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Chapter 16 - Transfer of Property Act, 1882

Chapter 16 - Transfer of Property Act, 1882

Introduction
Today, you're a real estate attorney! Sunny Leone and her three sisters are selling their family
home. It's been in their family for almost a century and changed hands within their family
many times. They've hired you to help them because this will be the first time it will be owned
by someone outside of the Leone family, and there's a lot involved to make sure this conveyance,
or property transfer, goes smoothly.

The sale of real estate is one form of voluntary property transfer, or property conveyance.
Property is also voluntarily transferred when it's gifted or left through a will. Voluntary
transactions may seem straightforward, since they're transactions that are purposeful and
intended by both parties. But, the act of transferring real property can sometimes be
complicated.

This is because there are several different legal steps that must be achieved before a property
is considered to be properly, and therefore legally, transferred. As the attorney, this will be
your job. You will determine which steps the family must take, and then help the family take
those steps in order to secure a legal transfer of the property. You'll oversee the signing, sealing
and delivery of this entire legal process for Sunny and her sisters. Let's take a look at the
process.

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YES Academy for CS Think, Believe, Receive! Chapter 16 - Transfer of Property Act, 1882

The law relating to transfer of property is governed by the Transfer of Property Act, 1882.
Before this Act came into force there was practically no law as to real property in India.
Barring few points which were covered by certain Regulations and Acts, the Courts in India in
the absence of any statutory provisions, applied rules of English law as the rule of justice,
equity and good conscience.
The Act was enacted with the object to amend the law relating to the transfer of property by
act of parties. The Act excludes from its purview the transfers by operation of law, i.e. by sale
in execution, forfeiture, insolvency or intestate succession. The scope of the Act is limited, as
it is confined to transfers inter vivos and excludes testamentary succession, i.e. transfers by
will.

Definition
1. Instrument
"Instrument" means a non-testamentary instrument.
2. Attachment to earth
 Attach to the earth means:
(a)Rooted in the earth (Example: trees and shrubs)
(b)Imbedded in the earth (Example: walls or buildings)
(c)Attached in such a way which gives permanent beneficial enjoyment.
3. Absolute Interest
 It means ownership which consists of a bundle of rights, the right to possession, right
to enjoyment and right to do anything such as selling, mortgaging or making gift of
the property.
 Example –
If A is the owner of a land, he has an absolute interest in the land. If A sells his land
to B, then B becomes the owner and he acquires an absolute interest in the land he
has purchased from A. Likewise if A makes a gift of his property to B, there again B
gets an absolute interest in the property which is gifted to him. These are instances
where persons may have an absolute interest.

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4. Reversion
 The residue of an original interest which is left after the grantor has granted the lessee
a small estate.
 Example
If a property has been given on lease for 5 years, after the period of 5 years, the
property which reverts back to him is called the reversion or revisionary interest.
5. Remainder
 When the owner of the property grants limited interest in favor of other person (1st
mentioned person) and gives remaining to other (2nd person) it is called remainder.
6. Attested
 Attested in relation to an instrument, means attested by two or more witnesses each
of whom has:
1. Seen the executants sign or affix his mark to the instruments
2. Seen some other person sign the instrument in the presence of and by the direction of
executants
3. Received from executants a person acknowledge of his signature or of the signature of
such other person
4. Signed the instrument in the presence of the executants
 It is not necessary that all the witnesses should be present at the same time. Also no
particular form of attestation is necessary.

Vested and Contingent Interest

Vested Interest – Section 19
 The word vested can be used in two references:
1. Vested in possession
2. Vested in Interest
 Vested in possession means the right to present possession of property.
 Vested in interest means present right to future possession of property.
 Vested interest means interest created in favor of person which is not subject to
happening of an event or if subject to the happening of an event then such event is
bound to happen.

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 Example – A property is given to A for life with a remainder to B, A’s right is vested
in possession; B’s right is vested in interest.
 Vested Interest is transferable and heritable.
 If transferee dies before taking possession of property then such property passes to his
legal heir.

Contingent Interest – Section 21

 Contingent Interest means an interest created in favor of some person which takes
effect on happening of certain pre-condition.
 Example – A transfer’s property to B until B marries and after marriage of B to C.C
has contingent interest in the property.
 Contingent interest is not heritable but is transferable.
Vested Interest Contingent Interest
It does not depend on the fulfilment of any It depends upon the fulfilment of condition.
condition.
It present immediate rights but its enjoyment Right of enjoyment accrues on happening of
may be postponed to future date. an event which is uncertain.
A vested interest cannot be defeated by the A contingent interest may fail in case of the
death of the transferee before he obtains death of transferee before the fulfillment of
possession. condition.
It is transferable and heritable. It is not transferable when the transferee of
contingent interest dies before obtaining
possession, the interest fails and does not
pass to the heir.

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YES Academy for CS Think, Believe, Receive! Chapter 16 - Transfer of Property Act, 1882

Movable and immovable Property

Movable Property
 The Transfer of Property Act, 1882 does not define movable property. It is defined with
the help of other statutes.
 As per General Clauses Act, 1897 movable property means “property of every description
except immovable property”.
 The Registration Act defines "moveable property" to include property of every description
excluding immovable property but including standing timber, growing crops and grass.
 Examples –
1. Machine fixed on land temporary.
2. Government Promissory note
3. Intellectual Property Right
4. Standing timber and trees
5. Right to recover maintenance allowance.
6. Royalty
7. Right to worship
8. Copyright
9. A decree for sale on a mortgage deed.
10. Standing timber, growing crops and grass

Immovable Property
 The term “immovable property” is also not defined under the Act. However, a negative
reference is given in the Act which says that immovable property does not include
standing timber, growing crop and grass.
 According to 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.
 The Indian Registration Act expressly includes under to immovable property the benefit
to arise out of land, hereditary allowance, right of way, light, ferries and fisheries.

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 Examples –
1. Chattel embedded to earth
2. Easement
3. Right to ferry
4. Right to way
5. Right to enjoyment of property under lease
6. A right to fishery
7. A right to collect rent of immovable property
8. Interest in mortgage
9. Hereditary offices
10. Right to collect lac from trees
11. Reversion in property leased.
12. A factory

Movable Property Immovable Property

The movable property can be easily The immovable property cannot be easily
transported from one place to another. transported from one place to another.
Example – Books , Timber ,Vehicles etc. Example – House ,land, tree attached to the
ground
Mango tree if cut and sold for timber purpose Mango tree if sold for nourishment of fruits,
are deemed as movable property. they are deemed as immovable property.
It is optional to register movable property Whenever there is a transfer of any
under the Indian Registration Act, 1908. immovable property, it must be compulsorily
registered under the Indian Registration Act,
1908.
Mere delivery with intention to transfer the Mere delivery is not sufficient for a valid
movable property completes the transfer. transfer,

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YES Academy for CS Think, Believe, Receive! Chapter 16 - Transfer of Property Act, 1882

Transfer of Property
Meaning of Transfer of Property – Section 5
 “Transfer of property” means an act by which a living person conveys property in
present, or in future, to one or more other living persons, or to himself, and one or more
other living persons.
 "Living person" includes a company or association or body of individuals whether
incorporated or not.

Essential elements of valid transfer

 It is necessary to fulfill the following conditions to make a valid transfer of an immovable
property :
1. Property must be transferable.
2. Transferor and transferee must be competent.
3. Consideration and object of transfer must be lawful.
4. Transfer must take place as per method prescribed under the Act.

Who can transfer the property?

 Every person who is competent to contract and entitled to transferable property, or
authorized to dispose of property is competent to transfer such property.
 Hence, every person competent to contract and having ownership can transfer property.
 According to Indian Contract Act, a person is competent to contract when he is a major
and of sound mind and is not disqualified from contracting by any law to which he is
subject.

Properties which can be transferred

Every kind of property can be transferred. But this section has a few exceptions. They are –
1. Chance of an heir apparent.
2. Right of re-entry.
3. Transfer of easement.
4. Restricted interest.
5. Right to future maintenance.

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6. Right to sue.
7. Transfer to public office salary and pension.

Properties which can’t be transferred

General Rule Exception Rule

Property of every kind Following Property cannot be

can be transferred. transferred:
1. Chance of an heir
apparent.
2. Right of re-entry.
3. Transfer of easement.
4. Restricted interest.
5. Right to future
maintenance.
6. Right to sue.
7. Transfer to public office
salary and pension.

1. Chance of an heir apparent

 This is also known as spes successionis.
 Heir apparent means the bare chance of person to get property on death of relative.
 This bare chance cannot be transferred.
 Example –
1) Suppose A is the owner of the property and B is his son. B is the heir of A. During
the life time of his father A, B has only a hope expectancy that he will inherit the
property of his father. This type of property which B hopes to get after the death
of the father cannot be transferred, during the life time of A.

2. Right of re-entry
 The right which the lessor has against the lessee for breach of an express condition
which provides that on its breach the lessor may re-enter is called the right of re-entry.
 Right of re-entry is a personal benefit which can’t be transferred.

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 Example
 A leases his property to B and adds a condition that if B sub-lets the leased land, A
will have the right to re-enter, i.e., the lease will terminate if the lessee breaks the
condition by subletting to a third person. Thus, right of re-entry being a right for the
personal benefit of any party cannot exist for the benefit of a person who has no
personal interest in the land.

3. Transfer of easement
 An easement is a right enjoyed by the owner or the occupier of land over the land of
another for beneficial enjoyment of his land and such as right of way, right of light,
right of support etc.
 Easement requires the existence of a dominant heritage and servient heritage. Dominant
heritage means certain land and servient heritage means certain other land.

4. Restricted interest or personal interest

 There are certain rights which are reserved for certain person. These are known as
restricted interest.
 Restricted interest cannot be transferred to another person.
 ‘Religious office ‘ are also included in the restricted interest
 Example
The right of the priest to worship and right to receive offerings made at temple.

5. Right to future Maintenance

 Right to future maintenance is personal benefit to whom it is granted.
 Right to future maintenance cannot be transferred.
 However arrears of future maintenance can be transferred.
 Example
The right of Hindu widow to maintenance is a personal right which cannot be
transferred.

6. Right to sue

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 A mere right to sue cannot be transferred.

 The right refers to a right to damages arising both out of contracts as well as torts.
 Example
A commits assault on B. B can file a suit to obtain damages but he cannot assign
the right to C and allow him to obtain damages.

7. Transfer of public officer

 It is against public policy to transfer public offices, salary and pension.
 Pension and salary are given on personal basis it can’t be transferred.

Formalities of transfer
 Property can be transferred either orally or by writing. Moveable property can be
transferred by delivery of possession or by registration.
 Incase of immovable property of value of more than 100 ,then it can be transferred only
by registered instrument.
 There are 3 formailities that are required to complete a transfer and they are :
1. Attestation
2. Registration
3. Notice

Restraint on transfer or property

1. Restrain on alienation
 If any property is transferred subject to a condition or limitation which absolutely
restricts the transferee from partying with or disposing of his interest in the property
such as condition or limitation and not the transfer itself is void.(The transfer takes
effect and is valid, and the condition not to alienate the property is void.)
 Restraint on alienation of property may be either absolute or partial.
 Absolute restrain is void but transfer is valid, while partial restraint as regard to time
place or person is valid.
 Example on absolute restraint:
If A transfer’s property to B and his heirs with a condition that if property is alienated
it should revert back to A. Such condition is void.

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 Example on partial restrain:

A transfer's property to B with condition that he should not alienate it in favor of D
who is a trade competitor. It contains partial restrain and hence is valid.
 Exceptions to rule of restraint on alienation:
1. In the case of a lease, the lessor can impose a condition that the lessee shall not
sublet the property or sell his leasehold interest.
2. In case of a married woman, a condition that she shall not have power during her
marriage to transfer the property is valid.

2. Restrain on enjoyment
 When property is transferred absolutely, transferee has the right to enjoy property as
he likes it.
 When transferor place restriction on the enjoyment of property which is transferred,
such condition shall be void.
 Example –
1. A has properties X and Y. He sells property Y to B and puts a condition that B
should not construct on property Y more than one storey so that A‟s property X
which he retains should have good light and free air.
2. A sells his house to B with condition that he can reside in this house, his family
members cannot. This condition is invalid.

3. Condition as to insolvency
 If person transfer property to another person with condition that property will be revert
to transferor if transferee becomes insolvent then such condition shall be invalid.
 If lessor reserve right to get back property on declaration of lessee as insolvent, it is a
valid condition.

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4. Illegal or impractical condition

 Interest created in the property under transfer, which depend on a condition the
performance of which is either illegal or impractical under law or harmful to the person
or property of another, is invalid.

Transfer for benefit of unborn child- Section 13

 Property can be transferred to living person as on date of transfer.
 It means property cannot be transferred to unborn person.
 However property can be transferred to unborn person through medium of trust.

Provisions
 Property can be transferred to unborn person if following conditions are satisfied :
1. Transfer cannot be made directly to unborn person.
2. Interest of the unborn person must be preceded by a prior interest.
3. When the prior interest comes to an end, the unborn person must be in existence
and he must have the interest at the latest, when he attains majority.
4. The unborn person must be exclusive owner of whole of property.

Example
A transfer’s 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, for the eldest son of the
intended marriage for life, and after his death for A‟s second son. The interest so created for
the benefit of the eldest son does not take effect, because it does not extend to the whole of
A‟s remaining interest in the property.

Rule against perpetuity

 Perpetuity means continuing forever.
 According to this rule, property can be transferred to person for his one lifetime existing
at date of transfer and to the minority of some person who shall be in existence at
the expiration of that period, and to whom, the interest created is to belong if he
attains the age of majority.

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 Elements of rule against perpetuity:

1. Property can be transferred to different living persons for their successive lives before
property is transferred to unborn person.
2. Transfer must be absolute.
 Example
A transfers a piece of land to his friend B for life, and afterwards to his friend C for
life, then to his friend D for life, and then to the son that may be born to B, for his
son’s life, then the son that may be born to C for his life, and then ultimately to the
son that may be born to D forever.
 In case of such disposition of the land, B cannot alienate the property, because he has
only a life interest therein. For the same reason neither C nor D, nor the sons of B and
C can alienate the property. When the property finally vested in D’s son, only he will
be entitled to alienate the property.
 This would certainly be a restraint on free alienation of the piece of land for a
considerable long period. This section lays down that one can tie up property and stop
its free alienation only for one generation, because all friends of A, now living must die
within the same time.
 Exceptions :
1. When land is purchased or held by corporation.
2. When property is transferred by way of gift for benefit of public.
3. Personal agreement
4. Agreement for perpetual lease.

Conditional Transfer
 When transfer of property is subject to fulfillment of condition by the transferee the
transfer is known as conditional transfer.
 The condition can be either precedent of subsequent.

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Condition precedent
 Where the terms of a transfer of property impose a condition which must be fulfilled
before a person can take an interest in the property, that condition is called condition
precedent.
 Transferee’s interest in property is only contingent until the condition is fulfilled.
 Example –
A transfers 5000 to B on condition that he shall marry with the consent of C, D and E.
But E dies and B marries with the consent of C and D.B is deemed to have fulfilled the
condition. This is called a condition precedent.
 A condition precedent shall be allowed if:
1. The condition imposed must not be impossible to fulfil.
2. It is not forbidden by law.
3. It should not be of such nature that if permitted, it would defeat provision of law.
4. It should not be fraudulent.
5. Condition should not be immoral or opposed to public policy.

Condition subsequent
 When property is immediately vested but can be destroyed or divested because of non-
fulfillment of condition it is called as subsequent condition.
 Example
A transfers a farm to B for his life with a proviso that in case B cuts down a certain
wood, the transfer shall cease to have any effect. B cuts down the wood. He loses his
life interest in the farm.
Condition Precedent Condition Subsequent
A condition precedent should happen before the A condition subsequent is one by the
estate commence. happening of which an existing estate
will be defeated.
The condition comes before the interest. The interest is created before the
condition.
Vesting on interest is postponed till the Vesting is immediately completed and
condition is performed. not postponed.

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Once the interest is vested it can never be Though the interest is vested it is
divested on the ground on non-fulfillment of the liable to be divested on the ground of
condition. non-fulfillment
Acquisition of an estate is affected by the Retention of estate is affected in the
condition precedent. condition subsequent.
In case of condition precedent, the transfer is In case of condition subsequent, the
void if the condition is: transfer is valid if the condition is:
1. Impossible of performance 1. Impossible of performance
2. Immoral and 2. Immoral and
3. Opposed to public policy. 3. Opposed to public policy.
The condition precedent must be valid in the The condition’s invalidity will be
eyes of law. ignored.
The condition precedent may be subsequently The condition subsequent must be
complied with. The doctrine of Cy-press applies. strictly complied with. The doctrine of
cy-press does not apply.

Doctrines of Transfer or Property

Doctrines of TOPA

Doctrine Doctrine of Doctrine of Doctrine of Doctrine of part Doctrine of

of Election holding out feeding the grant fraudulent performance lis pendes
be estoppel transfer

Doctrine of Election – Section 35

 This doctrine is based on the principle of equity.
 The principle of doctrine of election was explained in the leading case Cooper vs Cooper.
 Election here basically means “choice”
 The foundation of doctrine of election is that a person taking the benefit of an instrument
must also bear the burden, and he must not take under and against the same instrument.

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In other words, a person can’t accept part of agreement which is beneficial and reject
other part which is burdensome to him. He can either accept or reject the agreement.
 Person taking the benefit of instrument must also bear the burden.
 Example –
1. 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.
 Conditions necessary for the application of this doctrine:
1. The transferor must not be the owner of the property he transfers.
2. The transferor must transfer the property of other person to third person.
3. The transferor at the same time must grant some property of his own to the owner
of the property through the same instrument. If the transferor makes a gift of property
by one deed and by another asks the donee to part with his own property then there
is no question of election.
4. The two transfer i.e transfer of property of owner to transferee and transferee’s
property to third person must be in the same transaction. Doctrine of election won’t
arise if there are two separate transactions.
5. Election may be express or implied by conduct.
6. The doctrine of election is applicable if the benefit is given directly. A person taking
no benefit directly under a transaction but deriving a benefit under it indirectly need
not elect.

2. Doctrine of holding out- Section 41

 This doctrine is also known as transfer by ostensible owner.
 Where owner of property permits (expressly or impliedly) another person who is not owner
of property to hold himself as the owner of the property and third party to deal in good
faith with person so permitted such third party acquire good title as against true owner.
 Ostensible owner is not the real owner but one who can represent himself as the real
owner to the third parties for such dealings. Ostensible ownership means apparent

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ownership which is derived from conduct or words. Therefore, in this doctrine a transfer
can be made by a person even if he is not a real owner.
 This doctrine is an exception to the rule that a person cannot confer a better title than
what he has
 Conditions to be fulfilled for application of this doctrine:
1. Transferor is the ostensible owner.
2. He is ostensible owner by way of express or implied consent of true owner of property.
3. Transfer is for condition.
4. The transferee has acted in good faith taking reasonable care to ascertain that the
transferor had power to transfer
 Example –
1. A made a gift of property to B but continued in possession of the gifted property. He
purported to exercise a power of revocation and then transferred the property to the
defendant. The gift, however, was not revocable as it was an unconditional gift. B seeks
to recover possession from the defendant. The defendant invoked protection under Section
41. In the given example, the donor is not an “ostensible owner‟ holding the property
with the consent of the real owner. The defendant cannot, therefore, invoke the protection
of Section 41.
2. The manager of a joint Hindu family consisting of some minor members alienated the
ancestral house to P without any necessity and the alienee transferred it to the
defendants. The minors challenged the alienation. The defendants sought protection under
Section 41. Here Section 41 has no application for “P was not the ostensible owner of
the ancestral family house with the consent, express or, implied, of the persons interested
in the said ancestral house in as much as the plaintiff, who had an interest in the said
house, did not and could not by reason of the disability of infancy give their consent”.

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3. Doctrine of feeding the grant by estoppel-Section 43

 Where, a person fraudulently or erroneously represents that he is authorized to transfer
certain immovable property and professes to transfer such property for consideration, such
transfer shall, at the option of the transferee, operate on any interest which the transferor
may acquire in such property at any time during which the contract of transfer subsists.
 In other words, where person who purports to grant interest in property, which he did
not at the time posses but subsequently acquires, benefit of subsequent acquisition goes
automatically to earlier grantee. It is known as feeds estoppel.
 Example –
A, a Hindu, who has separated from his father B, sells to C three fields, X, Y and Z,
representing that A is authorized to transfer the same. Of these fields, Z does not belong
to A, it having been retained by B on the partition, but on Bs dying, A as heir obtains
Z. C, not having rescinded the contract of sale may require A to deliver Z to him.
 Conditions to be fulfilled to apply this doctrine:
1. There was fraudulent or erroneous presentation of ownership of transferor.
2. The transferee must have acted on the fraudulent or erroneous representation of the
transferor.
3. The transferor should not have transferable title on the property transferred.
4. The transfer should be for consideration.
5. The transferor must subsequently acquire title upon property transferred on the basis
of fraudulent or erroneous representation of ownership.
6. The transferee has not cancelled contract.
7. The transferee acted in good faith for consideration and without notice of the rights
under the prior transfer.
 In the following cases the doctrine is not applicable:
1. If the transfer is not for consideration.
2. If the transfer is invalid for being forbidden by law or contrary to public policy.
3. If the contract comes to an end before acquisition of property by the transferor.
4. This section is not applicable to court sales.
5. This right is not available against bona-fide purchasers for value without notice.

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4. Doctrine of lis pendes-Section 52

 Lis means dispute, Lis pendens means a pending suit, action, petition before the court.
 During the pendency of suit or petition before any court, property which is subject
matter of litigation can’t be transferred by any person, except with consent of court.
 If any party has transferred property under litigation in suit, transferee is bound by
judgment of court.
 Conditions to be fulfilled:
1. There must be a suit or proceeding in a court of competent jurisdiction.
2. The suit or proceeding should not be collusive.
3. The litigation must be one in which immovable property is directly and specifically in
question.
4. There must be transfer of or otherwise dealing with the property in dispute by any
party to litigation.
5. Such transfer must affect the rights of the other party that may ultimately accrue
under order or decree.
 Example:
A and B are litigating in a Court of law over property X and during the pendency of
the suit A transfers the property X to C. The suit ends in B‟s favor. Here C who
obtained the property during the time of litigation cannot claim the property. He is
bound by the decree of the Court wherein B has been given the property.
 Doctrine of lis pendes is not applicable when the property has been transferred by
stranger (i.e a person who is not party to litigation)

5. Doctrine of fraudulent transfer – Section 53

 Where a person transfers his property so that his creditors shall not have anything out
of the property, the transfer is called a fraudulent transfer. A debtor in order to defeat
or delay the rights of a creditor may transfer his property to some person, who may be
his relative or a friend.
 When debtor transfers immovable property with intent to defeat or delay his creditors,
transfer of property shall be voidable at option of any creditor so defeated or delayed.
 This doctrine is basically made to discourage fraudulent transfer of property.

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 This doctrine gives right to defraud creditor to challenge transfer of property in court
and get order from court that transfer is invalid.
 Conditions essential for this doctrine:
1. Creditor needs to prove fraudulent intention on part of debtor. If he can’t prove
fraudulent intention, transfer of property will be valid.
2. Transfer of property is valid if it is not challenged by defeated creditor before court.
3. Preference of one creditor over another is not fraudulent as per provision of any act.
 Example –
Chirag takes loan from Vikas and fail to pay the loan. Vikas sues him court to get back
his debt. Aman knows that his property will be applied by court for repayement of his
loan. Meantime he transfers his property to his friend Harish who simply holds the
property on behalf of the transferor. Here the property is transferred with a fraudulent
intention.

6. Doctrine of Part performance – Section 53A

 Transferor cannot take back the property only on the ground of non-registration of
documents, if the transferee has performed his part of the contract and has also take
possession of the property or part of it.
 Doctrine basically prohibits transferor from taking back property.
 Conditions necessary to apply the doctrine:
1. There must be a contract to transfer immovable property.
2. It must be for consideration.
3. The contract should be in writing and signed by the transferor himself or on his
behalf.
4. The terms necessary to constitute the transfer must be ascertainable with reasonable
certainty from the contract itself.
5. The transferee should have taken the possession of the property in part performance
of the contract. In case he is already in possession, he must have continued in
possession in part performance of the contract and must have done something in
furtherance of the contract.

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6. The transferee must have fulfilled or be ready to fulfill his part of the obligation
under the contract.

Provisions relating to specific transfer

Specific Transfer

Sale Exchange Gift Lease License Actionable claim Mortgage Charge

Sale –Section 54
 Sale means the transfer of ownership in consideration of price. Price is paid or promised
to be paid.
 Essentials
1. The subject matter is transferable property.
2. There must be two parties (i.e. seller and buyer)
3. The seller and the buyer must have capacity to enter into a contract.
4. There must be monetary consideration.
5. The property must be transferred absolutely.
6. Stamp duty and other compliances should be done.
 Mode of transfer of sale
Sale of an immovable property can be effected,
(a) Where such property is tangible
(i) By a registered instrument if it is of the value of Rs. 100 and upwards, and
(ii) By a registered instrument or by delivery of property when it is less than Rs.100
in value, and
(b) Where the property is tangible or a reversion, only by a registered instrument.

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Exchange – Section 118 – 121

 When two persons mutually transfer the ownership of one thing for the ownership of
another, neither thing nor both things being money only, the transaction is called an
"exchange".
 Essentials:
1. The person making the exchange must be competent to contract.
2. There must be mutual consent.
3. There is a mutual transfer of ownership though things and interests may not be
identical.
4. Neither party must have paid money only.
 Mode of exchange
1. An exchange can be possible for movable as well as immovable property.
2. An exchange is governed by provision of Transfer of Property Act.
3. An exchange of movable property is called barter and it is governed by the provision
of Indian Contract Act.

Gift – Section 122 – 128

 According to Section 122,
“Gift” is the transfer of certain existing moveable 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. Acceptance when to be made.—such acceptance must
be made during the lifetime of the donor and while he is still capable of giving. If the donee
dies before acceptance, the gift is void.
In simple words,
 Gift means the transfer of certain existing movable or immovable property made
voluntarily and without consideration, by one person to another.
 Person who transfers is known as donor.
 Person in whose favor property is transferred is known as donee.
Essentials
 There must be a transfer of ownership from donor to donee.
 The subject matter of gift must be a certain existing moveable or immovable property.

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 The transfer must be made voluntarily and without consideration.

 There must be acceptance by or on behalf of the donee, and such acceptance must be
made during the lifetime of the donor and while he is capable of giving.
Method
A gift of immovable property must effect by:
 A registered instrument signed by or on behalf of the donor.
 And attested by at least two witnesses.

In the event of gift of movable property, it may be effected by:

 Either by a registered instrument signed and attested as above or
 By delivery of the property, such delivery may be made in the same way as goods sold
may be delivered.

Lease-Section 105
According to Section 105
A lease of immovable property is a transfer of a right to enjoy such property, made for a
certain time, express or implied, or in perpetuity, in consideration of a price 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.
In simple words,
 Transfer of a right to enjoy an immovable property.
 It is for a specified time or for perpetuity.
 It is made for consideration which is either premium or rent or both.
 Transfer must be accepted by transferee.
 The person who transfers right in property is known as lessor.
 The person in whose favor right in property is transferred is known as lessee.
 Duties of the lessor
Following are some of the duties of the lessor: -

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1. The lessor is bound to disclose to the lessee any material physical defect in the property.
2. The lessor is to put the lessee in possession of the property.
3. It is the duty of the lessor to let the lessee enjoy the property continuously till he pays
the rent.
 Duties of the lessee:
The lessee has the following duties: -

1. The lessee is bound to disclose to the lessor nature or extent of the interest that lessee
will take.
2. The lessee is bound to pay the premium or rent to the lessor timely.
3. He should use the property as a person of ordinary prudence would make use of. But he
shall not permit another person to use the property for purposes other than that for
which it was leased.
4. He should not do any act which is destructive of or permanently injurious to the property.
5. The lessee must not, without the lessor's consent, erect on the property any permanent
structure except for agricultural purpose.
6. Before the termination of the lease, he can remove all the things attached to the earth.
7. If permanent fixtures are to be made, the lessee must obtain the consent of the landlord.
8. The lessee should hand over the property at the end of the lease.
 Rights of the lessee:
The lessee enjoys the following rights: -

1. The lessee has a right to enjoy the accretions of the leased property.
2. The lessee has right to deduct the expenses of repairs incurred by him on behalf of
landlord
from the rent if the contract permits so.
3. The lessee has right to deduct municipal expenses and interest incurred by him on
behalf of
landlord from the rent.
4. The lessee has a right to remove the fixtures he has erected during the term of the
lease.
5. The lessee may avoid the lease, if property is wholly or partly destroyed by tempest,
flood, or fire.

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6. The lessee has right to transfer absolutely or by way of mortgage or sub-lease, the
whole or
any part of his interest in the property.
License
License means right granted in respect of immovable property to do or to come on land and
use it in some way or other while it remains in the possession and control of owner.
Subject Matter Lease License
Transfer Lease involves transfer of interest. License does not transfer any
interest in property.
Possession Lessee gets the exclusive possession of License gets the right to use
the property for specified period. the property for specified
period.
Assignment Lease can be assigned or transferred. License can’t be assigned or
transferred being personal
right.

Actionable Claims – Section 130-137

 "Actionable claim" is defined in Section 3 of the Transfer of Property Act as follows:
A claim to any debt, other than a debt secured by mortgage of immovable property or
by hypothecation or pledge of moveable property, or to any beneficial interest in
moveable 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.
 In simple words,
Actionable claim means a claim to unsecured debt. Here debt not secured by mortgage
of immovable property or by pledge of immovable property.
 Examples of actionable claim
1. Arrears of rent
2. Provident fund amount standing to credit of member’s provident fund account
3. Money due from insurance policy
4. Claim for rent to fall due in future

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 Examples of non-actionable claim

1 Secured debenture
2 A claim which is decreed.
3 Copy right though a beneficial interest in immovable property is not an actionable
claim since the owner has actual or constructive possession of the same
4 “Right to sue” though it is a right but not an actionable claim.

Mortgages- Section 58-104

 Meaning
Mortgage is the transfer of an interest in a specific immovable property for the purpose
of securing payment of money advanced or be advanced by way of loan or performance
of an engagement which may give rise to pecuniary liability .
 Essentials of Mortgage
1. There must be transfer of interest in immovable property.
2. Property must be specified.
3. Transfer is for purpose of securing payment of loan or debt.

Types of Mortgage

Types of Mortgages

Simple Usufructuary English Anomalmou

Mortgage Mortgage mortgage mortgage Mortgage by s mortgage Puisne
by deposit of mortgage
conditional title deed
sale

1. 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

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be necessary, in payment of the mortgage-money, the transaction is called a simple

mortgage and the mortgagee a simple mortgagee.
In simple words,
 The mortgagor takes personal liability for repayment.
 The mortgaged property is not required to be delivered to the mortgagee.
 On mortgagor’s default in making payment mortgagee is entitled to cause mortgaged
property to be sold after obtaining decree from the court.
 There is no foreclosure (the action of taking possession of a mortgaged property when
the mortgagor fails to keep up their mortgage payments.) of the property.
 There is no transfer of ownership.

2. Mortgage by conditional sale – Section 58 (c)

Where, the mortgagor ostensibly sells the mortgaged property— on condition that on default
of payment of the mortgage-money on a certain date the sale shall become absolute, or on
condition that on such payment being made the sale shall become void, or on condition that
on such payment being made the buyer shall transfer the property to the seller, the transaction
is called mortgage by conditional sale and the mortgagee a mortgagee by conditional sale:
[Provided that no such transaction shall be deemed to be a mortgage, unless the condition is
embodied in the document which effects or purports to effect the sale]
In simple words,
 The mortgagor ostensibly (apparently) sells the mortgaged property to the mortgagee.
 The sale becomes void if the loan is repaid.
 The sale becomes absolute and binding if the loan is not repaid at a specific time.
 The mortgaged property is re-transferred to the mortgagor if the loan or debt is paid
within the specified time.
 The possession of the property is transferred here.
 The remedy to the mortgagee here is by foreclosure and not by way of sale.

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3. Usufructuary mortgage – Section 58 (d)

Where the mortgagor delivers possession 1[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 2[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 3[or] partly in
payment of the mortgage-money, the transaction is called an usufructuary mortgage and the
mortgagee an usufructuary mortgagee.
In simple words,
 Possession of property must be delivered to the mortgagee.
 There is no personal liability on the part of the mortgagor to pay.
 The mortgagee is entitled to rents and profits in lieu of interest or principal or both.
(The profit of the property is appropriated by the mortgagee towards discharge or
principal or interest.
 The mortgagee however is not entitled to foreclose the mortgagee or to sue for sale.
 It is also called mortgage with possession.

4. English Mortgage – Section 58(e)

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.
In simple words,
 The mortgaged property is transferred absolutely by the mortgagor to the mortgagee.
 There is a personal undertaking to pay the amount.
 There is an absolute transfer of property with a provision of retransfer of property in
case of amount due.
 The remedy to the mortgagee is by way of sale and not by way of foreclosure.

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5. Mortgage by deposit of title deed – Section 58 (f)

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.
In simple words,
 It is also called equitable mortgage.
 It is created in specific towns by deposit of title deeds even though the property is
situated outside those towns.
 It is affected by material title deeds.
 Delivery of possession of property does not take place.
 This mortgage is made to secure a debt or advances or to cover future advances.
 Registration is not necessary even if there is a writing recording deposit under Section
59.
 This mortgage prevails against a subsequent transferee who takes under a registered
instrument.
 This mortgage prevails against all who are not bona fide purchasers for value without
notice.

6. Anomalous Mortgage – Section 58(g)

A mortgage which is not a simple mortgage, a mortgage by conditional sale, an usufructuary
mortgage, an English mortgage or a mortgage by deposit of title-deeds within the meaning of
this section is called an anomalous mortgage
In simple words,
 A mortgage which does not belong to any of above categories is known as anomalous
mortgage.
 It is a combination of two or more mortgages.
 Possession may or may not be delivered.
 The remedy may be by foreclosure or by sale depending on the term of agreement.

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7. 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 `one lakh to B for `40,000 and
mortgages the same house to C for a further sum of `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 `40,000 plus interest

8. Sub-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.

Rights related to mortgaged property

1. Right of redemption
 Mortgagor has the right to redeem property provided as security.
 Redemption means to take back the mortgaged property by paying the mortgage money
at any time after stipulated date for repayment.
 According to Section 60 of Transfer of Property Act, any time after the principle amount
become due, the mortgagor has a right to redeem the property.
 Mortgagor can exercise this right:
(i) Before the right is extinguished by the Act of parties or by a decree of Court, or
(ii) Before it is barred by the Limitation Act
 According to Limitation Act, mortgagor can redeem the property within 60 years after
the money has become due.
 This right to redeem the property even after the time of payment has elapsed is called
the Right of Equity or Redemption. But the mortgagor is not entitled to redeem before
the mortgage money becomes due on the date fixed for repayment of the loan. His
right to redeem arises only when mortgage money becomes due and not before.

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 Example –
Chirag borrows money on a mortgage and agree to pay back after 10 years. Chirag has
obtained gift of money from his relative at end of 5th year from date on which he
borrowed money. Now, Chirag wants to pay the loan and redeem his property. He can’t
do so, because the right to redeem arises only when the money has become due at the
end of 10 years.

2. Doctrine on clog of equity redemption

 Mortgagor has right to redemption by virtue of mortgage deed.
 This right is considered to be inalienable and cannot be taken away from a mortgagor
by any means of any contract to its contrary.
 Redemption means the act of the vendor of property in buying it back again from the
purchaser at the same or an enhanced price.
 According to Section 60 of Transfer of Property Act, 1882 mortgagor can get his property
back from the mortgagee on the paying the amount borrowed from him.
 Clog on a right means the insertion of any clause or any provision under the mortgaged
deed which would alienate mortgagor of his property under certain circumstances.
 Any such provision would not be able to alienate the mortgagor of his ‘right to
redemption’ and such provision is void-ab-initio.
 Right to redemption shall remain effective unless the property is sold off under any
statutory provision.
 Even if mortgagee has went to the court for the foreclosure of the property mortgaged,
mortgagor can redeem his property by paying off the full amount in the court.

3. Doctrine of marshalling
 If the owner of two or more properties mortgaged them to one person and then
mortgages one or more of the properties to another person, the subsequent mortgagee
in absence of contact to the contrary, entitled to have the prior mortgage-debt satisfied
out of the property or properties not mortgaged to him, so far as the same will extend,
but not so as to prejudice the right of the prior mortgage. This is doctrine of marshalling.

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Implied contract by mortgagor:

 The parties are free to enter into any terms they like. Where, however, the contract
does not contain all the terms, Section 65 provides for implied terms as follows: In the
absence of a contract to the contrary, the mortgagor shall be deemed to have contracted
with the mortgagee that the:
(a) Mortgagor is entitled to transfer the interest (covenant for title);
(b) Mortgagor will assist the mortgagee to enjoy quiet possession;
(c) Mortgagor will pay public charges in respect of the mortgaged property;
(d) Mortgagor covenants as to payment of the rent due on lease where, the mortgaged
property is leased;
(e) Mortgagor covenants as to payment of interest and principal on prior encumbrances,
where the mortgage is a second or subsequent encumbrance on the property.

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.

Charge – Section 100

Meaning
 Where immovable property of one person is by the act of parties or by operation of law
made security for repayment of money of other and transaction is not mortgage it is
called charge.
 All provisions that are applicable to simple mortgage shall be applicable to such charge.

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Creation of charge
 Charge by act of parties:
When in a transaction for value, both the parties (debtor and creditor) intend that the
property existing or future shall be made available as security for the payment of a debt
and that the creditor shall have a present right to have it made available, there is a
charge.
 Charge by Operation of Law:
Charges created by law are those which arise on account of some statutory provisions.
They are not created by the voluntary action of parties but arise as a result of some
legal obligation.

Types of charge
(i) Fixed charge
 A fixed charge is a charge created on a specified property.
 Example – Charge created on office building situated in particular area.
 A fixed charge cannot be converted into floating charge.
(ii) Floating charge
 When charge not created on a specified property but a class of property it is known as
floating charge.
 It is charge on class of assets both present and future. The assets of the company are
constantly undergoing a change but the creditors will not normally interfere with the
assets of the company unless there is breach of some condition.
 Example – Charge created on the plant and machinery of the factory.
 Floating charge can be converted into fixed charge.

CRYSTALLIZATION OF CHARGE
 Conversion of floating charge into fixed charge is known as crystallization.
 Floating charge is converted into fixed charge in following situations:
1) When person ceases to carry on business.
2) When person or company is being wound up.
3) When any event in charge deed or agreement creating charge has taken place.

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4) When charge is created in favor of debenture holders and they take some steps to
enforce their security.

Matter Charge Mortgage

Transfer It is not transfer of any interest in It is transfer of interest in property.
any property.
Creation Charge is created by act of parties Mortgage is created by act of parties.
or operation of law.
Registration Charge created by operation of law Mortgage deed is required to be
is not required to be registered. registered and attested by two
witnesses.
Right of Charge holder can’t foreclose. Mortgagor can foreclose mortgaged
foreclosure property in certain types of mortgages.
Right in rem In charge, no right of rem is In mortgage, right in rem is created.
created.
Effect on Charge is good only against A mortgage is good against
subsequent subsequent transferee with notice subsequent transferees and may be
transfer enforced against a bona fide purchaser
for value with or without notice.
Liability In a charge created by act of In a mortgage, there can be security
parties the specification of the as well as personal liability. In fact,
particular fund or property the absence of a personal liability is
negatives a personal liability and the principal test that distinguishes a
the remedy of the charge-holder is charge from a simple mortgage.
against the property only.

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