctrine of Election (Section 35)
Election may be defined as “the choosing between two rights where there is a clear intention that both were not intended to be enjoyed”.
When a same deed contains a clause of transfer along with an obligation than only doctrine of election arises.
For Example :- a property is given to you and in the same deed of gift you are asked to transfer something belonging to you to another person. If you want to take the property you should transfer your property to someone else, otherwise you cannot take the property which is transferred to you by some one.
A transfer to you his paddy field and in the same deed of transfer asks you to transfer your house to C. Now, if you want to have the paddy field you must transfer your house to C, because the transferor is transferring to you his paddy field on the condition that you give your house to C. Thus, either you take the paddy field and part with your house or do not take it at all. This is called the doctrine of election. You must elect either to take under the instrument, in which case you will have to fulfill the condition and bear the burden imposed upon you or you must elect against the instrument, in which case neither the benefit nor the burden will come to you.
The foundation of doctrine of election is that a person taking the benefit of an instrument must also bear the burden.
Restraint of Transfer (Section 10)
When a property is transferred and condition thereto absolutely restrict the transferee to transfer the property than such condition will be void & invalid.
For Example:- A Gives property to B for Rs. 2000 and state a condition that he cannot make further sale of the same at Rs. 50000. This condition is invalid.
A Gives property to B for Rs. 2000 and state a condition that he will further sale the same at Rs. 50000. This condition is invalid.
A Gives property to B for Rs. 2000 and state a condition that he will further sale the same at Rs. 50. This condition is also invalid.
It means absolute restriction on transferred property related to further transfer cannot be imposed but partial restrictions may be imposed.
For Example :- At the time of partition a restriction is imposed that property may be further transferred to the family member only if they are not interested then to the stranger. This condition imposed partial restriction on transfer of property thus it is valid restriction.
At the time of partition a restriction is imposed that property may be further transferred to the family member at Rs. 1000 only if they are not interested then to the stranger. This condition absolutely restrict the person from selling the property to any one for good value. Hence this condition is invalid. (Trichinpoly Varthaga Sangum V. Shunmoga Sunderam)
But it is not permissible to restrict the alienation to a particular time. Such a restriction is not partial but an absolute restraint and as such invalid.
Absolute restriction is invalid but still lesser may impose restriction to the lessee that he cannot sublet the property, means he cannot transfer his right in property. This absolute restriction is valid.
Doctrine of Holding Out (Transfer by Ostensible Owner)
Basic rule is that “A person cannot transfer a better title than he himself hold” but as per this doctrine property may also be transferred as follows:-
As per this doctrine transfer of immovable property by Ostensible owner is valid transfer but subject to following conditions
1. Transferor is Ostensible Owner.
2. Consent of actual owner has been taken (Express or Implied).
Transfer is made for consideration.
3. Transfer is made in good faith.
Ostensible Owner means a person who is not actual owner of the property.
Doctrine of Fraudulent Transfer (Section 53)
If a person transfer his immovable property in such a way that he may make defraud with the creditors than such transfer is called fraudulent transfer.
“Every transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed.”
Fraudulent transfers are voidable at the option of creditors. It means if creditors does not take any objection than such transfer is valid but if creditors take objection than such transfers are invalid. The transfer is valid so long as the creditor does not challenge it in a Court of law and gets a declaration that the transfer is invalid.
For Example:- A suit instituted by a creditor to avoid a transfer on the ground that it has been made with intent to defeat or delay the creditors of the transfer or shall be instituted on behalf of, or for the benefit of all the creditors. Once the creditor sues the debtor and says that the debtor has the intention to deceive him, the transfer can be declared invalid by the Court.
Doctrine of Part Performance (Section 53A)
If part performance of a contract for transfer of immovable property has been done and transferee performs his part of obligations than such contract cannot be cancelled on the ground of non registration of document.
Essential Conditions for applicability of this doctrine
1. There must be a contract to transfer the immovable property.
2. It must be for consideration.
3. Contract must be in writing and signed by both the parties.
4. Terms of the contract are clear & absolute.
5. Transferee must have taken possession of the property.
6. Transferee must have fulfilled his part of obligations.
For Example:- A contract for the sale of land has been entered into between A and B. The transferee has paid the price entering into possession and is willing to carry out his contractual obligations. As registration has not been effected A, the transferor, seeks to evict B from the land. Can he do so? No, B will not be allowed to suffer simply because the formality of registration has not been through. The legislature grants some relief to such a transferee under Section 53A, which embodies the doctrine of part-performance.
Doctrine of feeding the grant by Estoppels (Section 43)
Where, a person fraudulently or erroneously represents that he is authorised to transfer certain immoveable property and professes to transfer such property for consideration, such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists. (Section 43)
It means when a person fraudulently transfers a property representing that he is actual owner than such person will have to transfer the property if subsequently interest arises and contract is not resigned.
1. There was a fraud representation.
2. Due to such representation property was transferred.
3. Transferor subsequently acquired the interest in the property.
4. Transfer of Property was for consideration.
5. Transferee did not resign the contract.
6. Transferee acted in good faith.
For Example :- A, a Hindu, who has separated from his father B, sells to C three fields, X, Y and Z, representing that A is authorised to transfer the same. Of these fields, Z does not belong to A, it having been retained by B on the partition, but on B‟s dying, A as heir obtains Z. C, not having rescinded the contract of sale may require A to deliver Z to him.
Doctrine of Les Pendens (Section 52)
Term Les Pendens means pending suit or litigation or the like.
This Doctrine states that “When a suit is pending before the court of law between two or more parties for immovable property than the property cannot be transferred or otherwise dealt with by any party, except under the authority of court”
If court provides express permission than property may be transferred but subject to final decision of the court.
For Example :- P and Q are litigating in a Court of law over property Z and during the pendency of the suit P transfers the property Z to R with the permission of the court. The suit ends in Q’s favour. Here R who obtained the property during the time of litigation cannot claim the property. He is bound by the decree of the Court wherein Q has been given the property.
1. There must be suit pending in the court of law.
2. Litigation is related to title of immovable property.
GIFT (Section 122-128)
“Gift” is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration by one person called the donor, to another called the donee and accepted by or on behalf of the donee.
Essential Conditions for Gift
1. There must be Existing Property.
2. Property may be movable or immovable.
1. Such transfer is voluntary transfer.
2. Such transfer is made without consideration.
3. Acceptance of Donee.
As per the provisions of section 123 gift of immovable property can be made only through registered document and gift of movable property can be made either through registered document or through mere delivery of possession.
The Privy Council in Kalyan Sundram v. Kumarappa, decided that after acceptance of the deed of gift and before registration, the donor cannot revoke the gift. The gift which is accepted by the donee, will take effect from the date of the execution of the document by the donor, even though it is registered at a later date.
After Acceptance of donee Gift cannot be revoked by the donor. It means if gift is not accepted than up to that time gift may be revoked by donor but when donee accept the same right of donee to take back the same lapse.
Gift may be conditional or unconditional, conditions may be precedent or subsequent but conditions should not be immoral or illegal.
For Example :- A gives a field to B, reserving to himself, with B‟s assent, the rights to take back the field in case B and his descendents die before A, B dies without descendents during A‟s lifetime. A may take back the field.
Gift of future property is always invalid as per Transfer of Property Act 1882.
For Example :- A makes a gift of his house and also makes a gift of the additions that he is likely to make in future. Here the gift of the house is valid but the gift of the additions that are yet to be made is invalid.
Onerous Gift – Gift may consist of bundle of several things some may create burdens. Such gift is onerous gift. A makes a gift of shares in the companies X and Y. X is prosperous but heavy calls are expected in respect of shares in Y company. This gift is called onerous gift.
Gift must be accepted in full , partial acceptance of gift is not valid BUT IF separate deed is exist for the gift than partial acceptance may be done.
The rules pertaining to gifts in the Transfer of Property Act do not apply to the gifts by Mohammedans. If a gift is made by a Mohammedan, its validity has to be judged according to Muslim law and not according to the Transfer of Property Act.
As per the provisions of section 54 of transfer of property act 1882, Sale means transfer of ownership in exchange for price paid or promised or partly paid & partly promised.
Essential Conditions for Sale
1. Seller must be competent to transfer and buyer should not be disqualified to be the transferee.
2. Subject matter of transfer must be transferable property.
3. There should be transfer of ownership.
4. Transfer must be for price paid or promised or partly paid & partly promised.
5. Consideration must be in terms of money, if it is not than it may be considered as barter or exchange not sale.
Sale of immovable property can be made only through registered document but if value of immovable property is less than Rs. 100 than it may be by mere delivery of possession.
A contract for the sale of immoveable property differs from a contract for the sale of goods in that the Court will grant specific performance of it unless special reasons to the contrary are shown.
EXCHANGE (Section 118-121)
When two persons mutually transfer the ownership of one thing for the ownership of another thing,
the transaction is called an “exchange”. Exchange may be of money also.
Essential Conditions of Exchange
1. Person making the exchange must be competent to contract.
2. Mutual Consent of both the parties.
3. Mutual Transfer of ownership.
4. Money should be consideration for exchange.
According to Section 105, a “lease” of immoveable property is a transfer of a right to enjoy property. Since it is a transfer to enjoy and use the property, possession is always given to the transferee. The lease of immoveable property must be made for a certain period or for perpetuity. For example, you may give a lease of property for a definite number of years, or for life, or even permanently.
Essentials Conditions for Lease
1. Transfer of right to enjoy immovable property.
2. Transfer may be for certain time or for perpetuity.
3. It must be for consideration either premium or rent or both.
4. Acceptance of transferee.
Transferor is called Lesser and Transferee is called the lessee. The price is called premium and the money, share, service or any other thing of value to be so rendered is called the rent.
Lease & Licence – A lease should be distinguished from a license. A license is a right to do or continue to do in or upon the immoveable property of the grantor, something which would, in the absence of such a right, be unlawful.
Formalities of Lease
Types of Lease or Tenancies
1. Tenancy from year to year
2. Tenancy at will
3. Tenancy by Sufferance
Requirement of Valid Notice
Notice to quit the tenancy must be valid and proper notice.
Determination of Lease
Section 111 specifies various ways by which a lease may come to an end. A Lease may come to an end by any of the following ways:-
1. By Efflux of time or Lapse of time
2. By Happening of a special event
3. By Surrender
4. By Forfeiture
DUTIES OF LESSER
DUTIES OF LESSEE
A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.
Essentials of a mortgage:
1. Transfer of Interest: – The mortgagor as an owner of the property is possessed all the interests in it, and when he mortgages the property to secure a loan, he only parts with an interest in that property in favour of the mortgagor. His ownership becomes less for the time being by the interest which he has parted with in favour of the mortgagee.
2. Specific Immovable Property:- The second point is that the property must be specifically mentioned in the mortgage deed.
3. To Secure the payment of debt :- Another characteristic of a mortgage is that the transaction is for the purpose of securing the payment of a loan for the performance of an obligation which may give rise to liability.
The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed.
Kinds of Mortgage
a)Simple Mortgage:- Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied, so far as may be necessary, in payment of the mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee.
b) Mortgage by conditional sale:– Where, the mortgagor ostensibly sells the mortgaged property on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or on condition that on such payment being made the sale shall become void, or on condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called a mortgage by conditional sale and the mortgagee a mortgagee by conditional sale.
PROVIDED that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale.
c) Usufructuary Mortgage-Where the mortgagor delivers possession or expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee, and authorizes him to retain such possession until payment of the mortgage-money, and to receive the rents and profits accruing from the property or any part of such rents and profits and to appropriate the same in lieu of interest or in payment of the mortgage-money, or partly in lieu of interest or partly in payment of the mortgage-money, the transaction is called a usufructuary mortgage and the mortgagee a usufructuary mortgagee.
d) English mortgage-Where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English mortgage.
e) Mortgage by deposit of title-deeds-Where a person in any of the following towns, namely, the towns of Calcutta, Madras, and Bombay, and in any other town which the State Government concerned may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds.
f) Anomalous mortgage-A mortgage which is not a simple mortgage, a mortgage by conditional sale, a usufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds within the meaning of this section is called an anomalous mortgage.
Where the mortgagee transfers by mortgage his interest in the mortgaged property, or creates a mortgage of a mortgage the transaction is known as a sub-mortgage. For example, where A mortgages his house to B for Rs. 10,000 and B mortgage his mortgagee right to C for Rs. 8,000. B creates a sub-mortgage.
Secondary Mortgage/Puisne Mortgage
Where the mortgagor, having mortgaged his property, mortgages it to another person to secure another loan, the second mortgage is called a puisne mortgage. For example, where A mortgages his house worth Rs. one lakh to B for Rs. 40,000 and mortgages the same house to C for a further sum of Rs. 30,000, the mortgage to B is first mortgage and that to C the second or puisne mortgage. C is the puisne mortgagee, and can recover the debt subject to the right of B, the first mortgagee, to recover his debt of Rs.40,000 plus interest.
Rights of Mortgagor
By mortgaging the property the mortgagor does not cease to be its owner, he only transfers an interest in it. The law, therefore, grants him the following rights:
a) Right of redemption: The first and the most important right of the mortgagor is the right to redeem i.e., take back the mortgaged property by paying the mortgage money at any time after the stipulated date for repayment. Section 60 of the Act provides that any time after the principal amount has become due; the mortgagor has a right to redeem the property.
b) Right against clog on equity of redemption: Right of redemption or equity of redemption is the essence of a mortgage, and any provision inserted in the mortgage deed to prevent, evade or hamper redemption is void. Any condition which prevents the mortgagor from redeeming the property is called a “clog” on the equity or right of redemption and is void. The rule of equity that once a mortgage always a mortgage prohibits a clog on the right of redemption. In other words, once a transaction is found to be a mortgage, the Court would not permit any condition in a mortgage deed which would prevent or impede redemption or repayment of the loan for which the security was given.
c) Right of partial redemption: A mortgage, as a rule, being one and indivisible for the debt and every part of it, the mortgagor cannot redeem piecemeal; he must redeem the whole property. But Section 61 of the Act gives a right of partial redemption stating that “a mortgagor who has executed two or more mortgages in favour of the same mortgagee shall, in the absence of a contract to the contrary, when the principal money of any two or more of the mortgages has become due, be entitled to redeem any one such mortgage separately or any two or more of such mortgages together.”
d) Right to inspection and production of documents:- A mortgagor, as long as his right of redemption subsists, shall be entitled at all reasonable times to inspect and make copies or abstracts of, or extracts from, documents of title relating to the mortgaged property which are in the custody or power of the mortgagee.
Rights of Mortgagee and his Remedies:
If the mortgagor does not pay the mortgage money, the mortgagee may proceed to recover (i) from the mortgaged property, or (ii) sue for recovery from the mortgagor personally. Thus the mortgagor has two remedies: one against the property and the other against the mortgagor personally.