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Study Material

TRANSFER OF PROPERTY ACT

WHAT IS TRANSFER

The term transfer means a process or an act by which some property is handed over to another. Para 1 of Section 5 defines transfer or property as follows:

Transfer of property means an act:

(1) by which a living person

(2) conveys

(3) Property

(4) in present or in future

(5) to one or more other living persons or to himself and one or more other living persons: and to transfer property is to perform such act.

ESSENTIAL ELEMENTS OF TRANSFER OF PROPERTY

1. Act: Transfer of property is an act. It therefore implies that the transfer doesn’t take place in itself without an action of transferee to be covered under this act.

2. Living person: The term living person includes a company or association or body of individuals, whether incorporated or not. A transfer usually involves two distinct living persons. However, the same person can be both transferor and transferee while holding two different positions such as one being in personal capacity and other being the sole in-charge of trust.

3. Conveyance: The term conveys in simple terms means to transfer. It implies transfer of property by a person entitled to it to a person having no title to it. It is used in Section 5 in a very wide sense. The following do not constitute a transfer of property within the meaning of Section 5 since no new rights are being created in such situations:

a) Family arrangements

b) Settlement of disputed claim

c) Release relinquishment and surrender

d) Partition

4. Property: The term property is not defined anywhere in the act however the act states that property of any kind may be transferred. This means the term property is used in the act in verywide sense and is left open for Judicial Interpretation. Generally, both movable and immovable property can be transferred by the act.

5. In present or in future: Here the term in present or in future refers to transfer and not property. It implies that transfer of property can take place at any time, i.e. in present or in future, however, the property must be present during the transfer and the transferor must have right to transfer the property.                   

IMMOVABLE AND MOVABLE PROPERTY

The act does not define immovable property. Section 3 only states that immovable property does not include standing timber, growing crops or grass etc.

In absence of clear definition in Transfer of property act, it is suitable to refer to General Clauses act that provides definition for wide variety of terms. According to Section 3 (26) of the General clauses Act 1897, immovable property includes land, benefits arising out of land, things attached to the earth or permanently fastened to anything attached to the earth.

Also, as per Section 2 (6) of the registration Act1908, the expression immovable property is defined to include land, building, hereditary allowances, right to ways, right of ferries, fisheries or any other benefit arise out of land and thing attached to earth but does not include standing timber, growing crops or grass. Immovable property includes not only physical objects like land and building but also every benefit arising out of it and every interest in it.

 

Recognized as immovable Property

Does not recognized as immovable property

A right to way

A copyright

A right of ferry

Standing timber

A right of fishery

Growing crop

Right to receive future rents and profit of

Grass

Movable property

• The Act does not define movable property but it may be said that any property which is not immovable is movable property.

Section 2 (9) of the Registration Act 1908 defines movable property as including standing timber growing crops and grass, fruit upon and juices in trees and property of every description except immovable property.

ESSENTIALS OF A VALID TRANSFER

1.    Property must be transferable (Sec-6): The general rule is that subject to exceptions mentioned in Section 6, every kind of property can be transferred. Exceptions are:

a) Chance of an heir apparent or “SPES SUCCESSIONIS” [Section 6 (a)]

Explanation: - The technical expression for the chance of an heir apparent succeeding to an estate is called “spes successsionis” which means a means chance of succession such as chance of a relation obtaining a legacy on the death of a kinsman. Such chance is dependent on many factors happening such as the deceased must not dispose of property during his lifetime or die without a will. Since there is no surety of passing of that property to the spes successionis hence, the property isn’t transferable by spes successionis.

b) Mere Right of re-entry [Section 6 (b)]

Explanation: - This is right which the lessor has against the lessee for breach of an expressed condition of the lease which provides that on its breach the lessor may re-enter or take the property back. Since, such right is of a personal nature meant for protection of contract between the lessor and lessee and since a person not party to the contract cannot sue for the breach of contract, hence mere right to re-entry cannot be transferred.

c) Transfer of easement [Section6 (c)]

Explanation: -Easement means an interest in land owned by another that entitles its holder to a specific limited use or enjoyment.

d) Restricted interest or personal interest [Section 6 (d)]

e) Right of future maintenance [Section (d(i))]

A right to future maintenance is solely for the personal benefit of the person to whom it is granted, and it cannot be transferred since that will defeat its main objective.

f) Mere Right to sue [Section 6 (e)]

A mere right to sue cannot be transferred. This prohibition is based on principle of privacy of contract.

g) A public office [Section 6 (f)] cannot be transferred nor the salary of a public officer since public office is granted on the merits of its holder.

h) Stipends [Section 6 (g)] allowed to military, naval, airforce and civil pensioners of the government and political pensions.

i) Persons who cannot assign their interest [Section 6 (i)]

• A tenant having an un-transferable right of occupancy cannot assign his interest as such tenant.

• The farmer of an estate in respect of which default has been made in paying revenue cannot assign his interest as such farmer.

2.    Transferor must be competent (Section 7): A person is competent to transfer a property when:

1.      Person must be competent to contract

2.       Person must be entitled to transferable property or authorized to dispose of transferable property not his own.

3.    Transferee must be competent [Section6 (h) (3)]

As a general rule every living person, even a minor can be transferee or property. But, a person legally disqualified cannot be a transferee.

4.    Consideration and object must be lawful [Section 6 (h) (2)]

5.    Transfer must not be opposed to nature of interest [Section 6 (h) (1)]

The following cannot be transferred:

i.                     Res communes: Thing of which no one in particular is the owner such as light, air, water of rivers or the Sea.

ii.                  Res extra commercium: Thing thrown out of commerce such as things dedicated to public or religious uses.

6.    Transfer must be in the prescribed manner [Section 9]

The transfer of property must be made in the manner and form prescribed by the Act.

REVERSION AND REMAINDER:

REVERSION

It is the residue of an original interest which is left after the grantor has granted the lessee a small estate.

REMAINDER

When the owner of the property grants a limited interest in favour of a person or persons and givesthe remaining to others, it is called a “remainder

 

Difference between Reversion and Remainder

In the case of a “remainder”, the property will not come back to the owner, but it goes over to the other person.

In the case of a “reversion”, the property will come back to the original owner after the expiry of lease.

TRANSFER FOR THE BENEFIT OF UNBORN PERSON (SECTION-13)

Section 13 may be analyzed as under: -

(a) No transfer can be directly made to an unborn person.

(b) The interest in favour of the unborn person must be preceded by a prior interest.

(c) The prior interest must be also created by the same transfer.

(d) Transfer must be absolute.

DOCTRINE OF ACCUMULATION OF INCOME (SEC 17)

Section 17 does not allow accumulation of incomefrom the land for an unlimited period in favour of transferee. The laws allow accumulation of income

for a certain period only. The period for which such accumulation is valid is: -

i.                    The life of the transferor; or

ii.                  period of eighteen years from the date of transfer.

Any direction to accumulate the income beyond the period mentioned above is VOID.

 

EXCEPTION

I. Accumulation for the payment of the debts of the transferor or any other person taking any interest under the transfer.

II. The provision of portions for children or any other person taking interest in the property under the same transfer.

III. The preservation or maintenance of theproperty transferred.

Example: A settles the sum of Rs. 5, 000 for the benefit of B on 1st January, 1979 and directs the trustee to invest the money in units of the Unit trust of India and to deliver the total accumulated income and the units to B on the turn of the century.

B would be entitled to the accumulated income and the units before the stipulated period, i.e. on

1st January, 1997 i.e. 18 years after 1st January, 1979. The accumulation of incomes is valid up to31st December, 1996 and would be void beyond the period.

VESTED AND CONTINGENT INTEREST

Vested Interest (sec 19): The term 'Vested' is thus used in two senses, i.e.

(a) Vested in possession, or

(b) Vested in interest only

An interest is said to be ‘Vested in possession’ when it is a right to present possession of property. An interest is said to be ‘Vested in Interest only’ when it gives a present right to the future possession or enjoyment of property.

Example: A transfers his land to B for life andthen to C, B in this case, has vested interest in possession. He has the immediate right to thepossession of land. C has also vested interest in the land even during the lifetime of B with apresent fixed right to enjoyment of land on the death of B, the interest of C is not subject to anyuncertain conditions, as B is bound to die sooneror later. If C dies before B, C's heirs will inherit the land.

Where, on a transfer of property, an interest there in is created in favour of a person to takeeffect only on the happening of a specified uncertain event, also known as “conditionprecedent” or if a Specified uncertain event shall not happen, such person thereby acquires a contingent interest in the property. Such interest becomes a vested interest, in theformer case, on the happening of the event, in thelatter, when the happening of the event becomes impossible. Contingent interest is not heritable although it is transferable.

Examples: property is given to A for life and thento B, if he marries C. B should marry C before Adies. If he does so, his interest is converted intovested interest. Before B marries C, his interest is contingent. Vested interest is not defeated by the death of the transferee:

DIFFERENCE BETWEEN VESTED INTEREST AND CONTINGENT INTEREST:

Basis

Vested Interest

Contingent Interest

Fulfillments of Conditions:

Vested Interest does not depend upon the fulfillment of any condition,

 

Right of the enjoyment

There is a present immediate right though its enjoyment may be postponed to some future date

 

Contingent Interest' right of enjoyment is to accrue on the happening of an event which is uncertain

 

 

 

 

 

 

 

CONDITIONAL TRANSFER

When an interest is a created on the transfer ofproperty but is made to depend on the fulfillment of a condition by the transferee, the transfer isknown as a conditional transfer. Such a transfer may be subject to a condition precedent or a condition subsequent.

If the interest is made to accrue on the fulfillmentof a condition, the condition is said to be condition precedent.

For instance, A agree to sell his land to B if B marries C. This is a condition precedent.

Condition subsequent is one which destroys ordivests the right upon the happening or nonhappeningof event.

For example: - A transfer a certain property to Bprovided that B will not run a CS institute like Dheeraj Tyagi classes for 5 years. Mr. B has not run a CS institute for further 5 years from the dateof transfer. This is condition subsequent.

Difference between condition precedent and condition subsequent

In condition precedent, the condition comes before the interest; whereas in condition subsequent, the interest is created before the condition.

TRANSFER BY OSTENSIBLE OWNER (SEC-41)

Where with the consent express or implied of the person interested in immoveable property a person is the ostensible owner of such property and transfer the same for consideration, the transfer shall not be voidable on the ground that the transfer was not authorized to make it, provided that the transfer after taking reasonable care to ascertain that the transferor had power to make the transfer has acted in good faith.

ESSENTIALS OF TRANSFER BY OSTENSIBLE OWNER

1. The transferor is the ostensible owner.

2. He is so by the consent express or implied of the real owner.

3.The transfer is for consideration and

4. The transferor has acted in good faith taking reasonable care to ascertain that the transfer has power to transfer.

5. If any one of these elements is absent the transferee is not entitled to the protection of

this section. The section makes an exception to the rule that a person cannot confer a better title than he has.

DOCTRINE OF FEEDING THE GRANT BY ESTOPPEL (SEC-43)

Applicability: - Where a person fraudulently or erroneously represents that he is authorized 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.

Non-Applicability: - Nothing in this section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.

Example: - A Hindu, who has separated from his father B, sells to C their fields X, Y and Z representing that A is authorized to father the same. Of these fields. Z does not belong to A, it having been retained the contract of sale may require A to deliver? Z to him. Thus, where a grantor has prop orated to grant an interest inland which he did not at that time possess, but subsequently acquire, the benefit of his subsequent acquisition goes automatically to the earlier grantee or as it usually expressed feeds the estoppels.

DOCTRINE OF LIS PENDENS (Sec.52)

Nothing new can be added during the pendency of a suit. LIS means dispute, LIS PENDENS means a pending suit, action, petition.

The doctrine of LIS PENDIS is expressed by the maxim “ut lite pendente nihil innovetur” which

means nothing new should be introduced duringthe pendency of a suit.

Example: There is a dispute between A and Bwith regard to ownership of property X. A files a suit against B in a law court. A may either win or lose the suit. If he wins, he gets the property. If he loses B gets the property. Now assume during the pendency of the suit. A professing to be theowner of the property Sells it to C. If the suit ends in A’s favour, no difficulty arises. If it ends in B'sfavour. C cannot retain the property C is bound by the decree of the court and must return the property to B. He cannot even take the plea that he had no notice of the pending litigation. This is the doctrine of LIS PENDENS.

Condition necessary for the doctrine:

• These must be pendency of a suit or proceeding.

• The suit or proceeding must be a right toimmovable property is directly and Specified in question.

• The suit of proceeding must be pending incompetent Court.

Example: - A court returned a plaint on the groundthat it had no pecuniary jurisdiction. A fresh plaint was field in a proper court two years later. In the meantime, the defendant gifted the property tohis wife and son. Held the gift was not affected bylis pendens as there was no suit pending in acompetent Court at the time of alienation.

• There must be transfer of property in dispute byany party to the litigation.

• The alienations must affect the rights of theother party to the suit or proceeding.

MORTGAGE

Meaning: - It relates to transfer of intrest inimmoveable property from one person to another as a security for money.

Types of mortgage: Sec. 58 classified the mortgage into the following six types.

1. Simple mortgage.

2. Mortgage by conditional sale.

3. Usufructuary mortgage.

4. English mortgage.

5. Mortgage by deposit of title deeds.

6. Anomalous mortgage.

1. Simple mortgage: - In case of simplemortgage, the mortgagor without delivering theprossession of the mortgaged property, gives aperson undertaking to the mortgage to repay theamount due under the mortgage.

2. Mortgage by conditional Sale: - Here, mortgagor, first sell the property, in favour of mortgagee, with a condition to revert it back tohim, if he is repaying his loan with interest, otherwisemortgagee will become absolute owner.

3. Usufructuary mortgage: - The word ‘usufruct’ means the right of enjoying the use and advantages of another person's property. In case of usufructuary mortgage, the mortgagor delivers possession of the mortgaged property. He further authorities the mortgagee to receives the rentsand profits accruing from the property and toappropriate the same in lieu of interest and the principal sum.

4. English mortgage: - Here, property first sell infavour of mortgagee, if mortgagor repay amount, then sale will become void, otherwise will become absolute in that case, if mortgagee now sell property to recover his loan so for any shortage inrepayment mortgagor is personally laible.

5.Mortgage by deposit of title deeds: - Where a debtor declares to a creditor or his agent documents of title to property, with intent tocreate a security.

6. Anomalous mortgage: - A mortgage which does not belong to any of the above categories is called an anomalous mortgage.

SUB MORTGAGE AND PUISNE MORTGAGE

(i) Sub-mortgage: - When a mortgagee furthermortgages the property mortgaged with him by way of security the mortgage is called a submortgage.

Example: - Mr. A mortgages his house to Mr.Bfor a sum of Rs. 20,000. If Mr. B further Mortgage that property then he creates submortgage.

(ii) Puisne mortgage: Puisne (pronounced as (pyunii) mortgage is the second mortgage by the mortgagor himself on a property which isalready subject to mortgage. The word puisne means junior in rank or next in order.

Example- Mr. A Mortgages his house worthRs. 50,000 to Mr. B for Rs. 20,000. He is need of more money creates another mortgage in favour of Mr. C on the same house for a further sum of Rs. 15,000. The secondmortgage is a puisne mortgage.

LEASE

According to Section 105, a “lease” of immoveable property is a transfer of a right to enjoy property. Since it is atransfer to enjoy and use the property.

Essential

(1) It is a transfer of a right to enjoy immoveableproperty.

(2) Such transfer is for a certain time or perpetuity.

(3) It is made for consideration which is eitherpremium or rent or both.

(4) The transfer must be accepted by thetransferee.

Formalities for lease: - For years to year lease, registered instrument is required, while in case of ease of less than 1-year, oral agreement is required.

EXCHANGE (Sec-118)

“When two persons mutually transfer theownership of thing for the ownership of another, neither thing or both things money only thetransaction is called an exchange”.

GIFT (Sec-122)

“Gift” is transfer of certain existing movable or immovable, property made voluntarily and without consideration, by one person, called the donor to another, called the donee and accepted by or on behalf of the donee. Such acceptance must be made during the lifetime of the donor and while he is still capable of giving.

Essentials of a gift

1. Transfer of ownership

2. Property must be in existence

3. Voluntary transfer

4. Without consideration

5. Acceptance by the done

GIFT HOW EFFECTED

1. Gift of immovable property: - For the purpose of making a gift of immovable propertythe transfer must be affected by a registered instrument signed by or on behalf of the donorand attested by at least two witnesses.

2. Gift of movable property: - For the purpose of making a gift of movable property, transfer may be affected either by a registered instrument ofprofession or by deliver.

SUSPENSION OF REVOCATION OF GIFT (SEC. 126)

Grounds for suspension of revocation

1. By agreement

2. By rescission

CONDITIONAL GIFT

Like any other transfer under the Act a conditionalgift can also be made. A gift which comes intoexistence on the fulfillment of a conditionprecedent is a conditional gift and is valid.

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