Q1. What is sale of immovable property?

(meaning, essential, rights and

liabilities of buyer and seller) Explain with case laws.

Introduction

In common parlance, a ―sale‖ is a transaction wherein one person purchases

some article from another in exchange for some consideration. However, when
it comes to the law, a sale has several facets. The law categorises the subject
matter of the sale into moveable and immoveable properties. At present, when
it comes to property laws, there are no laws that exhaustively deal with them.
For instance, the Sale of Goods Act, 1930, generally covers the sale of moveable
properties. However, it excludes ―money‖ and ‖actionable claims‖ from its
scope, even though they are considered moveable properties, according
to Section 2(7) of the Act. Similarly, in the Transfer of Property Act, 1882 (here-
in-after also referred to as ―TPA‖), the general rules of transfer provided
in Chapter II and the modes of transfer under Chapters
VI (exchanges), VII (gifts), and VIII (actionable claims) of the Act apply to both
moveable and immoveable properties. However, when it comes to the specific
modes of transfer, such as sale, mortgage, and lease, TPA only deals with
immoveable properties.

Before moving further, we must understand the kinds of transfers this Act
deals with. Though it encompasses many types of transfers, such as mortgage,
lease, exchange, gift, and actionable claims, it must be noted that the scope of
this Act is not exhaustive. It applies only to certain kinds of transfers.

 As provided under Section 2(d) of the TPA, it governs only those

transfers which take place by the ‗act of parties‘ and not by the
‗operation of law‘ except in cases of Section 57 (discharge of
encumbrances on sale)
or Chapter IV (mortgage of immoveable property and charges). This
simply means that TPA is not applicable for transfers due to insolvency,
forfeiture, succession or execution.

 Section 5 of the TPA further explains that the transfer must be an act of
‗living parties‘. Thus, it can be said that this Act only deals with
transfers inter vivos (between the living).

Now that we have a clear understanding of the applicability of this Act, we can
deduce that a sale under TPA is also a transaction between living parties
dealing with immoveable property. The provisions of sale under TPA range from
Sections 54 – 57 which deal with the definition, modes of transfer, registration,
rights and liabilities of buyer and seller, and other aspects relating to
marshalling and encumbrances.

Let‘s take a look at the said provisions.

Meaning and Definition of sale

Section 54 of the Transfer of Property Act, 1882, defines ―sale‖ as the transfer
of ownership in exchange for a price. The term ―price‖ is to be interpreted as a
price in terms of money and not otherwise. If the transfer involves any other
kind of consideration, it is not a sale. Further, the Section also provides that
the price need not be paid simultaneously with the transfer. The price may
either be paid in full or partially, or partly paid and partly promised. The
transfer will be deemed complete in all three cases. Thus, what is relevant is
not the immediate payment but the reference as to when and how the payment
is to be made.
The subject matter of the sale under the said Act is immoveable properties.
Section 54 includes immoveable properties, both tangible and intangible. The
tangible properties are those that are visible, such as lands, houses, etc. The
intangible properties are those that do not have a physical existence, such as
copyrights, trade secrets, the right to ferries or fisheries, or a right to mortgage
debt, etc. This Section provides two specific methods for how a sale can be
made and executed. According to this Section, a sale can be completed by a
―registered instrument‖ in cases of

 Transfer of tangible immoveable property of the value of Rs. 100 or

upwards;

 Transfer due to reversion; or,

 Transfer of intangible immoveable property.

In other cases, such as the transfer of tangible immoveable property of a value

less than Rs 100, a sale can be made either by a ―registered instrument‖ or by
―delivery of property‖. According to this Section, when the seller hands over the
possession to the buyer or the person he specifies, delivery of the property is
deemed to have occurred.

- Contract for sale

Section 54 further incorporates the concept of ―contract for sale.‖ It is an

agreement between the parties that a sale will be effectuated in the future by
executing a sale deed on mutually settled terms.

In English law, such a contract transfers an equitable estate in favour of the

purchaser. However, under Indian law, a contract for sale does not transfer any
title, nor does it create a charge or interest on the property. It is merely a
promise to create a right to obtain another document, i.e., a deed of
sale. Therefore, it does not require registration, as held in the case of Dave
Ramshankar Jivatram v. Bai Kailasgauri (1972). The Gujarat High Court in this
case also held that it is not enforceable in any court of law. For instance, A
agreed to sell the property to B, but they did not execute any documents. Later
on, A sold the property to C. In this case, B cannot approach the court to
enforce his right to specific performance.

However, as the courts in India developed from the common law approach to
equity courts in contractual matters, this difference has become insignificant to
a great extent. Various judgements have laid down that if an overt act, such as
payment of advance money, delivery of possession, or any similar act, has been
done in pursuance of the agreement, the transferee becomes entitled to obtain
relief from the courts. For instance, in Kodapalli Satyanarayan v. Kondapalli
Mavullu (1998), the Andhra High Court observed that if a property has been
transferred to someone other than the prior agreement holder and the
subsequent transferee has notice of the earlier transaction, then he will be
deemed to hold that property in trust for the former party.

Similarly, in Ramesh Chand Ardawatiya v. Anil Panjwani (2003), the defendant

agreed to sell his piece of land to the plaintiff. He also puts the plaintiff in
possession of the property for an advance payment. The plaintiff constructed a
boundary wall on that property. A trespasser tries to encroach upon the land at
the behest of the defendant. The plaintiff sought a declaration from the Court
that he was rightfully in peaceful possession of the property and sought a
permanent injunction to restrain the trespassers from interfering with his
possession. The Court granted the relief and held that the plaintiff is entitled to
protect his possession and that A should refrain from taking the law into his
hands and instead assert his title through due process of law.

The Court also observed, “if a person who entered into possession under a
contract for sale and is in peaceful and settled possession of the property with
the consent of the owner, he is entitled to protect his possession against the
whole world, except the true owner.” However, if he is in possession of the
property in part performance of the contract for sale and the requirements
of Section 53A are satisfied, he may protect his possession even against the true
owner.”

Essentials

- Parties to sale

In every sale, there are always two parties. The person who transfers the
property is known as the ―seller,‖ and the person who receives such property in
exchange for monetary consideration paid by him is known as the ―buyer.‖ They
both must be competent in the eyes of the law to effectuate a valid sale deed.

- Competency of a seller

Section 7 of the Act deals with the persons who are competent to transfer.
According to this Section, a transfer will be valid only if the transferor (the
person who is transferring the property) fulfils the following conditions:

 He must be competent to enter into a contract.

This part of the Section is pari materia (on the same subject matter)
with Section 11 of the Indian Contract Act, 1872, which deals with competency
to enter into a contract. It states that to make a valid contract, a person must
have reached the age of majority, must be of sound mind and must not be
disqualified by any law from contracting

 He must be entitled to the transferable property at the time of the sale

i.e., he holds the legal title to dispose of the property; or,

 He must be legally authorised to dispose of such property.

For instance, a Karta is empowered to sell the property of a Hindu Undivided

Family (HUF) only in cases of legal necessity, pious purpose, or in favour of the
female members of the family. Likewise, a guardian of a minor is authorised to
sell the property of the minor only with the permission of the court and not
otherwise. Similar observations have been made by the Supreme Court in the
case of Lakhwinder Singh v. Miss Paramjit Kaur (2003), wherein it observed that
if a sale deed has been executed by a person having a general power of attorney
over the property without the permission of the Court, such a sale deed will not
be valid in the eyes of the law. The case of Smt M Bhagyamma v. Bangalore
Development Authority (2012) further extended the scope and held that if a
power of attorney authorises the agent to transfer the property, then he will be
deemed to be a competent seller.

- Competency of a buyer

Generally, every person is competent to be a buyer, provided they are not

disqualified from purchasing any property under any law that is in force in
India. Besides that fact, even a minor can be a buyer, provided that the transfer
is made by his guardian. It is based on the principle that a minor is entitled to
retain assets and be exempt from liabilities. It was observed by the Allahabad
High Court, in the case of Ulfat Rai v. Gauri Shankar (1911), that a sale to a
minor by the guardian, which has been duly executed in exchange for a duly
paid consideration, is valid.

In a nutshell, the essentials of a sale can be summarised in the following

points:

 The sale must be between living persons. ―Living persons‖ includes a

company or associations or body of individuals, whether incorporated or
not;

 The subject matter of sale must be an immoveable property;

 There should be at least two parties to a sale i.e., a seller and a buyer;

 They must be competent to enter into a contract;

 They must hold a legal title to the transferable property at the time of the
sale or must be legally authorised to dispose of the property;

 There should be an absolute transfer of ownership in favour of the

buyer;

 The consideration must be in the form of money/price. It can be either

paid at the time of the transfer or as per the time or conditions mutually
settled by the parties;

 The sale deed must be registered if it is a tangible immoveable property

valuing one hundred rupees or more;

 A sale deed must be registered if the sale involves a transfer of intangible

immoveable property or a transfer due to reversion;

 In cases of a tangible immoveable property valuing less than Rs 100, the

sale can be made either by a registered instrument or delivery of
property.

Rights and liabilities of buyer and seller

Every property transaction create certain rights and liabilities for the
contracting parties. In the case of a sale, the contracting parties, a buyer and a
seller, are also vested with some rights and liabilities. Generally, the parties
themselves expressly agree as to which rights and liabilities they will subject
themselves to. These are mostly mentioned in a sale deed. However, the Act
does not leave it entirely up to the parties. Section 55 lays down a detailed
description of every right and liability in the absence of a contract to the
contrary. For convenience, the rights and liabilities of the buyer and seller can
be categorised into the rights and liabilities before and after the completion of
the sale.

- Liabilities and rights of the seller and the buyer before completion of sale

Liabilities of a seller

 Disclosure of material defects (Section 55(1)(a)): A seller is bound to

disclose any latent material defect in the property or his title in his
knowledge. A material defect is of such a nature that if it was known to
the buyer, his intention to enter into a sale might deviate [Flight v Booth
(1834)]. It is a latent defect because it cannot be discovered by the buyer
even after ordinary care and inquiry.
  Production of title deeds for inspection (Section 55(1)(b)): A seller is
bound to produce all the title documents relating to the property at the
request of the buyer for his inspection.

 Answer relevant questions regarding his title or the property (Section

55(1)(c)): The seller must answer every relevant question put to him by
the buyer relating to his title or the property. The answer must be to the
best of his information.

 Execute a proper conveyance of the property (Section 55(1)(d)):

Conveyance means an act of transferring a property. It can be done by
signing or affixing a thumb impression on the sale deed by the seller. A
seller is bound to execute a proper conveyance only on the payment of
the consideration by the buyer. This clause imposes reciprocal duties on
both the buyer and the seller. The clause also provides that the execution
must be at a proper time and place.

 Take reasonable care of the property and title deed (Section 55(1)(e)):
The seller is bound to take care of the property and title deed in the same
manner as an owner of ordinary prudence would do. This duty is to be
exercised till the delivery of the property to the buyer.

 Pay all the charges (Section 55(1)(g)): A seller is bound to pay all the
rent and public charges of the property, with interest if any, due till the
completion of the sale except if the buyer purchased the property with all
the encumbrances.

Rights of a seller

 Right to take rents and profits (Section 55(4)(a)): A seller is entitled to

collect rents and profits from the property until the ownership is
transferred to the buyer.

- Liabilities of a buyer

 Disclosure of all the facts known to the buyer that materially

increase the value of the property (Section 55(5)(a)): The buyer is under
obligation to confide to the seller any fact to which he has reason to
believe is not known to the seller relating to the increase in the property‘s
value. If he fails to do so, it will be considered fraud, and the seller can
avoid the sale if it is proven.

In the English case of Summers v. Griffiths (1866), an old lady contracted to sell
a property at a much lower price, believing that her rights in the property were
not absolute. The buyer was aware that the lady‘s interest in the property was
perfect and absolute, but he did not disclose it to the lady. He was held liable
for fraud, and the sale was set aside.

 Pay the price in accordance with the contract (Section 55(5)(b)): The
buyer must pay the purchase money at the time of completion of the sale
to the seller or any person as directed by the seller. If there are any
encumbrances existing on the property at the time of sale, the buyer is
free to deduce such amount from the consideration he has to pay. It is in
correspondence with the duty of the seller to execute a proper
conveyance.

Right of a buyer

 Refund of money paid on proper denial to accept delivery (Section

55(6)(b)): The buyer is entitled to receive the amount of any purchase
 money with interest properly paid by him to the seller in anticipation of
delivery. The buyer is also entitled to get a refund of any earnest money
paid by him or the cost awarded to him in a suit to compel the specific
performance of a contract or to obtain a decree for its rescission.

- Liabilities and rights of the seller and the buyer after completion of the sale

Liabilities of a seller

 To give possession (Section 55(1)(f)): The seller is bound to put the buyer
or person as directed by the buyer in possession of the property on being
so required. This clause uses the words- ―…such possession of the
property as its nature admits.‖ It refers to the nature of possession. For
instance, in the case of tangible immoveable property, physical control is
to be given over property. In the case of intangible immoveable property,
the possession is symbolic.

 Implied liability (Section 55(2)) – The seller must undertake impliedly

that he holds the perfect title to the property and is transferring the same
free from any encumbrance. The rights or interest created by the sale
shall vest with the transferee and may be enforced by every person in
whom that right or interest is for the whole or any part thereof from time
to time is vested.

 To deliver title deeds on receipt of price (Section 55(3)): The seller is

bound to hand over all the documents relating to the title of the property
to the buyer on payment of the whole of the purchase money. Proviso (a)
to Section 55(3) states that if a seller retains any part of the property
comprised in the documents, he is entitled to keep the documents as
well. Proviso (b) also imposes the same duty on the buyer of the greatest
value when the property is sold to different buyers. However, in both
cases, such a person must furnish such documents and their true copies
to other buyers at their request. They are also under an obligation to
keep the documents safe unless prevented from doing so by fire or other
inevitable accidents.

Right of a seller

 Charges upon the property for the unpaid price (Section 55(4)(b)):
Where the ownership has been transferred to the buyer before payment of
the whole consideration amount, the seller becomes entitled to a charge
upon the property which is in the hands of the buyer or any transferee
without consideration or any transferee with notice of non-payment. The
charge will be for the amount of the purchase money or the part
remaining unpaid or for the interest on such amount or part from the
date on which possession has been delivered.

Liabilities of a buyer

 To bear loss to the property (Section 55(5)(c)): After the completion of

the sale, the ownership is completely transferred to the buyer. From that
date, if any damage, destruction or decrease in value occurs in the
property, the buyer will be bound to bear such losses.

 To pay the outgoings. (Section 55(5)(d)): The buyer is liable to pay all the
public charges or rent accruing after the completion of the sale or as
agreed by the terms settled in the sale deed.

Rights of a buyer
  Benefit of the increment. (Section 55(6)(a)): Any benefit arising from
improvement or increase in value of the property or the rents and profits
after completion of the sale shall vest with the buyer.

- Marshalling by subsequent purchaser

Section 56 of the Act deals with marshalling. The situation of marshalling

arises when a debt has to be satisfied and two or more properties are available.
The rule of marshalling suggests that where the owner of two or more
properties mortgages them to one person and sells one or more of the properties
to another person, the buyer of the property is entitled to make an arrangement
with the mortgagee to satisfy his debt out of those properties that are not sold
to him.

This Section is based on the principles of equity. It insists that when a buyer
purchases some property, its absolute interest must be protected. In Brahm
Parkash v. Manbir Singh (1963), the Supreme Court held that under Section 56,
a subsequent purchaser has a right to claim marshalling. This Section also
provides that such marshalling shall not affect the rights of the mortgagee,
persons claiming under him, or any other person who has acquired any interest
in the property for consideration.

Encumbrances and court sale

Generally, a sale needs to be free of any kind of lien, charge, or obligation.

However, there may be instances in which a property with encumbrances has
been sold. Section 57 of the Act caters to such a situation. This Section covers
both the sales made by the court or in the execution of a decree and those
made outside the court. It offers a legal procedure to obtain a declaration from
the court that the property is free from any kind of encumbrance.

Section 57(a) provides that any party to the sale may apply to the Court to
obtain this relief. If the court thinks fit, it may direct or allow the applicant to
deposit in court, for the encumbrancer (who has the charge over the
property), a capitalised value of the periodic charge or a capital sum charged
on the property, together with incidental charges, sufficient to satisfy the
charges or any interest thereon. The court shall also order the deposit of any
additional amount that it considers sufficient for meeting any further costs,
expenses, interest, or any other contingency, but it shall not exceed one-tenth
of the original amount unless otherwise directed by the court.

Section 57(b) states that the court may serve notice on the encumbrancer after
the payment has been made. The court can also dispense with such notice after
recording its reasons. In addition to that, the court may also declare the
property to be free from any encumbrances and proceed to issue an order of
conveyance, or vesting order, proper for giving effect to the sale.
Further, Section 57(c) deals with the order of transfer and distribution of the
deposit to the encumbrancer.

It is also provided that an appeal is allowed from any declaration, order, or

direction made in accordance with this Section, just as if it were a
decree. (Section 57(d)).

Under this Section, the jurisdiction is vested in either of the following Courts,
as provided in Section 57(e):

1. A High Court in the exercise of its ordinary or extraordinary original civil

jurisdiction;
 2. A District Court within the local limits of whose jurisdiction the property
or any part thereof is situated; or,

3. Any other Court notified by the State Government in the official gazette
from time to time.

Recently, the Kerala High Court, in M.P. Varghese v. Annamma Yacob (2020),
elaborated in great depth on Section 57. The Court discussed the aims and
objectives of this Section as well as thoroughly explained its procedural
mechanism. In this case, the property was divided among the siblings through
a partition deed with a clause stating that the brothers must pay Rs. 500 each
to their sister within a year. If they fail to do so, the sister will acquire a charge
over the property. The brother, who is the appellant in this case, entered into a
contract of sale with someone. He contends that the respondent, in this case,
the sister, is refusing to accept the payment because of which the property is
burdened with the charge, and consequently he is not able to execute the sale
deed. The respondent failed to show any reasonable cause for refusal of
payment apart from personal reasons. The Court noted that the amount of Rs.
500 alone stands charged on the property as a capital sum, and the appellant
has no further obligation whatsoever. Thus, it was held that the appellant is
entitled to a declaration under Section 57.

- Rescission of a contract of sale

To rescind a contract means to do away with it. Rescission is an equitable

remedy that allows the contracting parties to cancel the contract and return to
the position they would have had if the contract had not been made. A sale
transaction is similar to a contract. It can also be rescinded by the parties in
the same manner as other contracts.

Rescission of a contract is governed under Sections 27-30 of the Specific Relief

Act, 1963. Section 27(1) of this Act provides the ground of rescission, which can
be claimed by any person interested in the contract. These grounds are
mentioned as follows:

1. Where the contract is voidable or terminable by the plaintiff;

The contract becomes voidable when the plaintiff‘s consent to enter into a
contract has been obtained through coercion, fraud, misrepresentation, or
undue influence. This has been provided under Section 19 and Section 19A of
the Indian Contract Act, 1872. Section 55 of the TPA also contemplates a
similar situation. It states that when the buyer or seller, as the case may be,
omits to disclose any material fact to the detriment of the other, such omission
will be considered fraudulent. Thus, rescission in such cases can also be
claimed by the aggrieved party.

2. Where the contract is unlawful for causes not apparent but the defendant
is to be blamed more

The Specific Relief Act, 1963, also contemplates one other ground for rescission
under Section 28(1) of the Act. This rescission is a result of non-compliance
with the court‘s order to pay the purchase amount within a stipulated time in a
suit of specific performance. It states that when the order of specific
performance has been decreed against the seller and the purchaser is directed
to pay the amount within a time fixed by the court and he fails to do so, the
seller may apply in the same suit to have the contract rescinded.
Apart from the aforementioned grounds, the Indian Contract Act, 1872, also
provided some more grounds on which the rescission of a contract can be
claimed. These provisions are mentioned in the following points:

 Under Section 39, if a party to a contract refuses to perform the promise

or disables himself from performing the promise in its entirety, the other
party is at liberty to put an end to such a contract.

 Section 53 states that if a party to a contract prevents another party from

performing his part of the promise, the contract becomes voidable at the
option of the party so prevented.

 Section 55 mentions that time is the essence of the contract and if the
party fails to perform his promise in a specified time, the aggrieved
party can claim to put an end to such contract.

- Effects of rescission

The rescission renders the contract null and void and aims to put the parties
back to their status quo ante, i.e., the previously existing state of affairs. If the
parties cannot be restored to the same position, they will not be able to go for
rescission. Thus, restoration of benefit is one of the essential elements for the
rescission of a contract. The provisions for the restoration of benefits and
compensations are mentioned in the points listed below:

 Section 64 of the Indian Contract Act, 1872, provides that if the party
who is claiming rescission had received any benefit from the other
party then he must restore such benefit to the person from whom he
has received it.

 Section 75 of the Indian Contract Act, 1872, deals with the compensation
for the loss sustained by the aggrieved party because of the non-
performance of the contract by the party in default.

 Section 28(2) of the Specific Relief Act, 1963, states that if the vendee was
in possession of the property and the contract was rescinded because of
the non-payment of the purchase amount, he must make payment of all
the rent and profits to the vendor that has accrued from the date of his
receiving possession until the date of restoration. Similarly, the vendor, if
received any earnest money from the vendee, must refund the same.

Important case laws

Essential elements of sale

The courts have interpreted Section 54 now and again. A thorough

interpretation of this Section has helped the Courts decipher the essential
ingredients of sale. Following is a list of cases that helps in understanding the
nature of some of the important ingredients:

 In Vidhyadhar v. Manikrao (1999), the Supreme Court held that to

constitute a ‗sale‘ the parties must intend to transfer the ownership of
the property. The intention is to be gathered from the recitals in the sale
deed, the conduct of the parties, and the evidence on record.

 In the case of Commissioner of Income Tax v. M/s. Motor and General

Stores (1967), the Apex Court opined that the price, in the ordinary sense
connotes monetary consideration for the sale of the property. It also
observed that if some other valuable consideration is kept, the
transaction is not a sale but can be an exchange or barter.
  The Allahabad High Court in Hakim Singh v. Ram Sanehi (2001), observed
that inadequacy of consideration is not a relevant factor in a sale. Even
when the price or the consideration is found by the Court to be less than
the market value of the property, the sale is valid.

Effect of an unregistered sale deed

 The Gauhati High Court in Saniram Kachari and Anr. v. Gauri Ram Koch
and Ors. (1951) held that though an unregistered sale deed is valid under
the Registration Act, it cannot confer a title on the purchaser under
Section 54. However, when an unregistered sale deed is followed by
delivery of possession in compliance with Section 54, then such a sale
will be considered effective. It also observed that the registered sale deed
might be regarded as a surplusage when the delivery of possession is
sufficient to confer title under Section 54.

 In a landmark case of Suraj Lamp and Industries Pvt. Ltd. v. State of

Haryana and Anr. (2011), the Supreme Court affirmed that a sale of
the immovable property could be made only by a registered instrument
and an agreement of sale does not create any interest or charge on its
subject matter.

 The Karnataka High Court, in the recent case of Gangappa v. Lingareddy

(2022), resolved the issue of whether an unregistered sale deed can
discard the title which has been acquired by delivery of possession of a
tangible immoveable property whose value was less than rupees one-
hundred.

In this case, the appellant contended that the property belonged to her mother,
who inherited it from her father, and the respondent was trying to interfere
with the property by creating a bogus document of title in his favour. However,
the respondent claimed that he received the property through the will of his
father, who acquired the property through a sale deed from the appellant‘s
maternal grandfather. Since the value of the property was less than one
hundred rupees, they did not register the sale deed.

The court held that Section 54 of the Transfer of Property Act, 1882, allows two
alternative modes for the execution of the sale in the case of tangible
immoveable property valued at less than Rs. 100, namely, by way of either a
registered instrument or simple delivery of the property. Since the latter
criteria have been fulfilled by the respondent, the appellant‘s claim stands to be
dismissed.

Conclusion

In light of the above discussion, we can conclude that the Transfer of Property
Act, 1882 deals with the sale of immovable property by the act of living parties
lucidly and comprehensively. It does provide not only the definition but also the
modes of execution and registration. It also provides a framework of rights and
liabilities to which the seller and buyer will be subjected, but at the same time,
it is also flexible enough to allow the parties to settle on other terms at their
discretion. In my view, there is one matter that needs some clarification. It can
be seen that the bare text of Section 54 lacks clarity regarding the ramifications
of an unregistered sale deed. It plainly states that it does not create any title or
interest in the property. Though various courts have ruled that the answer
depends on the facts and circumstances of each case and the applicability of
principles of equity in those cases, the language of the Section remains rigid. To
eliminate any confusion, it should be more comprehensive and expansive.
Q2. What is Vested and Contingent Interest?

Introduction to Vested and Contingent Interest

Transfer of Property Act deals with vested and contingent interest. Vested
Interest is created where there is a condition of the happening of a specified
certain event. While Contingent Interest is created on fulfilling a condition of
happening of a specified uncertain event.

Vested Interest

Section 19 of the Transfer of Property Act, 1882 talks about Vested Interest. It
is an interest which is created in favour of a person where there is a condition
of the happening of a specified certain event and time is not specified. The
person having the vested interest does not obtain the possession of that
property but expects to receive it upon happening of a specified certain event.

Example- A promises to transfer his property to B on him attaining the age of

21. B will have vested interest in A‘s property till the time he does not become
21 years old and gets the possession of it.

After death, the person (promise) who is having this interest will not have any
right over that property and the interest will vest in his legal heirs.

In the above example, if B dies at the age of 20, then the interest vested in B
will pass on to the legal successors of B and they will get the charge over the
property in the mentioned time period.

All the aforementioned important aspects of a vested interest are written

in detail below:

1. Interest should be vested: This basic postulate lays down that interest
should be created in favour of a person where time is not specified or a
condition of the happening of a specified certain event is provided. A person
should proclaim to transfer a particular property in order for this interest to be
created.

2. Right to enjoy property is postponed: When interest is vested in a person,

he does not immediately get the possession of that property and hence cannot
enjoy that property.

But any person who is not a major and has a guardian is only entitled to the
vested interest after he attains majority.

Example- X agrees to transfer the property ‗O‘ to Y and commands his guardian
Z to give him the property when he attains the age of 20. Y gets vested interest
once he attains the age of 18, the age of majority.

Other important point to remember:-

1. Contrary Intention: The transferor can specify a time slot as to vest the
interest in the person who will receive the property.

2. Death of the transferee: If the transferee dies before getting the property in
his possession, the interest vested in him will be vested in his legal heirs and
they will get the possession of that property after the condition is fulfilled.

3. Time of vesting: The interest is vested right after the moment when the
transfer is initiated.

In the case of Lachman v. Baldeo (1)[i], a person transferred a deed of gift in

favour of another person but directed him that he will get the possession of that
property only when the transferor himself dies. The transferee will have a
vested interest even though his right of enjoyment is postponed till the death
event.

Characteristics

1) Vested interest creates a current right that comes in effect immediately,

although the enjoyment is postponed to the time prescribed in the transfer. It
does not entirely dependent on the condition as the condition involves a certain
event.

2) Vested interest is a Transferable and heritable right.

3) Death of transferee will not make the transfer invalid as the interest will pass
on to his legal heirs.

Section 20 of the Transfer of Property Act, 1882 talks about vested interest
to an unborn child. The interest in the property will be vested in him once he is
born. The unborn child might not get the right of enjoyment of the property
immediately after having vested interest.

Contingent Interest

Section 21 of the Transfer of Property Act, 1882 states about Contingent

Interest. It is an interest which is created in favour of a person on fulfilling a
condition of happening of a specified uncertain event. The person having the
contingent interest does not get the possession of the property but receives it
upon happening of that event but will not receive the property if the event does
not happen. Contingent interest is entirely dependent on the condition imposed
on the transfer.

Example- A agrees to transfer the car ‗X‘ to B on the condition that he shall
secure 80 % in his exams. This condition is uncertain on the happening of the
event or not happening and therefore B here acquires a contingent interest in
the car ‗X‘. He shall get the property only if he gets 80 % and when the
condition is fulfilled.

In the case of Leake v. Robinson (2)[ii], the court upheld that when a condition
involves an event that is to be given ‗at‘ a particular age or ‗upon attaining‘ a
particular age or ‗after‘ attaining this particular age, then it can be derived that
the transfer involves a contingent interest.

Characteristics

1. This interest only happens when the condition is fulfilled.

2. Contingent interest is a transferable right, but the condition of heritability

depends upon the nature of such any transfer and the condition.

3. Death of the transferee before getting the possession of the property will
result in the failure of continent interest and the property will remain with the
transferor.

Some important aspects of contingent interest are explained in detail

below:

1. Interest: In a transfer if a condition is such that the transfer will take effect
only upon the fulfillment of that condition and till that time, the interest is
contingent.
2. Exception: When a person who has an expectancy in the rights of ownership
of a specific property, and he for the time being till the happening of the event,
gets any sort of income that arises from that property. This interest in the
property does not come under the aspect of contingent interest.

The following sections of Transfer of Property Act lay down the conditions for
contingent interest.

Section 22 talks about the transfer to a group or class of members with a

contingent interest. Example:- there is a transfer to a group of 4 people, and the
condition is that the property will be vested in persons who attain the age of 40
years on a particular date. The persons who have attained that age will get an
interest in the property and people who have not attained, will not get an
interest in that property.

Section 23 talks about a transfer which happens after happening of an event

that was mentioned in the transfer which involves contingent interest. This
section writes about what happens after the happening of the specified
uncertain event.

Section 24 states about a transfer to a group or class of members who will get
the property on a condition that they shall be living at the specified date. This is
also a contingent interest as an uncertain event. The transfer will only take
place for those people who satisfy the condition of surviving at a particular
date. The legal heirs of the deceased cannot claim an interest in that property
as a transfer involving a contingent interest solely depends upon the fulfillment
of the condition.(3)[iii]

Conclusion for Vested and Contingent Interest

The Transfer of Property Act, 1882 deals with vested interest and contingent
interest.

The concepts of vested interest and contingent interest are very important to
understand as there are many sections relating to these concepts.

The transfer of property involving Contingent interest takes effect only after the
condition is fulfilled, if the condition is not fulfilled then the transfer will not
take effect. The conditions are required to be fulfilled and they have to
mandatorily synchronize with the preamble rules that talk about justice, equity
and good conscience, the three major principles of the natural law on which
this whole act is based upon.

Q3. What are rights and liabilities of mortgager in India?

Introduction

Nowadays mortgage is a very commonly used word. Every single person has
the knowledge that if he wants a loan to be sanctioned, he has to pay some
collateral and for that, he has to mortgage his property with a bank. Mortgagor
and mortgagee are the parties who have an important role to play during
mortgage of a property. Various statutes available in India deals with a
mortgage.

- When do rights & liabilities of a mortgagor arise?

The rights and liabilities of a mortgagor arise during a mortgage. A loan may be
secured or unsecured. Where a loan is given simply on the basis of debtor‘s
promise to pay (e.g. on promissory-note), such loans are called as unsecured
loans. But, where the creditor takes security from the debtor for the repayment
of his money, the loan is known as secured loans. One such way to secure
loans is mortgage. Section-58(a) of the Transfer of Property Act, 1882 has
defined mortgage as the transfer of an interest in a specific immovable property
for securing:

 The payment of money given to him or to be given through loan, or

 An existing or future debt, or

 The performance of an engagement which may give rise to a pecuniary

liability.

Rights of Mortgagor

Every mortgage-deed leaves a right to the mortgagor and a corresponding

liability for mortgagee and vice versa. Following are the rights given to a
mortgagor given by the Transfer of Property Act, 1882:

1. Right to redemption

2. Right to transfer mortgaged property to a third party instead of

retransferring

3. Right of inspection and production of documents

4. Right to accession

5. Right to improvements

6. Right to a renewed lease

7. Right to grant a lease

1. Right to Redemption (section-60)

It is one of the most important rights of a mortgagor given under section of the
Act. This right puts an end to mortgage by returning the property of
mortgagor. The right to redeem further grants three rights to the
mortgagor:

A. Right to end mortgage deal

B. Right to transfer mortgaged property to his name

C. To take back possession of property in case of delivery of possession

In the case of Noakes & Co. vs. Rice (1902) AC 24, Rice was a dealer who
mortgaged his property, premise and goodwill to N subject to the provision that
if R paid back the whole amount, the property would be transferred back to his
name or any other person‘s. A covenant was attached that stated whether or
not the amount is due, R would only sell Malt liquor by N in his premises.
Because of this covenant, R had difficulty in redemption and it didn‘t give him
absolute right over his property. House of Lords held that anything which clogs
this right is bad and they came up with the concept that ‘once a mortgage
always a mortgage’ and said that mortgage could never be irreducible.

This principle was added to protect the interest of a mortgagor. Any condition
or provision which prevents a mortgagor from redeeming his mortgaged
property is a clog on the right of redemption. The right to redemption continues
even though the mortgagor fails to repay the loan amount to mortgagee. In the
case of Stanley v. Wilde, (1899) 2 Ch 474, it was held that any provision
mentioned in the mortgage-deed which has an effect of preventing or impeding
the right to redemption is void as a clog on redemption.

 Exceptions to the right- The right to redeem has three exceptions. It

can be extinguished under the following cases:

 By the act of parties

 By operation of law

 By decree passed by the court

2. Obligation to transfer to the third party instead of transferring it to

mortgagor (section-60A)

This right was added in the Act by Amendment Act of 1929. This right provides
the mortgagor with authority to ask the mortgagee to assign the mortgage debt
and transfer the property to a third person directed by him. The purpose of this
right is to help the mortgagor to pay off the mortgagee by taking a loan from a
third person on the same security.

3. Right to inspection and production of documents (section-60B)

This section is also inserted by the Amendment Act of 1929. It is the right of
mortgagor to ask mortgagee for the production of copies of documents of the
mortgaged property in his possession for inspection on notice of reasonable
time. The expenses incurred on production or copies of documents or travel
expenses of a mortgagee are to be paid by the mortgagor. This right is available
to the mortgagor only as long as his right to redeem exists.

4. Right to Accession (section-63)

Basically, accession means any addition to property. According to this right

mortgagor is entitled to such accession to his property which is in the custody
of mortgagee. There are two types of accession:

 Artificial accession- It is when mortgagor made some efforts and

it increased the value of land.

 Natural accession- The name itself defines i.e. without any man-made
efforts.

In case an accession is made to the property due to the efforts of mortgagee or

at his expense and such accession is inseparable, mortgagor, in order to be
entitled to such succession, needs to pay the mortgagee the expense of
acquiring such accession.

If such separate possession or enjoyment is not possible, the accession must be

delivered with the property; it is the liability of mortgagor, in the case of an
acquisition which is necessary to preserve the property from destruction,
forfeiture or sale, or made with his assent, to pay the proper cost thereof, as an
addition to the principal money, with interest at the same rate as is payable on
the principal amount, or, where no such rate is fixed, at the rate of nine percent
per annum.

5. Right to Improvements (section-63A)

According to this right if the mortgaged property has been improved while it
was in possession of mortgagee, then on redemption and in the absence of any
contract to the contrary mortgagor is entitled to such improvement. The
mortgagor is not liable to pay mortgagee unless:
  Improvements made by the mortgagee were to protect the property or
with the prior permission of mortgagor.

 Improvements were made by the mortgagee with the permission of the

public authority.

6. Right to Renewed Lease (section-64)

If the mortgagor is entitled the mortgaged property is a leasehold property and

during the duration of mortgage the lease gets renewed then, on redemption the
mortgagor is entitled to have the benefit of the new lease. This right is available
to the mortgagor unless he enters into any contract to the contrary with
mortgagee.

7. Right to grant a Lease (section-65A)

This right was introduced by the Amendment Act of 1929. Prior to this right,
the Transfer of Property Act did not allow a mortgagor to lease out the
mortgaged property on his own but only with the permission of mortgagee.
Now, a mortgagor has the right to lease out the mortgaged property while he is
in lawful possession of that property, subject to the following conditions:

 All conditions in the lease should be according to the local laws and
customs to prevent any fraudulent transaction.

 No rent or premium shall be paid in advance or promised by mortgagee.

 The contract shall not contain any provision for the renewal of the lease.

 Every such lease shall come into effect within a period of six months from
the date of its execution.

 Where the mortgaged property is a building, the term of the lease should
not exceed three years in total.

Duties/liabilities of a mortgagor

Along with the rights given to a mortgagor, the Transfer of Property Act has also
conferred some duties on him. Following are the duties of a mortgagor:

1. Duty to avoid waste

2. Duty to indemnify for defective title

3. Duty to compensate mortgagee

4. Duty to direct rent of a lease to mortgagee

1. Duty to avoid waste (section-66)

This section imposes a duty on the mortgagor to not to commit any act which
leads to the waste of property or any act which reduces the value of the
mortgaged property. Waste is divided into two categories:

 Permissive waste– A mortgagor who is in possession of the mortgaged

property is not liable to the mortgagee for any minor waste.

 Active waste– When an act is done which causes major waste of the
property or leads to the reduction in the value of mortgaged property,
then the mortgagor will be liable to the mortgagee.

2. Duty to indemnify for defective title

It is the duty of a mortgagor to compensate the mortgagee for a defective title in
the mortgaged property. A defective title refers to a situation when a third party
starts claiming or interferes with mortgaged property. It is a liability for the
mortgagor to compensate for the expenses incurred by mortgagee for protecting
the title of that property.

3. Duty to compensate mortgagee

If the mortgaged property is in possession of mortgagee who is paying all the

taxes and other public charges, then it is the duty of mortgagor to compensate
mortgagee for incurring such expenses. Similarly, when there is no delivery of
possession i.e. the mortgaged property is still in possession of mortgagor, then
it is his duty to pay all public charges and taxes levied on it.

4. Duty to direct rent of a lease to mortgagee

Where the mortgaged property is leased by mortgagor then it is his duty to

direct lessee to pay the rent, etc. to the mortgagee.

Conclusion

A mortgage-deed comes up with many rights and liabilities for both the parties
involved i..e. mortgagor and mortgagee. These rights and liabilities were
created and included in the Transfer of Property Act in 1882 which is quite old
and therefore is outdated. Though amendments were made in the Amendment
Act of 1929, but no recent amendments have been made in the chapter of rights
and liabilities of mortgagor. This has lead to various fraudulent transactions as
both the mortgagor and mortgagee has found various new methods of
deceiving each other. Therefore, the need of the hour is to amend the laws and
make it more stringent so that no party attempts to enter in fraudulent
transactions.

Q4. What are rights and liabilities of mortgagee?

Introduction

The term Mortgage is a conveyance of property, upon condition, as security for

the payment of a debt or the performance of a duty, and to became void upon
payment or performance according to the stipulated terms; also the written
instrument by which the conveyance is made or a state of being pledged; as,
lands given in mortgage or to grant or convey, for the security of debt. A
mortgage is a debt instrument, secured by the collateral of specified real estate
property, that the borrower is obliged to pay back with a predetermined set of
payments.

Rights and Liabilities of Mortgagee

A mortgagee possesses one right against the property and another against the
mortgagor personally. Following are the rights of mortgagee: -·

1. Right to Foreclosure or Sale

The right of foreclosure is a right available to a mortgagee to recover his

outstanding money. The transaction is affected through a document called the
mortgage deed. The relevant provision regarding foreclosure are contained
under section 67 of the transfer of property act.

2. Right to sue for Mortgage Money

A mortgagee has the right to sue for the mortgage money where the mortgagor
bind himself to repay, where the mortgaged property wholly and partially
destroyed, where the mortgagee is deprived of his security due to a wrongful act
and where the mortgagor has failed to deliver possession of the property to the
mortgagee. Section 68 deals with sue for mortgage money in transfer of
property act.

3. Power of Sale when valid

Section 69 of the transfer of property act, 1882 states that, the mortgagee has
the power to sell the mortgaged property without the intervention of the court,
on default of payment of mortgage money by the mortgagor in following three
cases:

A. When the mortgage is an English mortgage between non-Hindus, non-

Muslims, non-Mohammedi‘s and member of the race or sect notified by the by
the state government of the official gazette.

B. When government is mortgagee, with the express provision of sale without

intervention of the court.

C. When the mortgaged property is situated at Calcutta, madras, Bombay or

any other gazette town or area.·

4. Right to Accession – Increased Mortgaged Property

If, after the date of a mortgage, any accession is made to the mortgaged
property, the mortgagee, in the absence of a contract to the contrary, shall, for
the purposes of the security, be entitled to such accession. Provision of this act
is under Section 70 of Transfer of Property act, 1882.·

5. Right to Accession – Renewal of Security. Section 71, Transfer of Property

Act, 1882

When the mortgaged property is a lease, and the mortgagor obtains a renewal
of the lease, the mortgagee, in the absence of a contract to the contrary, shall,
for the purposes of the security, be entitled to the new lease.·

Rights of Mortgagee in Possession

A mortgagee may spend such money as is necessary for the mortgaged

property from destruction, for making his own tittle thereto good against the
mortgagor; and may in absence of a contract to the contrary, add such money to
the principal money, at the rate of interest payable on the principal, and where
no such rate is fixed, at the rate of nine percent per annum.

Right to proceed of Revenue sale or Composition on Acquisition

Section 73, Transfer of Property Act state that where the mortgaged property or
any interest therein is sold owing to failure to pay arrears of revenue or other
charges of a public nature or rent due in respect of such property, and such
failure did not arise from any default of the mortgagee, the mortgagee shall be
entitled to claim payment of the mortgage shall be entitled to claim payment of
the mortgage-money, in whole or in part.

Liabilities of Mortgagee

1. Possession
Section 76 of transfer of property act provides that when during the
continuance of the mortgage, the mortgagee takes possession of the mortgaged
property. Mortgagee must have to manage the property as a person of ordinary
prudence. He must use his best endeavors to collect the rents and profit
thereof; He must , in the absence of contract to the contrary, make such
necessary repairs of the property as he can pay for out of the rent and profits
thereof after deduction from such rents and profits the payments and the
interest on the principal money. He must not commit any act which is
destructive or permanently injurious to the property.

He must keep clear, full accurate accounts of all sums received and spent him
as a mortgagee, and, at any time during the continuance of the mortgage, give
the mortgagor, as his request and cost, true copies of such accounts and of the
vouchers by which they are supported.

A mortgagee is bound to sue on behalf of all the mortgagees in respect of which

the mortgage money has become due in the absence of express contract.
During the continuance of the mortgage, the mortgagee is bounded to protect
the mortgaged property.

2. Legal aspects

Mortgages may be legal or equitable. Common law jurisdictions have evolved

two main forms of Mortgage:

A. The mortgage by demise

In a mortgage by demise, the mortgagee becomes the owner of the mortgaged

property until the loan is repaid or other mortgage obligation fulfilled in full, a
process known as redemption. Mortgages by demise are the original form of
mortgages, and continue to be used in many jurisdictions, and in a small
minority of states in the united states.

B. The Mortgage by Legal Charge.

A legal charge is a method by which a lender protects the money they have lent
to an individual or company. It is a legal document signed by the borrower and
which is registered against a property at the land registry so as to alert any
potential buyer of the existence of the debt .One of the most common types of a
legal charge is a mortgage from a bank or building society. In consideration of
the mortgage funds that you are borrowing, the bank or building society will
require a legal charge to be secured against the property.

Case Laws

In the case of Venkata Reddy v. Pethi Reddy AIR 1963 SC 992, it is indisputable
that in a mortgage suit there will be two decrees, namely, preliminary decree
and final decree, and that ordinarily the preliminary decree settles the rights of
the parties and the final decree works out those rights.

In Kausalya v. Kauleshwar 1945 ILR 25 Pat 305, it cannot also be disputed

that a mortgage merges in the preliminary decree and the rights of the parties
are thereafter governed by the said decree.

In the case of Stanley v. Wilde, it was held that any provision mentioned in the
mortgage-deed which has an effect of preventing or impeding the right to
redemption is void as a clog on redemption.

Conclusion
A mortgage deed comes up with many rights and liabilities for both the parties
involved i.e. mortgagor and mortgagee. These rights and liabilities were being
mentioned in the Transfer of Property Act 1882 which is quite old. New
amendments were also being made in the Amendment Act of 1929 which is not
implemented in a proper way so there is way in which both the mortgagor and
mortgagee are having various ideas for deceiving each other. So, the need of the
hour is to amend the laws and make it more stringent so that no party
attempts to enter into a fraudulent transaction.

Q5. What is movable and immovable property? Explain the concept of transfer
of property?

Property incorporates all rights of a person except his personal rights which
constitutes his status in the society. The property can classify into movable and
immovable properties. Transfer of Property Act deals with it.

Property: Movable and Immovable Property

Property has a wide degree and, along these lines, no thorough definition. The
court completely expressed in Raichand v. Dattary that property incorporates
all rights of a person except his personal rights, which determine his status in
society.

Property‘s significance is not static; it changes with the reason, idea of an act,
and new laws. Along these lines, as to guarantee that different choices,
proposals, and any suggestions identified with property are appropriately made,
first the property is classified into movable and immovable properties, and
afterward, as per their separate laws, the related activity is attempted.

The question now is, ―What is the difference between movable and immovable
property?‖

Definition of Movable Property

- Section 3 (36) of the General Clauses Act defines movable property as:

‗Movable property shall mean property of every description, except immovable

property.‖

- Section 2 (9) of the Registration Act, 1908 defines property as:

‗Moveable property‘ includes standing timber, growing crops and grass, fruit
upon and juice in trees, and property of every other description, except
immovable property.‖

In this manner, crops remain in the field and incorporate all the vegetables and
natural products. They are considered as movable property since they must be
utilized once they are served from the land. Additionally, the grass is by and
large nourishment for dairy cattle, and consequently it is likewise considered as
movable property.

Also, Timber is helpful for development of houses, yet for that, it must be cut
and served from the land and afterward no one but it very well may be utilized,
that is the reason it is considered as movable property. Then again, trees
bearing natural products are helpful when they are established in the earth,
and that is the reason they are viewed as immovable property.

- Section 22 of IPC defines property as:

The words ―moveable property‖ is intended to include corporeal property of
every description, except land and things attached to the earth or permanently
fastened to anything, which is attached to the earth. But things attached to the
land may become moveable property by severance from the earth. [4]

Transfer of Property Act does not define movable property, since it

regulates transfer of immovable property by sale, mortgage, lease, gifts or
through actionable claims.

Definition of Immovable Property

- Section 3 of Transfer of Property Act defines ―Immovable Property‖ does not

include standing timber, growing crops or grass.[5]Moving property includes
standing timber, growing crops, and grass, according to this definition.

- Section 3(26) of the 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‖. [6]

- Section 2(6) of The Registration Act,1908 defines ―Immovable Property‖ as

under: ―Immovable Property includes land, building, hereditary allowances,
rights to ways, lights, ferries, fisheries or any other benefit to arise out of land,
and things attached to the earth or permanently fastened to anything which is
attached to the earth but not standing timber, growing crops nor grass‖. [7]

Joining all the 3 definitions, immovable property can be summed as :-

i. Land

ii. Advantages emerging out of the land

iii. Things connected to the earth

iv. Things Embedded in earth

v. Things attached to what is embedded in the earth

vi. Things established in the earth, with the exception of:-

a. Standing timber,

b. Developing harvest

c. Grass.

Following on from the preceding points, it is commonly assumed that things

found on the earth, as well as deep within the earth, such as minerals, are also
immovable in nature.

Case Laws

Since, the definitions of with movable and immovable property are not exact
and have room for interpretation, thus various issues have arisen in past years
regarding the kind of property. Profit prying is the right to take something from
someone else‘s territory.

It is right to enter another person‘s property and to make some benefit from the
soil. There are different points of reference that have been set by the court in
acknowledging this concept. Some landmark cases that have been decided are
:-
The court held in Smt. Shantabai v. State of Bombay that the right to enter the
land, cut and carry away wood for a period of 12 years is a benefit arising from
land and thus immovable property.

For the situation in Anand Bahera v. Province of Orissa, it was held that profit
arising from land is movable property. The option to stroll on the land and to
draw fish from the lake and remove them is immovable property, as it is the
benefit emerging from the land. Grazing of cattle on the land is additionally
immovable property as it is profit emerging from the land.

Idea of Annexation turns into an establishment for choosing an issue in cases

including question of characterizing the property, If property lies on the land on
its own weight, it is movable; however, if a thing cannot be expelled without
causing significant harm to the land, it is viewed as having been implanted in
interminability and must be treated as immovable property. The level of
annexation is known by the intention and the timeframe for its use.

As an example, while staying on a boat is movable property, the use of any

nails and jolts is immovable property because they will most likely be used for a
long time and will cause damage if severed.

The above-mentioned concept is further elaborated in the case of Bamdev v.

Manorma where it was held that the pieces of equipment are movable
property and they simply don‘t become immovable just because they are
embedded in the earth. They are embedded in the gear for their enjoyment
rather than the land. The cinema built is a temporary cinema, and the supplies
and other supporting equipment will be fixed only until the mortgage exists.

In Duncans Industries Ltd. v. State of UP, light was thrown on the intention of
fixing equipment. It stated that a property is movable, or immovable based on
the intention of the owner, whether they wanted to have the equipment
permanently or temporarily. In this case, Company A decided to sell its
fertilizers business to Company B. It included land and apparatus. The
hardware that is installed in the earth is implanted there for long-term use. It is
beyond the realm of imagination to expect to expel them without causing
extreme harm to the land. Subsequently, it ought to be considered as
unflinching property.

Following various judicial pronouncements, some of the judicially recognized

immovable properties include :- Right to collect rent for immovable property,
hereditary office, , right to ferry, right of fishery, equity of redemption, factory,
building, walls, interest of mortgage in immovable property etc.

Judicially recognized movable properties include :- Government promissory

notes, royalty, right of warship, decree of sale of a mortgaged property, standing
timber, grass, growing crops etc.

Apart from the above-mentioned items, with time and development and
changing perspectives on the bar and the bench, various items are included
and excluded as needs be from the rundown of versatile and steadfast things.

Conclusion

In the end, according to the need, circumstances, and purpose of the item, it is
classified, and using the statute, an action is taken. However, to venture out
characterization of movable and immovable property, the idea becomes one of
extreme importance because, in the current times, it is only property, whether
personal or proprietary, tangible or intangible, movable or immovable, that
defines a person and his status.
Q6. What is intangible property in India? Explain the concept and emerging
trends?

Introduction

John Locke believed that a person has a natural right to hold

his property, especially the one which he got through his own labour.

―Property‖ brings the concept of ownership in mind which is a relation that a

person shares with an object. Ownership is bunched with a lot of complex
rights, duties as well as obligations. This concept has been intervened in our
life and we cannot imagine our world without it. Our society has been deeply
influenced by the concept of ownership. Now this ownership is not only of
tangible objects but it also revolves around intangible objects. It holds no
physical presence .It helps a person to hold ownership on the basis of their
creativity like brands, identity, copyright, trademark or patent etc.

Let us consider an example a pharmaceutical company invents a medicine

which is very effective to cure cancer. Now he can use his right that no other
scientist may copy the medicine without the permission of original creator.
This is right is known as intellectual property right. Due to industrial revolution
and rapid development there is an increased demand or knowledge of
intellectual property rights regimes across countries. They deal with the artistic
or scientific work which can be protected by providing us with 20 years patent
or 10 year trade mark, 60 year copyright etc.

- Is Intangible Property Also Human Rights?

At the end of 19th century, the desirability of intellectual property right was not
considered important but today in contrast they have created their own value in
the market which comes with a lot of obligations .Thus various new acts and
bodies were formed such as ―TRIPS‖(trade related intellectual property ,1995) or
―WIPO‖(world intellectual property organization ). Now with the growing
technology awareness, human rights have also grown. Widespread recognition
between human rights and IPR has gained a lot of importance.

After World War – II there has been a great upsurge for human rights treaties.
These have brought a new age ―age of rights‖ and ―an era of humanitarians‖,
through UN intervention which play a significant role through‖ universal
declaration of human rights‖. This has given birth to international covenant on
civil and political rights and international covenant on economics, social and
cultural rights (article 17, UDHR). Thus both human rights and IPR regimes
have grown significantly and the intersection between them have expanded.

An example can be of an Australian man, where a manufacturer copied

aboriginal designs of a carpet, without the permission of artist. The art work
copied was very sacred and something that could only be witnessed during a
special occasion and thus the court considered it as a violation of rights and
thus asked the manufacture to compensate the artist and the court also stated
that copying a design was something that could be compensated with money
but copying a sacred design that has also hurt the religious sentiments of the
community and thus should be viewed from frame work of human rights
because it is something very important for the survival of individual
community.

- How Does Intangible Property Affect the Economic Aspect?

Intellectual property such as patent has always been a topic of controversy.

There have been may doubts regarding it‘s growth in country. But the only
difference that prevails is it‘s immobility and that even does not affect its
management for development and this can be the reason it is called ―the
currency of knowledge economy‖. When we try to analyze innovations through
economic point of view it‘s then we can justify the primary creation of IPR
laws[5]. IPR deals with the innovation, which allows people to explore more with
the available resources, thus making innovation an important component
through which economy can flourish.

During 1970, there was the creation of patent act which lead to the promotion
of industrial sector .The main aim behind this act was just not availability of
rights to the inventors but also for the speedy development of technology in the
country which could enhance the economic condition of the country. Before the
TRIPS, Indian market was not able to flourish much due to lack of availability
of such rights on various products like medicine. In India the major drug
development was basically started by central drug research institute. They were
suppose to get recognized by R&D but were not provided with the same because
Indian markets lacked in reserving engineers and invent new drugs but when
the TRIPS came into existence there came number of opportunities which
enhanced the Indian economy by providing new market opportunities to invent.
A survey was organized which proved Indian markets were flourishing by
promoting IPR. In order to analyze IPR system that how the economy has been
effected by it‘s intervention,

Let us look at one of the company ―Ranbaxy‖. Ranbaxy is an Indian company

that started in 1961 in gurgaon, after IPR came into existence it has total sale
of $1.03 billion and it has become the largest market in U.S., Brazil, Russia as
well as China .Thus the harmonization of IPR laws has opened new windows for
innovation in developing countries like India.

Emerging Trend in India

It is a limitation as well as an exception in fair dealing to the authors who

create new things .This fair dealing helps to copy the available material but also
leads to the infringement of rights .That is why fair dealing has been kept out of
this intellectual property rights concept .Now this defense was made available
through the doctrine of equity which has allowed people to copy new creations
and one of the main reason to follow this copyright was just because of the
promotion of new work created by any inventor so that his work does not
remain stagnant. It was just because of this doctrine that people could
differentiate between moral intention of copying a work and dishonest intention
of copying a work. That is the reason that this doctrine was added in TRIPS and
all the member countries have to follow it.

The Indian and UK laws regarding copyright are considered to be limited and
very strict because they do not allow much interruption where as the laws in
US are very open as they do allow easy additions in any work. Although India
has developed a lot but it has still not been able to progress in the field of fair
dealings. India as said has always been very strict towards the rules and thus
even a single step of violation of law leads to infringement.

Case Law

The best example of this is ―Independent News Services Pvt. Ltd. v. Yashraj
Filmsprivate Limited and Supercassetes Ltd. This whole case was about the
defendant, ―INDIA TV‖ which has shown a documentary regarding the life of a
singer, his performance, his songs and clipping of his movies. As a result the
prosecutor filed a case of copyright infringement. However the defendant party
claimed that it was the fair use of their rights as they worked according to the
fair dealings. So the judges gave the judgment in the favor of plaintiff and
defendant was restrained from using any music or any song or any movie clips
as it would lead to infringement of law. This judgment signifies that there is a
lot of need to look upon this concept of fair dealing to improve our system and
loosen it up a little bit and understand the difference between good and wrong
use of stuff to avoid let our country develop.

Conclusion

Intellectual property rights have gained a lot of importance in the growing

technology due to increased awareness. People are becoming aware by its
benefits for the society as well as new ways of earning .This 21st century has
brought with itself new technologies as well as new challenges. Each coin has
two sides of story so with the increasing benefits of technology; the increase in
burden to match the technology has also started peeping. This modern way of
possessing any intangible property is a boon for new inventors to invent more
by learning more and thus earning more. This not only helps the artistic world
to grow but also give a great push to the imaginary world to prove its existence
and shine in this world.

Q7. What is apportionment of property?

Introduction

Apportionment‟ means distribution in proper shares. Section 36 and 37 of the

Transfer of Property Act deals with Apportionment of Property in India.

In law this term is used in various senses even various statutes define it in
various ways and as per the laws regulating these apportionment the process of
determine the apportioned amount also changes.

Section 36 & 37 of the Transfer of Property Act lay down the rules regarding the
principle of apportionment. It is classified into two types

Apportionment of Property by time

Section 36 deals with the apportionment of time, which states- ―In the absence
of a contract or local usage to the contrary, all rents, annuities, pensions,
dividends and other periodical payments in the nature of income shall, upon
the transfer of the interest of the person entitled to receive such payments, be
deemed, as between the transferor and transferee, to accrue due from day to
day and apportionable accordingly but to be payable on the days appointed for
the payment thereof‖.

This principle does not apply on tractions which take place by operation of law
but to those transaction based on equity.

When a property generates certain kind of periodical income, apportionment of

income between the transferor and transferee arises. The general rule in
regards to the transfer of income between the transferor and transferee is dealt
in section 8 of the Act and is inapplicable on transaction of periodical nature
requiring apportionment.

Liability of the tenant – section 6 of the Act specifies that the section is
applicable for transaction held between transferor and transferee and does not
make tenant liable.

Concept of Transfer – The Transfer of Property Act, 1882 says that when a
property is lent to several owners, any of those several owners on the basis of
being the co-owner cannot ask for proportion of rent of evection in case of non-
payment. The apportionment created by the Apportionment Act 1870 statute is
―apportionment in respect of time.‖ The cases to which it applies are mainly
cases of either:

 apportionment of rent due under leases where at a time between the

dates fixed for payment the lessor or lessee dies, or some other alteration
in the position of parties occurs

 apportionment of income between the representatives of a limited owner

and the remainder-man when the limited interest determines at a time
between the date when such income became due.

Apportionment of Property by Estate

Apportionment in respect of estate may result either from the act of the parties
or from the operation of law.

Section 37 deals with this kind of apportionment stating that ― When, in

consequence of a transfer, property is being divided and held in several shares,
and thereupon the benefit of any obligation relating to the property as a whole
passes from one to several owners of the property, the corresponding duty
shall, in the absence of a contract, to the contrary amongst the owners, be
performed in favour of each of such owners in proportion to the value of his
share in the property, provided that the duty can be severed and that the
severance does not substantially increase the burden of the obligation the duty
shall be performed for the benefit of such one of the several owners as they
shall jointly designate for that purpose:

Provided that no person on whom the burden of the obligation lies shall be
answerable for failure to discharge it in manner provided by this section, unless
and until he has had reasonable notice of the severance. Nothing in this section
applies to leases for agricultural purposes unless and until the State
Government by notification in the Official Gazette so directs‖.[2]

when the whole of a property is transferred to more than one person, any
benefit arising out of obligation to the property is transferred to the several
owners.

Apportionment by estate simply means transferring of property to several

person whereby distribution of benefits and obligation arising out of property
between those several owners takes place.

Section 37 i.e. apportionment by estate highlights a situation where income

arising out of the property is apportionment between owners on the basis of
share in the property. How the payment is to be done whether separately to
owner or to single has to be contemplated. This section basically deals with
apportionment in case tenancy be liable only singly.

Apportionment by act of the parties

Where a lessee is evicted or he forfeits part possession of the leased property he

becomes liable to pay the apportioned value of rent which he retains

Apportionment by Operation of Law

Apportionment by operation of law may be brought about where by due to some

reasons like by the ―act of God‖, as, for instance, where part of an estate is
submerged by the encroachments of the sea it becomes inoperative as regards
to its subject matter.
 Conclusion

In section 36 and 37 of the transfer of property Act, 1882 which deals with
Apportionment of Property in India. And how it is read with section 8 of the
transfer of property of property Act, 1882. Various exceptions to these sections
to Apportionment of Property in India was discussed. Theses section are of
immense important in the Act as it specifies the rule of apportionment and how
apportionment of income has to be done in case of transfer or tenancy or lease.

Q8. What is Actionable Claim?

Introduction

The Transfer of Property Act was enacted in the year 1882 with the objective of
codifying the laws relating to transfer of properties. This Act is not exhaustive
in nature, as it does not cover all kinds of transfers, or all types of properties.
The Transfer of Property Act, 1882 does not incorporate all the rules relating to
the different modes of transfer, neither does it include the transfer of all
properties. There are other Acts which codify the laws regarding different types
of property such as the Sale of Goods Act, 1930.

This Act also does not deal with transfers by operation of law, which includes
transfers in execution of a Court‘s decree. This Act only covers inter vivos
transfers which are transfers between living persons by act of parties through
express or implied contracts. Also, the Act mainly deals with transfer of
immovable properties, but some of the provisions of the Act are also applicable
to movable properties.

So, to know whether the Transfer of Property Act, 1882 will apply to a
particular transaction or not, it is necessary to determine the mode of transfer
as well as the type of property being transferred. One of the intangible
properties that the Act deals with is actionable claim that is discussed further
in detail.

What is Actionable Claim?

Actionable claim is defined in Section 3 of the Transfer of Property Act, which

was included in the Act by the Amending Act II of 1990. Actionable claim is an
intangible movable property, and its transfer is dealt with in Chapter VIII of the
Act.

According to Section 3 of the Act, actionable claim means:

A. Claim to an unsecured debt

B. Beneficial interest in a movable property

These are both claims that are recognized in the Courts of law as affording
relief. There are other types of claims also that afford relief and are actionable
in the Courts of law, such as secured debts and tortuous suits like defamation
or nuisance. But those are not categorized under the meaning of actionable
claim. The term actionable claim only covers the above mentioned two types of
claims.

A. Unsecured Debt

Unsecured debt refers to all monetary obligations of a certain amount, and that
is not covered by any security in the form of mortgage, pledge or
hypothecation. This is not just limited to the concept of loans forwarded by a
creditor to a
principal debtor. It extends to all kinds of monetary obligations, such as rent or
payment on sale of property etc.

The three requirements for a transaction to qualify as unsecured debt are:

1. Monetary obligation

2. No security

3. Certainty of amount of money obligated

According to Sunrise Associates v. Govt. of NCT of Delhi [2], an actionable claim

may be existent in praesenti, accruing, conditional or contingent. So, the three
types of unsecured debt are:

1. Existent Debt

2. Accruing Debt

3. Conditional or Contingent Debt

Existent Debt

This is the kind of debt that has already become due, and is payable and
enforceable in the present. For instance, if Mr. A sells a house to Mr. B in
present, and the monetary consideration has to be paid then and there, then
the consideration becomes payable right then, and this is existent debt.

Accruing Debt

If a monetary obligation is due in present, but becomes payable on a future

date, then that is accruing debt. For example, if Mr. A is the employee of Mr. B
and he gets his salary on the last day of every month, then his salary is
accruing debt during that month, as it is due throughout the month, but it
becomes payable only on the last day of the month. So, if Mr. B fails to pay the
salary, then Mr. A can approach the Court to claim it only after the last date of
the month, when it becomes payable.

Conditional or Contingent Debt

A debt is conditional or contingent if it becomes payable on the fulfillment of a

condition or contingency.

It is called conditional debt when the stipulation is in control of the parties. For
example, an agreement between A and B that A will pay Rs. 1000 if B buys C‘s
house, then this is a conditional debt. Here, Rs. 1000 becomes payable and B
can claim it only after he fulfills the condition.

On the other hand, when the stipulation is beyond human control, then it is
called a contingent debt. For instance, if A promises to pay a particular amount
to B if C‘s ship sinks, then since the sinking of the ship is beyond the control of
the parties, so it is a contingent debt.

B. Beneficial Interest in Movable Property

If a person has the right to possess a movable property, then it is said that he
has beneficial interest in that movable property. But if that property is not in
his possession, then he has an actionable claim. So, the requirements to
constitute this type of actionable claim are:

1. Movable property;

2. The movable property is not in the possession of the claimant;

 3. The claimant has the right to possess that movable property.

For example, if A sells his car to B and B has completed his obligation, that is,
B has forwarded the consideration from his side, then B has the right to
possess the car; but if B is unable to acquire possession, then B can approach
the Court to claim this possession.

But if the movable property is already in the possession of the claimant, either
actual or constructive, then he cannot claim possession. So, if in the previous
example, A had given the car keys to B, then it can be said that B has
constructive possession, and hence, B cannot approach the Court to claim
possession.

Moreover, the right to possess of the Claimant must be a legal right, which is
recognized by the law. For instance, if a person of unsound mind or a minor, A
sells 100 bags of wheat (or any other movable property) to Mr. B, and Mr. B
also forwards the consideration from his side, that is Mr. B fulfills his
obligations, then also Mr. B cannot claim possession. This is so because Mr. B
does not have a legal right to possess, as A does not have the capacity to
contract, and the agreement between A and Mr. B is void ab initio. Now, since
the right to possess of Mr. B is not recognized legally, so this is not covered
under the heading of actionable claim.

Instances of Actionable Claims

Some examples of actionable claims are:

1. Claim for arrears of rent.

2. Claim for money due under insurance policy.

3. Claim for return of earnest money.

4. Right to get back the purchase money when the sale is set aside.

5. Right of a partner to sue for an account of the dissolved partnership firm.

6. Right to claim benefit under a contract for the purchase of goods.

7. Right to get the proceeds of a business.

In all of these instances the amount for which the suits are filed are certain and
definite. So, such claims are transferable under actionable claims.

Claims not covered under Actionable Claim

Various types of claims are not covered under the head of actionable claim, and
hence cannot be transferred under the Transfer of Property Act.

The right to claim damages, whether arising out of a tortuous or contractual

liability are not actionable claims. This right is not an unsecured debt, even
though it is a monetary obligation because of two reasons. First of all, it is an
uncertain amount of money, and second, it is not a part of the original
transaction. Actionable claim under the category of unsecured debt only covers
the amount in the original transaction. Hence, it covers the principal amount
and the interest upon that principal, as these are of a certain amount.
Whereas, damages is uncertain, and hence, does not come under actionable
claim.

Moreover, in cases of tortious liability such as defamation, or nuisance, the

damages is uncertain and personal or attached with immovable property, and
hence cannot be transferred. For instance, if A defames B, then B has the right
to sue A for defamation; this right is personal in nature as B has been defamed
and so, only B can have the right to sue A. So, this right cannot be transferred
and it is not an actionable claim. An instance of nuisance would be if person
X‘s neighbour, Y, let his drain pipes overflow into X‘s lawn. Here, X has the
right to sue for damages for the nuisance caused by Y because of virtue of
ownership that X has over his lawn. Hence, X is the only person who has this
right to sue and so, it is not a transferable actionable claim. But, if X sells his
property to a third person, Z, then Z, along with the property, will also receive
this right to sue Y for nuisance.

In the case of Jai Narayan v. Kishun Dutta , it was held that a claim for mesne
profits is not an actionable claim, as mesne profits are unliquidated damages
and it is not a claim to any beneficial interest in moveable property, not in the
possession, either actual or constructive, of the claimant. Thus, it was a ―mere
right to sue‖ and not an actionable claim.

Rights such as copyright , patent or trademark are not actionable claims

because they already vest in the person who has it. These have their own
governing Acts and are not transferable as they are the intellectual property of
the claimant, and any other person cannot be allowed to claim that.

Instances of Claims not recognized as Actionable Claims

There are certain types of rights and claims which are not recognized as
actionable claims, and hence cannot be transferred. Some examples of this type
of claims are:

1. Right to get damages under the law of torts or for the breach of a
contract: Since these are uncertain amounts of money and hence, this
cannot be transferred.

2. Claim for mesne profits: This is also uncertain, and so cannot be allowed
to be transferred.

3. Copyright, patents and trademarks: These rights are personal in nature,

as these are available to that particular person.

4. Decree or judgment of debt: This cannot be transferred under

actionable claim, as after the judgment has been pronounced, no action
subsists that could be transferred.

Incapable Transferees of Actionable Claim

Section 136 of the Transfer of Property Act, 1882 declares certain groups of
people who cannot deal in the transfer of actionable claims. Section 136 states
that-

―No judge, legal practitioner or officer connected with any Court of Justice shall
buy or traffic in, or stipulate for, or agree to receive any share of, or interest in,
any actionable claim, and no Court of Justice shall enforce, at his instance, or
at the instance of any person claiming by or through him, any actionable claim
so dealt with by him as aforesaid.‖

This Section bars Judges, legal practitioners or officers of Court from receiving
any share or interest in any actionable claim, and hence they cannot be the
transferee in transfer of actionable claim. Section 6(h)(3) provides that any
property cannot be transferred to a person who is legally disqualified from
receiving that property, that is, transfer cannot be made to legally disqualified
transferees, and Section 136 legally disqualifies these persons from being
transferees of actionable claims and hence, actionable claims cannot be
transferred to this class of people.

The reason behind this prohibition is to ensure impartiality of the judiciary. The
Privy Council illustrated the importance of this prohibition in the case
of Kerakoose v. Serle by stating that- ―It is of great importance that no officer of
a Court of Justice should be even exposed to the suspicion that in the
discharge of his official duties his conduct may be influenced by any personal
consideration.‖

Actionable Claim is Movable Property

Actionable claim is an intangible movable property. This can be inferred from

the interpretation of Section 2(7) of the Sale of Goods Act, 1930, which reads as
follows-

―‗goods‘ means every kind of moveable property other than actionable claims…‖

Section 2(7) of the Sale of Goods Act, 1930 defines ―goods‖, wherein it states
that goods include all kinds of movable property, except for actionable claims.
This Section provides for an exception clause to exclude ‗actionable claims‘ from
the category of movable property. This exclusion would not have been required
if the actionable claim was an immovable property. Hence, the interpretation of
Section 2(7) of the Sale of Goods Act, 1930 shows that an actionable claim is a
movable property.

Conclusion

Actionable claim is an intangible movable property, and it is transferable. It

mainly refers to the types of claims that can be recovered through proceedings
in Courts. Out of multiple such kinds of claims, the concept of actionable claim
includes two types, which are claims on unsecured debt and beneficial interest
in movable property. Such claims can be transferred to another person, but
certain people are barred from becoming transferee of actionable claims. This
bar has been imposed in order to maintain the integrity of Court proceedings.
The concept of actionable claims is a highly important one that all law students
must be clear with.

Q9. What are rules against Perpetuity?

Introduction

Only if human beings had their way they shall wish to live
perpetually. However, laws of nature prevail over mankind and all living beings
are destined to perish. So, the next best Homo sapiens‘ desire is to preserve
and pass his real assets from generation to generation or vernacularly „pust dar
pust‟, „naslan bad naslan‟, „pidhi dar pidhi‟.

Imagine an asset that shall forever continue to remain within a family till
eternity, and deprive all others from enjoying its benefits. This impedes free
and active circulation of property both for purposes of trade and commerce, as
well as betterment of the property itself. Can you imagine, even the owner
himself is denied the right to dispose it for higher value or to tide away difficult
times. Similarly, the state is divested from earning revenue, which is only
possible if property can change hands frequently. So, if perpetuities are
allowed then even though the transferee has received the property, he has no
power to alienate it. To quote Sir D. Mulla, “It is illogical to imagine a dead
person below the grave controlling properties above his grave.” For this very
reason, the state and the lawmakers felt the need for drafting the „Rule against
perpetuity‟.

Perpetuity may arise under two circumstances: –

1. Transferor of property is deprived of the power of alienation.

2. Remote interest is created in the property but without the right of

alienation to the transferee.

However, a condition restraining alienation is void under section 10 of ‘The

Transfer of Property Act,’ (TPA), and remote interest is governed by section
14 of TPA.

Rule against Perpetuity

Section 14 of the „The Transfer of Property Act, 1882‟ (TPA) is rightly called
‗Rule against perpetuity‘ as it limits the maximum time period beyond which
property cannot be transferred. Starting from the date that the transferor
transfers the property + lifetime of the last prior interest holder‘s + gestation
period of the unborn beneficiary + 18 years, ( „Age of majority of persons
domiciled in India‟ under section 3 of The Majority Act, 1875). This period is
called the perpetuity period, and vesting of the property in the transferee
cannot be postponed beyond this limit.

The above transfer is contingent to many other conditions viz. sections 5, 10,
13, 15, 16, 18 and 20 of TPA. However, it is to be borne in mind that section
18 of TPA allows transfer in perpetuity for benefit of public, and so provisions
of section 14 & 16 do not apply in such cases.

Understanding section 13, 14 & 16 of TPA

These sections are complex and intertwined, so we will do ourselves a favor by

breaking them threadbare.

Section 13 TPA

“Transfer for benefit of unborn person – Where, on a transfer of property, an

interest is created for the benefit of a person not in existence at the date of the
transfer, subject to prior interest created by the transfer, the interest created for
the benefit of such person shall not take effect, unless it extends to the whole of
the remaining interest of the transferor in the property.”

1. Person in existence: To begin with, the ultimate beneficiary of the

transfer is an unborn person, who is not yet in existence. Child may not
be physically born, but from conception itself, he is considered as a
person in existence. Transfer of interest in property is valid from the day
of conception, though the same shall vest on birth of such child.

2. Prior Interest: Section 5 of TPA mandates transfer of property inter vivos

or between living persons only. Since, the transferor wishes to pass
interest on to a person not in existence, to overcome this predicament a
prior interest is created in favor of living person on the date of transfer.

3. Whole remaining interest: Prior interest transferred to a living person is

lifetime interest, which means he can enjoy the benefits of the property
without alienation. In other words, transferor transferred limited and not
absolute interest. The remainder interest in the transferred property is
the right of alienation, which is still held by the transferor. For the
transfer to be valid in the hands of final beneficiary this right of
alienation plus prior interests together should reach the beneficiary.
Additional salient features of Section 13 TPA

1. Transferor cannot fetter the free disposition of the property in the hands
of more than one generation.

2. Section 13 does not prohibit successive interests, limited by time or

otherwise, created in favor of several persons living at the time of
transfer. Prohibited is grant of interest, limited by time or otherwise,
to a person not in existence.

3. After the last life-interest if more than one, property must rest in
someone for resting cannot be perpetually delayed.

When all the above conditions are met, then only the transfer is held to be valid
under section 13.

Section 14 TPA

“Rule against Perpetuity – No transfer of property can operate to create an

interest which is to take effect after the life-time of one or more persons living at
the date of such transfer, and the minority of some person who shall be in
existence at the expiration of that period, and to whom, if he attains full age, the
interest created is to belong.”

1. After the life-time: Here again, to safe-guard against violating section 5

of TPA, transfer of property has to take place latest; during life-time of
prior interest and conception of beneficiary, otherwise the transfer shall
fail.

2. Attains full age: The degree of transfer of interest in favor of beneficiary

can be broken into 3 stages. On conception interest is created, which
becomes vested interest on birth i.e. as per section 20 of TPA, and on
attaining age of majority; absolute interest that includes enjoyment of
property, possession, alienation etc.

Section 16 TPA

“Section 16: Transfer to take effect on failure of prior interest – Where, by reason
of any of the rules contained in sections 13 & 14, an interest created for the
benefit of a person or of a class of persons fails with regards to such person or
the whole of such class, any interest created in the same transaction and
intended to take effect after or upon failure of such prior interest also fails.”

1. Prior Interest fails under section 13 & 14: Before section 16 comes
into operation, the prior interest created should fail. This is because it
does not fulfil either of the conditions mentioned in section 13 & 14 for a
person or a class of persons.

2. Fate of second interest: On failure of prior interest, the second interest

which too is created in the same transaction, and was to be
exercised after or on failure of prior interest, shall fail for all purposes.

Per contra under 15 of TPA, if interest is created in the same property for more
than one person, then it shall be valid for only those who fulfil the conditions of
section 13 & 14 and fail for the rest.

Application of law against perpetuity in the practical aspect

To understand the same let us study the 1934 judgment of High Court of Oudh
in case titled Girjish Dutt vs. Data Din. Brief facts of the case are that
one Mt. Sugga made a gift deed in favor of Mt. Ram Kali who is the daughter of
Data Din, son of Mt. Sugga‘s real brother. The gift contained three alternative
contingent grants independent of each other namely: –

“12…..(1.) A grant to Mt. Ram Kali for life, with remainder to her sons and
grandsons, dependent upon the contingency that there was a son or a grandson
or sons or grandsons alive at the time of her death. (2.) A grant to Mt. Ram Kali
for life, with remainder to her daughters for life, dependent upon the
contingency that there were no sons or grandsons alive at Mt. Ram Kali‟s death,
but that there was a daughter or daughters alive at that time, and (3.) A grant to
Mt. Ram Kali for life, with remainder to Data Din, dependent upon the
contingency that there were no sons or grandsons or daughters alive at the time
of Mt. Ram Kali‟s death.”

Infra table about the gift deed: –

Validity of Gift deed as per Section 13 & 16 of TPA

Interest
transferred Ultimate beneficiary &
Contingency TPA section
Life or Interest Transferred.
Absolute
Remainder / Absolute
Life interest in
interest in favor of
One favor of Mt. Transfer valid u/s 13
son/grandson if alive at
Ram Kali
the death of Mt. Ram Kali
Violates Section 13, as
Life interest in favor of
Life interest in whole of the remainder
daughters i.e. in the
Two favor of Mt. interest of Mt. Sugga
absence of sons /
Ram Kali has not been transferred
grandsons.
to daughters.
No issue of Mt. Ram Kali
i.e. neither sons,
grandsons or daughters. In the absence of any issue
Life interest in Therefore, absolute the whole of remainder
Three favor of Mt. interest is transferred to interest u/s 13 fails, and so
Ram Kali Mr. Data Din father of Mt. does transfer to Mr. Data
Ram Kali Din u/s 16.

“18. Admittedly Mt. Ram Kali had no children at the time when the gift was made
in her favor and she died issueless. The gifts therefore in favor of her male or
female descendants were in favor of unborn persons. These gifts were also
clearly subject to the prior interest created by the same transfer in favor of Ram
Kali. Section 13, Transfer of Property Act, requires that such a transfer in order to
be valid must extend to the whole of the remaining interest of the transferor in the
property. As the gift over in favor of the sons or grandsons of Mt. Ram Kali
related to the absolute interest, it was clearly valid. It seems equally clear that
the gift over to the daughters was void because the transfer in their favor related
merely to a limited interest….”

“19. If we analyze the section it will be seen that three conditions are necessary
for its implication: (1) There should be an interest created for the benefit of a
person or a class of persons which must fail by reason of the rules contained in
Sections 13 and 14; (2) there should be another interest created in the same
transaction; and (3) the other interest must

be intended to take effect after or upon failure of the prior interest. We have
already held that the interest created for the benefit of the daughters fails by
reasons of Section 13, T.P. Act. It is also clear that the interest created in favour
of Data Din is an interest created in the same transaction. There can therefore
be no doubt about the first two conditions being satisfied. The only question is
whether the interest created in favour of Data Din was one intended to take
effect after or upon failure of the prior interest created in favour of the daughters.
It is agreed by both parties and is also clear from the terms of the will that the
gift in favour of Data Din was not intended to take effect after the gift in favour
of the daughters. The intention of the donor clearly was that Data Din should get
the property only in case the gift in favour of the male-descendants and the
daughters of Ram Kali failed. The case therefore seems to be fully covered by the
words “upon failure of such prior interest.”

- Indian Succession Act (ISA) & TPA

Sections 113, 114, 115 and 116 of Indian Succession Act, 1925, (ISA) are
true reflections of sections 13, 14,15 & 16 of TPA. This is because, transfer of
property also takes place under „Indian Succession Act,
1925‟ (ISA). It regulates intestate and testamentary succession i.e.
when testator a person makes a will before his death for the disposition of his
property or when he dies without making a will. A will comes into operation
only on the death of the testator.

Exceptions to rule of perpetuity

1. Section 18 of TPA provides protection from rule against perpetuity when

the transfer is in favor of public viz. advancement of religion, knowledge,
commerce, health, safety or any other object beneficial to mankind.

2. Does not apply to personal agreements that do not create interest in

property.

3. Renewal of lease agreements.

4. Covenant for redemption of property under mortgage.

5. Charge created over property, as this does not amount to transfer of

interest.

6. Contract of pre-emption.

Conclusion

The rule against perpetuities limits the duration by imposing certain

restrictions on the use, enjoyment and transfer of property. Nevertheless, the
rule against perpetuity along with relevant sections of TPA are complex and
abstract in its application, especially when seen through the eyes of the
transferor. Despite the best of intentions, the ultimate beneficiary or grantee
may be deprived of their interests through an inadvertent choice of words
while drafting the pertinent covenant. It shall not be an understatement that the
majority of the so-called learned advocates drafting such instruments are
themselves incompetent to understand the subtilties of the law.

Q10. What is doctrine of ‗Lis Pendens‘ and Section 52 of TOPA.

Introduction

The Transfer of Property Act, 1882, was promulgated embodying the principles
of English Common Law, namely equity, good conscience, and justice
underscored by the provisions of the Indian Contract Act, 1872, and came into
force from July 1, 1882.

Property or ownership are synonymous with each other, and ownership

interest is automatically created when a right is vested.

Ownership has to be:

1. Indefinite in point of the user – The owner may use the property subject
to some restrictions without injuring the rights of other persons, but at
no point in time will it negate the ownership in the property even if the
rights may be curtailed.

2. Unrestricted in the point of disposition – The owner has an unfettered

right to dispose of the property. However, there are exceptions to this as
minors (those below the age of 18) can be owners but cannot alienate the
property. Also, the Government may acquire the property for specific
purposes irrespective of the property owner‘s consent.

3. Unlimited in the point of duration – As long as the property in question

exists, the property rights are heritable. Again, the Government can, at
any point, acquire the property and terminate the owner‘s rights.

The Transfer of Property Act covers transfers inter vivos, i.e., between two
living persons. A transfer is defined as an act by which living persons convey
the property to one or more living persons.

The transferee can get the transferor‘s rights and nothing more, where the
owner is the transferor, and the transferee is the person or persons to whom
the rights are conveyed.

The first amendment to the Transfer of Property Act, 1882, was in 1929,
whereby the definition of living persons was amended to include companies,
associations, and bodies of individuals, whether incorporated or not.

Origin of the doctrine of Lis Pendens

The doctrine of Lis Pendens has its origin by Lord Justice Turner in Bellamy Vs.
Sabine, 1857 Where the Court observed the following:

“This is a doctrine common to law and equity courts, which I apprehend, on the
grounds that, if alienation pendente lite was allowed to prevail, it would simply
not be possible for any action or suit to be resolved successfully. In any case, the
Plaintiff will be responsible for the Defendant who alienated the property before
the judgment or the decree and must be obliged, according to the same course of
action, to initiate these proceedings de novo.”

The facts of the above case were the following:

A person, Mr X, sold an immovable property to Mr A.

Mr X‘s son, Mr Z, who was the heir of Mr. X, sued Mr A in a competent court to
declare the sale as void.

However, while this litigation was pending, Mr. A sold the property to Mr. B,
who did not take notice of the suit.

The Court held that the son Mr. Z was entitled to the property and the sale was
set aside.
Mr. B who purchased the property from Mr. A does not get any title as he
purchased the property from someone who did not have the title and therefore
cannot convey it.

Therefore, evolving the principles of common law and Section 52 of The

Transfer of Property Act, 1882, was born and is as follows:

When there is an ongoing lawsuit in any Court having authority within the limits
of India, a suit or proceeding in which any right to immovable property is
precisely in question, the property cannot be conveyed by any party to the
lawsuit which can influence the rights of any other party thereto under any order
which may be rendered therein, unless under the jurisdiction of the Court and on
such conditions as it may enforce.

Lis Pendens literally means ‗litigation pending‘ or ‗pending suit‘ and is drawn
from the concept based on the maxim ―Pendente lite nihil innovature‖ which
means that nothing new must be introduced while a litigation or suit is
pending.

This Doctrine states that the Transfer of property shall be restricted when there
is a litigation pending on the title or any rights that arise directly thereof
involving an immovable property.

The suit commences the moment a complaint is presented or the day of

commencement of proceedings in the appropriate Court and shall be
terminated by Order of the Court.

The Court may, however, permit any party to the suit to transfer the property
on such terms which it may think fit and proper to impose.

The sale of immovable property can take place through private negotiations,
but the said Transfer will be subservient to the verdict of the competent Court.

Now that the doctrine is clear, an inevitable question that may arise is – what is
the objective or purpose of this doctrine? Let us read on to find out.

The purpose of the doctrine of Lis Pendens

This Doctrine is essential as it prevents Transfer of the title of any disputed

property without the Court‘s consent, there can be endless litigation, and it will
become impossible to bring a lawsuit to a successful termination if alienations
are permitted to prevail, and covenants are not imposed.

The ‗Transferee pendente lite‘ is bound by the verdict just as if he were a party
to the suit and the transfer shall be subservient to the result of the pending
lawsuit.

Let us understand the various conditions that need to be met for the doctrine to
apply:

Conditions for Applicability of the Doctrine as provided in Section 52

 A suit or proceeding is pending.

 The above suit is brought to a competent court within the jurisdiction.

 The right to the title of an immovable property is directly in question.

 There cannot be any collusion.

 The suit should directly affect the rights of the other party.

 The property in question is being transferred by either party.

Some examples for Non-Applicability:

 This does not apply to a private sale by a creditor who holds the right to
dispose of the property that is mortgaged to it even when the borrower
has a redemption suit pending.

 The Doctrine also does not apply when the property is not described
correctly, making it unidentifiable.

 In a maintenance suit, where the property is mentioned only so that

maintenance payments can be determined transparently; the Doctrine
does not apply when a right to the said immovable property is not
directly in question and alienations are thereby permitted.

 The Doctrine fails to apply when a Court orders restoration of immovable

property under the Civil Procedure Code, Order 21, Rule 63.

Understanding the jurisprudential evolution of this Doctrine- Case Laws

In Ayyaswami vs Jayaram Mudaliar AIR 1973 SC 569, the Court held that the
purpose of this provision is not to deprive the parties of every just or fair
argument but rather to guarantee that the parties submit themselves to the
jurisdiction and authority of the Court which shall determine all claims that are
placed before it to the satisfaction of the parties concerned.

In the case of Hardev Singh v. Gurmail Singh, Civil Appeal No. 6222 of 2000, the
Court ruled that Section 52 of the Transfer of Property Act, would not make
void or unlawful any sale of the contested properties, but only puts the
purchaser beyond the binding limits of the judgment on the disposition of the
conflict.

In the case of Koyalee v. Rajasthan District, AIR 2009 Raj.28, the land in
question was originally registered in the name of the Plaintiff‘s husband. After
his death, his brother realised and knowing well that the wife of his brother was
alive and was the sole legal heir, filed a lawsuit pursuing the Khatedari rights,
and pursuant to this, the wife had to contest that she was the sole legal heir of
the recorded Khatedar. The brother further went on to transfer the land despite
the lawsuit that was pending, since this was done without seeking the Court‘s
permission the transfer was struck down under Section 52 of the Transfer of
Property Act as per the Doctrine of lis pendens.

In Vinod Seth v. Devinder Bajaj, 2010, though reiterating its power to exclude
the suit property from the limitations set out in Section 52 of the Act, it has
allowed the Respondent to make a pendente lite move. These exemptions
under Section 52 are, however, subject to certain conditions imposed by the
Court. In the case at question, the Plaintiff was a contractor who wished to
make a profit by constructing a building on the suit-land, and the Defendant
wanted to move it to a third party. A total of three lakh rupees was to be
deposited as a security by the Defendant to transfer the property in question,
The sum the claimant would have profited by. The Court had thus levied the
condition for the payment of that sum, which would make the pendente lite
transfer legitimate.

The Court‘s positions on this pendente lite-transfers issue are explained

in Ashok Kumar v. Govindammal and Anr, 2010. The Supreme Court of India
has here reaffirmed that a pendente lite cannot be transferred for a
property whose title is the subject of litigation.

These transfer payments would limit the rights of the party to whom the Court
would eventually have agreed that the property would be given the title. Where
the right of the pendente lite transferor to the property is upheld under the
decree of the Court, then the title of the transferee to the property is
disregarded. However, if the title of the pendente lite transferor is
acknowledged only for a smaller portion of the property, only for that portion of
the property can a transferor have the title. The Transfer of the title of the rest
of the land, for which there is no right for the pendente lite transferor, is
invalid. This means that the transferee cannot claim the title or any other
interest in the rest of the property. Finally, if the transferor was found to have
no right in the first place to the transferred land, then the transferor would also
not have gained rights on this property.

The Supreme Court discussed and amended the law concerning the Doctrine of
lis pendens in Har Narain v Mam Chand, in compliance with Section 47(2) of
The Registration Act, 1908. The lis pendens doctrine states that no fixed
property may be transferred when a lawsuit relating to it is pending. Under
Section 47, from the date of execution, a recorded sale deed of a fixed property
is considered to exist upon registration. The Court made it clear that the fiction
produced pursuant to Section 47 does not prohibit lis pendens from
functioning. Thus, if the civil action starts and is registered later, the Court
held that land sales are still subject to the principle of lis pendens.

Suggestions

To digitize all property records, while the Doctrine is necessary to ensure that
the property rights of the parties involved are protected, it is also imperative
that technology be employed so that the property title in question does not get
transferred while the case is pending. This can be achieved by the complete
digitalization of property records wherein all properties are accorded a property
identification number, this along with the fact that India has already created a
Unique Identification System for all its citizens via the Aadhaar card can be
combined to ensure that the integrity and sanctity of the data are never in
question. This will also help in avoiding cases where the property cannot be
identified.

When an encumbrance certificate (EC) is issued, it mentions any encumbrance.

This can be improved, so as to list any pending litigation(s) to alert the
registering authority and the parties concerned.

Conclusion

The doctrine of Lis Pendens is strictly based on the theory of necessity rather
than on the theory of notice governed by the principles enshrined in common
law, namely Justice, Equity and Good Conscience. It is, therefore, pivotal in
ensuring that justice is provided without injuring the rights of either party.

Q11. What is Doctrine of Election under Transfer of Property Act, 1882?

Introduction

Election simply means to choose. In legal terminology the Doctrine of Election

is based upon principle of equity and is an obligation imposed upon a party by
the court to make a choice between two inconsistent rights and that he should
not enjoy both.

Statutory Provision

The doctrine is dealt with under Section 35 of The Transfer of Property Act,
1882 (TPA).
 Essentials of the Doctrine Under Section 35

 The essentials can be enumerated as follows:

o The transferor professes to transfer property which is not his own.

o In the same transaction, benefit is conferred upon the owner of the property.

o The owner must either confirm the transfer or dissent from it.

o In case he dissents, he shall relinquish the benefit so conferred.

 The benefit so relinquished reverts back to the transferor or his representative

where:

o The transfer is gratuitous and transferor before election dies,

becomes incapable of making a fresh transfer and

o The transfer is for consideration.

Then, the disappointed transferee has to be made good (compensated) the

losses equal to the amount of property attempted to be transferred.

 Transfer – Section 5 of TPA defines transfer as an act by which a living person

conveys property, in present or in future, to one or more other living persons, or
to himself, or to himself and one or more other living persons; and ―to transfer
property‖ is to perform such act.

 Transferor - A person who makes a transfer or conveyance of property.

 Transferee - A person to whom a conveyance is made.

Illustration:

The farm of Sultanpur is the property of C and worth Rs. 800. A, by an

instrument of gift professes to transfer it to B, giving by the same instrument
for Rs. 1,000 to C. C elects to retain the farm. He forfeits the gift of Rs. 1,000.
In the same case, A dies before the election. His representative must out of the
Rs. 1,000 pay Rs. 800 to B.

Disappointed Transferee

A transferee who chooses to reject the benefits conferred, dissents from the
transaction and can no longer take the property is a disappointed transferee.

Choice of Election

A person not entitled to a direct benefit but to an indirect benefit under the
transaction need not elect.

Case Law

 Valliammai V Nagappa (1967), the Supreme Court (SC) held that the question
of election arises only when the transferee takes the benefit directly under the
transaction.

Exception to the Doctrine

 Where a particular benefit is expressed to be conferred on the owner of the

property which the transferor professes to transfer, and such benefit is
expressed to be in lieu of that property, if such owner claims the property, he
must relinquish the particular benefit, but he is not bound to relinquish any
other benefit conferred upon him by the same transaction.
o This simply means that if someone offers a benefit in place of property during a
transfer and the property owner chooses the property, they have to give up
that specific benefit. However, they don't have to give up any other benefits
offered in the same transaction.

Mode Of Election

 Acceptance of the benefits by the person on whom they are

conferred constitutes an election if:

o He is aware of his duty to elect.

o He is aware of those circumstances which would influence the judgment of a

reasonable man in making an election, or

 He waives enquiry into the circumstances.

 In the case where the owner, after complying with the above-said provisions has
knowingly accepted the benefits, it signifies he has accepted the transaction. A
presumption is drawn towards acceptance where:

o He enjoys the benefit for two years without doing any act to express dissent.

o He does some act by which it is impossible to restore the parties to their

original position.

Illustration:

A transfers to B an estate to which C is entitled, and as part of the same

transaction gives C a coal-mine. C takes possession of the mine and exhausts
it. He has thereby confirmed the transfer of the estate to B.

Limitation Period

 Where the owner does not within one year after the date of the
transfer, signify to the transferor or his representatives his intention to confirm
or to dissent from the transfer, the transferor or his representative may, upon
the expiration of that period, require him to make his election.

o If he does not comply with such requisition within a reasonable time after he
has received it, he shall be deemed to have elected to confirm the transfer.

Effect Of Disability

In case of disability, the election shall be postponed until the disability ceases,
or until the election is made by some competent authority.

Case Laws

 Cooper v. Cooper (1873): The principle of the doctrine of election was

explained by the House of Lords in this leading case in following words:

 “... there is an obligation on him who takes a benefit under a will or other
instrument to offer full effect thereto instrument under which he takes a benefit ;
and if it‟s found that instrument purports to affect something which it had been
beyond the facility of the donor or settlor to eliminate, but to which effect are
often given by the concurrence of him who receives a benefit under an equivalent
instrument, the law will impose on him who takes the benefit the requirement of
carrying the instrument into full and complete force and effect.”

 Muhammad Afzal v. Gulam Kasim (1903), it is a landmark case on the topic

described below:
 Facts – On death of Nawab of Tank, the Government transferred cash
allowance to Nawab's second son. Nawab, during his lifetime had
already transferred villages to his second son for his maintenance.

 Question – Whether both transactions were a part of the same transaction, and
can doctrine of election be applied in this case?

 Verdict – Privy Council in this case held, as the second son acquired grants
through two different sources, they do not form part of same transaction and
second son cannot be put to election.

Application

The Doctrine is applicable to both Hindu Law as well as Muslim Law.

Concept Under English Law

 A transferee by electing against the transfer does not lose his benefit rather
he needs to compensate the disappointed person.

o However, under Indian law, such person has to forfeit the benefit.

 There is no limitation period prescribed for making the election under English
Law whereas under the Indian Law it is one year.

Conclusion

Doctrine of elections is based upon the Latin maxim ‘quod approbo non
reprobo’ which translates to ‗that which I approve, I cannot disapprove‘. A
person who elects thus cannot choose to select the part of instrument or
transaction that is beneficial to him and choose to reject the other part. As this
doctrine forms a part of the rule of estoppel, a person must also bear the
burden if he receives the benefit.

Q12. What is fraudulent under Transfer of Property Act, 1882?

Introduction

A fraudulent transfer is a property transfer made by a defaulter in an attempt

to defeat a creditor's collection efforts against the property. This usually
happens when a nonpayer attempts to sell the whole thing to anyone for a set
amount of money in order to keep his property out of the hands of his creditors.
If the court determines that the contract is a deception designed to defraud the
creditor, it will set aside the contract and order the person holding the property
to return it to the creditor.

Meaning

The concept of "fraudulent transfer of property" refers to an illegal transfer of

property with the intent to defraud or delay creditors. In the instance of
fraudulent property transfer, the debtor intentionally deprives the creditor of
his lawful and just entitlements. Most fraudulent transfers occur in the context
of a debtor-creditor relationship. Section 53 of the Transfer of Property Act of
1882 recognises the regulations governing fraudulent property transfers.

A constructive fraudulent transfer is the other form of fraudulent transfer. This

is relocation when a person does not obtain "rationally equivalent value" in
exchange and runs away with insufficient property to pay bills as they come
due.
 Essential Elements

The following are the essentials of a fraudulent transfer under the Transfer of
Property Act −

 The transferor makes the property transfer.

 It should be immovable property.

 The transfer is done without consideration.

 The transfer is done with the goal of defrauding a subsequent transferee

and defeating or delaying his creditors.

 Such a transfer may be voidable at the option of the subsequent

transferee.

Exceptions

The following are the exceptions to fraudulent transfers under the Transfer of
Property Act −

 Acted in good faith, and

 The transfer was for consideration.

Objective of Fraudulent Transfer

Section 53 of the Act is applied when an immovable property is fraudulently

transferred by a transferor with the unjustified intention of defrauding the
creditors' interests in such a way that they are defeated or delayed. The
legislature created this legislation in order to protect creditors' financial right
to acquire their lent amount.

- Burden of Proof

The burden of proving that a transfer is fraudulent falls on the creditors under
Section 53 of the TPA, 1882, as they are attacking the debtor with this section.
Once the creditor establishes that the transfer was made fraudulently in order
to defeat or delay his claims, the burden shifts to the transferee to prove that he
acted in good faith, is a bona fide purchaser for value, and was not a party to
the fraud. As a result, the transferee can use this section as a shield to defend
himself, and the creditor can use it to attack the debtor.

- Scopes of Fraudulent Transfer

Major scopes of fraudulent transfer are −

 Section 53 of the Act only applies to immovable property and does not
apply to moveable property.

 A creditor files a suit to take advantage of the provision not in an

individual capacity but in a representative one that includes subsequent
creditors.

 This section doesn't really declare a transaction void from the start, but it
can be considered voidable at the option of the creditor who has been
defrauded and defeated in his financial interests.

The Madras High Court observed in Saroj Ammal v. Sri Venkateswara

Finance Corp. (AIR 1989 NOC 4 Mad) that the essential ingredient to
invalidate a transfer under Section 53 of the Act might be inferred as a
fraudulent intention to defeat or delay the creditors. The transferee must
convey the fraudulent intent in order to help the transferor carry out this
intention.

Effects of Section 53 of TPA, 1882

If the creditors do not choose to avoid a fraudulent transfer of property, the

transfer may be valid between the debtor and purchaser. When a substantial
portion of a transfer is fraudulent, the whole transfer is considered fraudulent.
Where only a part of the consideration was owed to the creditor and the rest
was fictitious, the whole transfer must be void.

Case Law

Kanchanbai vs. Moti Chand, AIR 1967 MP 145

In this case, the court stated that the term "creditors" might also refer to a
single creditor. The provision would be attracted even if only one creditor was
defrauded or intended to be defrauded. The transfer was made in this case to
fail and delay the creditor's claim. As a result, section 53 would be applicable.

Dr. Vimla vs. Delhi Administration, 1963 Supp. (1) CR 585

The Supreme Court observed in this decision that the term "fraud" has two
elements: deceit and injury to the defrauded person. The harm does not just
result in economic loss. It also involves the deprivation of property or money,
as well as harm to a person's body, mind, and reputation.

Conclusion

The extent of fraudulent transfers is full of potential issues and traps. But still,
there would be no poverty for asset protection thinking if the Fraudulent Act
did not exist. When a creditor is about to begin collection proceedings, a debtor
may have only left his or her assets to family and friends, leaving the creditor
with no useful performance to underwrite commerce.

And, while piece debtors may complain about the broad scope of the fraudulent
assign act, it is ultimately a very necessary law to ensure the sustainability of
technical transactions as well as in part disposition and business.

Q13. What is Doctrine of Subrogation?

Introduction

Did you know the doctrine of subrogation is quietly at work when any property
is caused loss or damage by any third party? What is this doctrine of
subrogation? To explain simply, when someone else takes your place and
demands reimbursement from the party behind the cause of damage or loss,
this is subrogation. In subrogation, the rights to seek claims are transferred to
another party. This doctrine helps ensure that the person behind the loss or
damage is held liable and pays for the financial burden that the party has
caused by the loss or damage to the property. The integral players in the
doctrine of subrogation are the policyholders, the insurer, and the liable party.
As the other party is putting themselves in someone else‘s position, the rights
and duties are also now in their ownership, similar to those of the owner.

- What is subrogation and the doctrine of subrogation

Subrogation is a legal principle where the third party assumes the

responsibility of the other party in relation to debt collection or damages. A
right of subrogation can arise by agreement, operation of law, or statute. The
doctrine of subrogation is commonly seen in countries that inherit the common
law system. The legal doctrine entitles one person to enforce the rights that are
revised or substituted for the other party‘s benefit.

There is a long history behind the doctrine of subrogation. The case of John
Edwards and Co. v. Motor Union Insurance Co. Ltd. (1922) 2 KB 249 (CA) is said
to have shaped the origin of the doctrine of subrogation. The doctrine of
subrogation was credited to natural justice, a creature of equity, by several
historians in the past. The doctrine can be seen commonly in insurance law,
but it can also be seen and applied in various other types of legislation, such as
insolvency laws, contract law, etc. The word subrogation has a Roman origin,
which means to replace one party in the place of another or when someone is
substituted for another concerning a legal claim or a legal right. The rational
basis for the doctrine of subrogation evolved in the case of Lord Hardwick‘s
chancellorship.

The doctrine of subrogation has roots in Roman and French law. It evolved
from the Roman law principle „cessio actionum‟, which allows another party to
sue on someone‘s behalf and keep the trial winnings. The doctrine was further
developed under Lord Hardwick‘s chancellorship in the case of Randal v.
Cockran [Ves. Sen. 98, 27 Eng. Rep. 916 (1748)]. There are two ways by which
the right of subrogation arises: one is by operation of law, and the other is by
the presence of any written agreement or any part of a contract.

- Importance of the doctrine of subrogation

The doctrine of subrogation plays a crucial role in India‘s legal system due to its
various benefits:

 One of the key reasons for implementing the doctrine of subrogation is

for cost recovery. The doctrine of subrogation allows insured parties to
recover costs and claim damages, reducing their financial burden.

 With the doctrine of subrogation in play, the concept of fairness is also

present. The doctrine promotes fairness by ensuring that the party
causing the loss or damage bears the financial consequences.

 The subrogation principle also aids in reducing and mitigating risks. In

the doctrine of subrogation, the responsible party is held accountable for
their actions, which also discourages negligence.

 The insured parties are entirely protected under the doctrine of

subrogation. The doctrine provides comprehensive protection for insured
parties, helping to maintain their financial security.

 For the insurance sector, subrogation provides stability by promoting

effective cost management, balancing risk exposure, and fostering
viable business models.

- Doctrine of subrogation under the Transfer of Property Act, 1882

Meaning

The Transfer of Property Act of 1882 (TPA Act, 1882) in India governs all
property-related transactions, including gifts, sales, leases, and mortgages. One
key concept in this Act is the doctrine of subrogation, which allows for
substituting one party for another in a mortgage agreement. This doctrine is
based on justice, equity, and good conscience principles.
- Essentials of a valid claim of subrogation

The following are the essentials of a valid claim of subrogation:

1. A claim can only be made by a co-mortgagor if they repay the other

mortgagor on the property. On the other hand, a mortgagor cannot claim
the subrogation because repaying the debt is his duty in the first place,
and making a payment will only fulfil that duty.

2. For a claim to be valid, it must be fulfilled in whole. A partial subrogation

is not considered valid. The redemption must be done as a whole.

3. To demand subrogation, the presence of a legitimate interest is

very important.

4. The redemption of the property must be confirmed in writing, stating

that the debt has been repaid and the rights will be subrogated.

- Relevant sections

The doctrine of subrogation, added to the TPA Act of 1882 in 1929, is outlined
in Section 92. This section, rooted in Roman law, applies the principles of
equitable subrogation, which existed in India before the amendment. According
to Section 92, anyone other than the mortgagor or co-mortgagor who redeems a
mortgaged property will have the same rights as the mortgagor or co-mortgagor,
including rights related to the sale, redemption, and foreclosure of the property.

There are two types, as per Section 92 of the TPA Act of 1882. The two types of
subrogation are:

 Legal subrogation

Legal subrogation, commonly resulting from the operation of the law, is based
on the principle of reimbursement. It applies when one party makes a payment
on behalf of another party who is legally bound to make that payment. The
party making the payment is then entitled to reimbursement. The following
parties can claim legal subrogation: a co-mortgagor, surety, purchaser of equity
of redemption, and puisne mortgagee.

The purchaser
Surety of equity in Co-mortgagor Puisne mortgagee
redemption

Under Section 91 of the If a co-mortgagor The prior

TPA Act of 1882, a surety pays both their mortgagee has the
A purchaser of
who repays a loan on a share and the right to sue for
equity in
property is entitled to share of another redemption of an
redemption
that property. The surety mortgagor, they earlier mortgage if
becomes the
is then subrogated to the obtain the right to they win a prior
owner of the
position of the creditor, subrogation in decree without
property.
assuming all their rights place of the other suing the prior
and liabilities. mortgagor. mortgagee.

 Conventional subrogation

If the person who is repaying the debt has no direct interest in the property,
conventional subrogation arises when the parties enter into a contract. The
contract can be written as well as registered, expressed, or inferred in nature.
 Case laws

In the case of Bisseswar Prasad v. Lala Sarnam Singh [(1910) 6 Cal. LJ 134], the
Calcutta High Court elaborated on the doctrine of subrogation, a principle of
equity jurisprudence. This principle, which can be either implied or expressed,
does not depend on the privity of the contract. It applies except when equity is
imported into a transaction, thereby implying a contract. The concept of natural
justice is used in conjunction with the circumstances and facts of each case.‖

Subrogation does not apply if the mortgagor redeems the condition. If the
mortgagor discharges the prior debt, it will not be entitled to subrogation or its
associated remedies and rights. This was demonstrated in the case of Narain v.
Narain, (1930), where the mortgagor discharged their obligation by settling the
claim on the property they had created.

The Madras High Court ruled that when a subsequent mortgagee redeems the
prior mortgage, the reason for the redemption is irrelevant; it can be for the
benefit of the mortgagor or any other reason. The applicability of Section 92 of
the Transfer of Property Act, 1882, is crucial only for proving the payment and
demonstrating that the mortgagee made the payment, as established in the
case of Nagayya v. Govindayuyar [AIR 1923 Mad 349].

Conclusion

The doctrine of subrogation helps in making sure that there is efficiency and
fairness in the matter. The subrogation principle acts as a powerful tool for
recovery. The right use of the doctrine of subrogation helps in adhering to the
rules and regulations. With this doctrine in use, the insurer can step into the
shoes of the insured and seek recovery from the party that is responsible for
the damage or loss caused. The doctrine of subrogation will ensure that the real
party responsible for causing the loss bears the financial burden for the same,
which also prevents unjust enrichment. In conclusion, both subrogation and
assignment play vital roles in matters of insurance; they differ significantly in
terms of their meaning, rights, transfer of interests, agreement requirements,
and the parties involved.

Q14. What is doctrine of promissory Estoppel ? And its applicability in India ?

Introduction

The doctrine of promissory estoppel is an equitable doctrine evolved by equity

to prevent injustice. The doctrine estops the promisor to retract from his
promise in case while acting on the promise of the promisor, the promisee
alters his/ her position. It is based upon principles of justice, fair play, and
good conscience. The doctrine is different from the rule of estoppel spelled out
in Section 115 of the Indian Evidence Act, 1872 as said Section talks about the
representation made as to the existing facts whereas the promissory estoppel
deals with the future promises. The doctrine is neither in the realm of contract
nor in the realm estoppel1.

The question whether doctrine is applicable against Government or not

assumes more importance in view of the Article 229 of the Constitution of India
which provides for the procedure for execution of contracts by the Government
and requires the same to be compulsorily recorded in the form of a formal
contract. And also, since the doctrine of promissory estoppel dilutes the
principle which require consideration to enforce a contractual obligation2. The
Supreme Court in catena of judgments has held that the promissory estoppel is
applicable against the Government, but with the passage of time certain
exceptions are developed to this general rule. Thus, where the Government
makes a promise knowing or intending that it would be acted on by the
promisee and, in fact, the promisee, acting in reliance on it, alters his position,
the Government has been held bound by the promise and the promise is held to
be enforceable against the Government at the instance of the promisee
notwithstanding that there is no consideration for the promise and the promise
is not recorded in the form of a formal contract as required by Article 229 of the
Constitution.

In Collector of Bombay v. Municipal Corporation of the City of Bombay3 the

Municipal Corporation removed old markets from a certain site and vacated it
in the year 1865 upon the assurance of the Government who approved and
authorized the grant of another site to the Municipality. The Government also
assured the Municipality that no rent should be charged from it. The
Municipality on the assurance of the Government gave up the required site and
erected new markets on the new site after spending a sum of Rs. 17 lakhs. The
Government thereafter in the year 1940 assessed the new site to land revenues.
The Municipality challenged the actions of the Government and the Supreme
Court held that the Government, under the circumstances of the case, has lost
its right to assess the land in question by reason of the equity arising in favour
of the Municipality Corporation because Corporation has taken possession of
the land in terms of assurance given by the Government. This is the first
instance of doctrine of promissory estoppel deployed against the Government by
the Supreme Court where the Court did not allow the Government to go back
on its representation and charge the land revenues from the Municipality.

In the case of Union of India v. Indo-Afghan Agencies4, the Textile

Commissioner published a scheme called the Export Promotion Scheme
providing incentives to exporters of woollen goods by granting Import
Entitlement Certificate for full value of goods exported by the exporters.
Relying upon the assurance under the Export Promotion Scheme the Petitioner
therein exported the woollen goods of certain value. However, contrary to the
terms of the scheme and assurance thereunder, the Petitioner was issued an
Import Entitlement Certificate for an amount lesser than the full value of goods
exported by it. The Supreme Court while essentially invoking doctrine of
promissory estoppel against the Government held that the Petitioner had acted
upon the unequivocal promises held out to it by the Textile Commissioner and
exported goods on the specific assurance given to it and hence the
Commissioner is bound by the assurance given thereof and obliged to carry out
the promise made thereunder.

In another case of Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. and
others5 the Government gave assurance to the Petitioner therein that it will be
entitled to exemption from sales tax for three years from date of commencement
of production and based on the assurance the Petitioner set-up a vanaspati
plant after taking finance from various financial institutions. The Supreme
Court enforced the assurance given by the Government by invoking the
doctrine of promissory estoppel against the Government.

- Circumstances under which the doctrine of estoppel cannot be applied against

the Government

i. Doctrine of promissory estoppel cannot be applied to aid to compel

Government to carry out a representation or promise which is contrary to
law- There is no promissory estoppel against law. This exception was first
laid down by the United States Supreme Court in Federal Crop Insurance
 Corporation v. Merrill6 wherein the promise made by the Government
that even reseeded wheat is insurable was held to be not enforceable
against the Government since the crop insurance regulations prohibited
insurance of reseeded wheat. The promise being contrary to the wheat
crop insurance regulations was held to be not binding on the
Government. The Government being a non-natural person is basically
dependent upon its officers and agents, therefore as a rule of prudent the
government is not bound by the promise of its officers and agents who
without authority enter into agreements to do what the law does not
sanction or permit7.

The exception is well recognized in India also. The Supreme Court of

India in Kasinka Trading v. Union of India8 while adjudicating the
applicability of the doctrine of promissory estoppel against the
Government concluded that the doctrine cannot be used to compel the
Government to carry out a representation or promise which is contrary to
law or which was outside the authority or power of the officer of the
Government to make.

In Shree Sidhbali Steels Ltd. v. State of U.P.9 it has been observed by the
Supreme Court that there is no promissory estoppel against the settled
proposition of law therefore, Government cannot be compelled to do
something which is not allowed by law or prohibited by law.

ii. Public interest prevails over promissory estoppel - The Courts in India
has in various judgments held that the doctrine of promissory estoppel
cannot be invoked in the abstract against the Government and the courts
are bound to consider all aspects including the public good at large. In
Shrijee Sales Corporation v. Union of India10 it was held by the Supreme
Court that doctrine may be applicable against the Government but its
determination hinges upon balance of equity or public interest. And in
case there is a supervening public interest, the Government would be
allowed to change its stand and it would then be able to withdraw from
representation made by it which induced persons to take steps which
may have gone averse to the interest of such person on account of such
withdrawal.

In STO v. Shree Durga Oil Mills11 the Government was allowed to retract
from its representation on the ground of public interest. The Supreme
Court held that the public interest must override any consideration of
private loss or gain.

In another case of State of Rajasthan v. Mahaveer Oil Industries12 the

Supreme Court has held that the Government can withdraw the
representation if public interest so requires.

Conclusion

Thus, it can be safely concluded that the doctrine of promissory estoppel which
has been also called equitable estoppel is applied against the Government. But
under certain circumstances as discussed above, the Government (with due
regard to the doctrine of executive necessity) can be exempted from the
application of the doctrine of promissory estoppel even though the person may
have acted upon the representation and altered his position.
Q15. What is Doctrine of Marshalling and Contribution?

In the Transfer of Property Act, section 56, 81 and 82 deals with the doctrine of
marshalling and contribution. Marshalling means arranging things, systematize,
or regulate things. Contribution means providing money for a common fund.

Introduction

Marshalling means arranging things, systematize, or regulate things which

mean the things arranged in a proper manner or order. In the Transfer of
Property Act, section 56, 81 and 82 deals with the doctrine of marshalling and
contribution. According to section 56 of the transfer of property act, the
marshalling applies on seller and buyer. Section 56, the rule of marshalling by
the subsequent purchaser only deals with the sale not mortgage. Section 56
incorporates the rule of marshalling by a purchaser. And for a mortgage,
section 81 is the rule of marshalling in which the subsequent mortgagee has
the right to claim to marshal. The right of marshalling securities is not
absolute.

The rule of contribution described in section 82 of the transfer of property act.

The meaning of the rule of the contribution means providing money for a
common fund. The doctrine of marshalling and contribution are very vital
section (81, 82) for the transaction of the mortgage.

Doctrine of Marshalling

Marshalling means arranging something. Section 81 of the transfer of property

act says that if the owner of two or more properties mortgages them to one
person and other property mortgages to other people, the new mortgagee is in
the absence of a contract to the contrary, entitled to have the mortgaged debt
satisfied out of the properties not mortgaged to him, so far as the same will
extend, but not to prejudice the rights of the prior mortgagee or persons
claiming under him or of any other person who has for consideration acquired
an interest in any of the properties. The right given to the subsequent
mortgagee under this section contemplates a situation where
a mortgagor, mortgages more than two or more than two properties firstly to a
mortgagee and after that mortgages some of these properties to the other
person.

For example-

· X mortgages properties A, B and C to Y for securing a loan of 30,000 rupees.

· After that X mortgages property B to Z for securing another loan of 10,000

rupees.

In this Y is the first mortgagee on properties A, B and C which are securities for
a loan of 30,000 rupees. And property B mortgages to X for loan 10,000 rupees.
Here Y is the prior mortgaged and Z is the subsequent mortgagee. The right is
given to Z (subsequent mortgagee) entitles him to say that the loan of rupees
30,000, it should be satisfied out of sale proceeds of properties A and B only
and it is not from C which has been mortgaged to him. In the case, A and B
could be sold for less than 30,000 rupees, property C mat be sold to complete
the amount. Although Z is a subsequent mortgagee and his claim is not before
the Y but Z has right of marshalling or in other word he has right to arranging
the securities in his favour.

According to this, the subsequent mortgagee under section 81 has right of

marshalling securities.
- Here the right of marshalling securities is not absolute, it follows some
conditions-

1. The mortgagees may be two or more than two-person and the mortgagor
must be same.

2. Mortgagor mortgages two or more than two properties to another new

mortgagee without prejudice the prior mortgagee.

3. There exists not a contract to the contrary.

4. The new mortgagee entitled to have the mortgage debt satisfied out of the
property.

5. At last new mortgagee must not be prejudiced to the first mortgagee as well
as a third person or other person claiming as the purchaser.

Landmark Cases

In the case of Devatha Pullaya v. Jaldu Manikyala Rao[1], where a puisne

mortgagee has taken the mortgage expressly on condition of discharging
certain amount due on the prior mortgage but fails to fulfil that term, he cannot
exercise the right of marshalling.

In the case of Fiatallis North America, Inc Et Al v. Pigott Construction Limited Et

Al[2]held that there must be a single or common mortgagor or debtor.

In the case of Nova Scotia saving & loan v. O‟Hara et al[3], held that the
doctrine, whose object is to achieve fairness, will not be applied to the prejudice
of the third party.

Section 82, Contribution to Mortgage-Debt

Contribution means providing money for the common fund. Section 82 of the
transfer of property act deals with the rules relating to the contribution of
money towards mortgaged debt. It is the right of a person who has discharged a
common liability to recover proportionate share from others. The doctrine of
contribution requires that the persons under common liabilities that liabilities
equitable.

Section 82 contemplates a situation in which there are two or more than two
mortgagors who take a common debt by mortgaging different properties in one
property. The nature of the doctrine of contribution is based on the principles of
equity, justice and good faith or good conscience. Each mortgagor or debtor
must be liable to contribute to such common debt. When two or more
properties of different persons are mortgaged to secure a loan, the mortgagee
has the right to recover the debt from the property of any one person.

- Rules of Contribution

1. The mortgaged property belongs to two or more persons.

2. One property is mortgaged first and then again mortgaged with another
property.

3. Marshalling supersedes contribution.

Difference Between Doctrine of Marshalling and Contribution

Doctrine of Marshalling

 The right of marshalling is available to mortgagees.

  It settles right of subsequent mortgagees.

Doctrine of Contribution

 Contribution determines the right of one mortgagor against other

mortgagors.

 It rights of mortgagors inter se.

Conclusion

The doctrine of marshalling and doctrine of contribution is a very important

section (81, 82) for the transaction of the mortgage. Marshalling is the right of
the subsequent mortgagee and the contribution to debt and in other words, it is
the right of the co-mortgagors of several shares in one property. This is referred
to as the scheme of ratable distribution. The nature of the doctrine of
contribution is based on the principles of equity. Both the section plays an
important role for a mortgage.

Q16. What is mortgage of Immovable Property in India ?

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. Transfer of Property Act deals with Mortgage in India.

INTRODUCTION

Mortgage is French term which means „death contract‟. The term death
contract means that the pledge (promise, bailment, and guarantee) ends only
when the loan is repaid, the obligation is fulfilled or when the borrower takes
over and/or sells the collateral, the mortgaged property by way of foreclosure.

According to the Bouvier‘s Law Dictionary (8th) Edition, “Mortgage” is a

conditional conveyance of land designed as a security for the payment of
money, the fulfilment of some contract, or the performance of some act, and to
be void upon such payment, fulfilment or performance. Mortgage works as a
security of the loan amount. It is way to secure profit for the bank and/
financial institutions and it is the way of getting loans for the common people,
builder and/or company, firm etc.

The Black‘s Law Dictionary (7th) Edition defines the term “mortgage” through
the following definitions as: A conveyance of title to property that is given as
security for the payment of a debt or the performance of a duty and that will
become void upon performance according to the stipulated terms.

Definitions

· A lien against property that is granted to secure an obligation (such as debt)

and that is extinguished upon payment or performance according to stipulated
terms.

· An instrument (such as a deed or contract) specifying the terms of such a

transaction.

· Loosely the loan on which such a transaction is based.

· The mortgagee‘s right conferred by such a transaction.

· Loosely any real- property security transaction, including a deed of trust.‖

 MORTGAGE OF PROPERTY IN INDIA

The Transfer of Property Act, 1882 was modelled on the English Law of
mortgage. The latter has been changed by the Law of Property Act, 1925. As a
result the mortgage in England has become a demise (lease) and the condition
one of defeasance: A cesser of the term comes in with the discharge of the
mortgage – money. It has been rightly observed in the case of Gopal v Parsotam
(1883), that mortgage as understood in this country cannot be defined better
than by the definition adopted by the legislature in Section 58 of the Transfer of
Property Act, 1882.

In case of Kottayya v Annapumamma (1945), a debtor who was not able to

repay the amount of the debt granted to the creditor a right to occupy and enjoy
certain land for a period of 20 years. It was held that the transaction was not a
mortgage but a lease. In the case of South African Territories Ltd v Wallington
(1898), Lord Macnaghten said, ―That specific performance of a contract to lend
money cannot be enforced is so well established and obviously so wholesome a
rule, that it would be idle to say a word about it‖.

- S.58of the Transfer of the Property Act, 1882 defines ―Mortgage‖ as follows:

―Mortgage‖, ―mortgagor‖, ―mortgagee‖, ―mortgage-money‖ and ―mortgage-deed‖

defined.—

-(a) 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. 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.

In the case of Dattatreya Shanker Mote v Anand Chintaman Datar (1974), the
court observed that a charge is wider than a mortgage and as such a mortgage
is included in it also. Hence, every mortgage is a charge, but every charge is not
a mortgage.

(b) 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.

It could be summarised as in a simple mortgage, the mortgager does not deliver

the possession of the mortgaged property. He finds himself personally to pay
the mortgage money and agrees either expressly or impliedly, that in case of his
failure to repay, the mortgagee shall have the right to cause the mortgaged
property to be sold and apply the sale proceeds in payment of mortgage money.
The essential feature of the simple mortgage is that the mortgagee has no power
to sell the property without the intervention of the court. The mortgagee can:

· Apply to the court for permission to sell the mortgaged property, or

· File a suit for recovery of the whole amount without selling the property
(c) 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 mortgage by conditional sale and the mortgagee a
mortgagee by conditional sale: 1[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.]

It could be summarised as the mortgage in which the mortgager ostensibly sells

the property to the mortgagee on the following conditions:

· The sale shall become void on payment of the mortgage money.

· The mortgagee will retransfer the property on payment of the mortgage money.

· The sale shall become absolute if the mortgager fails to repay the amount on
ascertain date.

· The mortgagee has no right of sale but he can sue for foreclosure.

In the case of Natesa Pathar v Pakkirisamy Pathar (1997), the condition of sale
and resale was engrafted in the same document. The purchaser was specifically
prohibited from encumbering the property within the period of five years
stipulated for repurchase. There was a substantial difference between the
actual value of the property and consideration as stipulated in the deed. The
transaction was held to be a mortgage by conditional sale. In another case
of Chunchun Jha v Ibadat Al (1954), the Supreme Court held that if the sale and
repurchase is embodied in separate documents then the transaction cannot be
a mortgage whether the documents are contemporaneously executed or not.

(d) Usufructuary mortgage.—Where the mortgagor delivers possession 1[or

expressly or by implication binds himself to deliver possession] of the
mortgaged property to the mortgagee, and authorises 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 the case of Ferozshah v Sobhat Khan (1933), it was observed by the court
that it is not necessary that the mortgagee should take physical possession, for
the mortgagor may continue in possession as lessee of the mortgagee; but
unless there is a clause providing for the mortgagee going in possession, there
cannot, of course, be a usufructuary mortgage.

(e) 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.

In the case of Ramkinkar v Satya Charan (1939), the Privy Council held that Sec
58 (e) cannot be construed as declaring an English mortgage to be an absolute
transfer of the property, but as merely declaring that such a mortgage would be
absolute, were it for the proviso for retransfer. In the case of Narayana v
Venkataramana (1902), the court had stated three essential ingredients for
English mortgage which could be stated as follows:

· First, the mortgagor has to bind himself to repay the mortgage money on a
certain day.

· Secondly, the property mortgaged is transferred ―absolutely‖ to the mortgagee.

· Thirdly, this transfer is subject to a proviso that the mortgagee will recover the
property to the mortgagor upon payment of the mortgage – money on the date
fixed for repayment.

(g) 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.] In the case of Madho Rao v Gulam Mohiuddin (1919),
the Privy Council held that an anomalous mortgage is, one which does not fall
within any of the other five classes enumerated. While considering an
anomalous mortgage, the intention of the parties must be gathered from the
terms of the instrument as controlled by the provisions of the Act.

(h) Mortgage by Deposit of Title deeds- Sec. 58(f) of the Act states that 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

, with intent to create a security thereon, the transaction is called a mortgage

by deposit of title – deeds. This is called in English law an equitable mortgage.

The court in the case of Webb v Macpherson (1904), held that the
term “equitable mortgage”is not appropriate in India, for the law of India knows
nothing of the distinction between legal and equitable estates.

In case of K.J. Nathan v S.V. Maruthi Rao (1965), the Supreme Court
observed that, what constitutes the transaction is delivery with the intention
of creating a security. Hence in a case where physical delivery takes place
outside the notified town, but the intention to create a mortgage is formed
after the deeds are in one of the notified towns, the Supreme Court applied
the section. The requisites of a mortgage by deposit of title deeds are:

· a debt;

· a deposit of title – deeds in notified town; and

· An intention that the deeds shall be security for the debt.

In accordance with the provisions of Section 96 of the Transfer of Property Act,

1882, mortgage by deposit of title deeds, though without writing or by any
deed, is equivalent to a simple mortgage.

ESSENTIALS

The valid essentials of a mortgage include as follows:

Transfer of Interest- The first thing to note is that a mortgage is a transfer of

interest in the specific immovable property. The mortgagor as an owner of the
property possesses all the interests in it, and when he mortgages the property
to secure a loan, he only parts with a part of the interest in that property in
favour of the mortgagee. After mortgage, the interest of the mortgagor is
reduced by the interest which has been transferred to the mortgagee. His
ownership has become less for the time being by the interest which he has
parted with in favour of the mortgagee. If the mortgagor transfers this property,
the transferee gets it subject to the right of the mortgagee to recover from it
what is due to him i.e., the principal plus interest.

Specific Immovable Property- The second point is that the property must be
specifically mentioned in the mortgage deed. Where, for instance, the mortgagor
stated ―all of my property‖ in the mortgage deed, it was held by the court that
this was not a mortgage. The reason why the immovable property must be
distinctly and specifically mentioned in the mortgage deed is that, in case the
mortgagor fails to repay the loan the court is in a position to grant a decree for
the sale of any particular property on a suit by the mortgagee.

The words ―specific immovable property‖ make it necessary to specify

the immovable property in order to create a mortgage. The description must at
least be sufficient to identify the property. It has been held in the case of Indian
Insurance & Banking Corpn v Paramasiva Mudaliar (1957), that machinery in a
mortgaged building does not form part of the security, unless it is attached to
the building for the permanent beneficial enjoyment thereof.

To secure the payment of a loan- Another characteristic of a mortgage is that

the transaction is for the purpose of securing the payment of a loan or the
performance of an obligation which may give rise to pecuniary liability. It may
be for the purpose of obtaining a loan, or if a loan has already been granted to
secure the repayment of such loan. There is thus a debt and the relationship
between the mortgagor and the mortgagee is that of debtor and creditor. When
A borrows 100 bags of paddy from B on a mortgage and agrees to return an
equal quantity of paddy and a further quantity by way of interest, it is a
mortgage transaction for the performance of an obligation.

S.59 of the Transfer of the Property Act, 1882

Section 59 of the Transfer of Property Act, 1882 provides as, where the
principal money secured is one hundred rupees or upwards, a mortgage other
than a mortgage by deposit of title deeds can be effected only by a registered
instrument signed by the mortgagor and attested by at least two witnesses.
Where the principal money secured is less than one hundred rupees, a
mortgage may be effected either by a registered instrument signed and
attested as aforesaid or (except in the case of a simple mortgage) by delivery of
the
property‖.

The words ―other than a mortgage by deposit of title deeds‖ were inserted by the
Amending Act 20 of 1929. In either case, a simple mortgage can only be effected
by a registered instrument. Mortgage by deposit of title deeds has been
specifically excluded from the purview of this section and no registered
instrument is necessary to effect such a mortgage. The words ―principal money
secured‖ in the section show that interest is not to be taken into account in
estimating the amount secured. A mortgage does not become complete and
enforceable until it is registered.

Conclusion

The concept of mortgage is one of the important concepts under the Transfer of
Property Act, 1882 as it helps in securing the debt to the mortgagor and also
helps in redeeming the property as soon as the mortgagor pays back the
amount due to the mortgagee.
Q17. What is Redemption of Mortgage and Clog on Redemption?

Right of redemption is discussed under section 60 of the Transfer of Property Act,

1882 .Right of redemption is the right which every mortgagor possess, which is
created by virtue of the mortgage deed.

Introduction

According to Black’s Law Dictionary, ―Redemption‖ can be defined as the act

of the vendor of property in buying it back again from the purchaser at the
same or an enhanced price. Mortgage redemption is the endpoint of
involvement with a mortgage for most borrowers with repayment mortgages, it
occurs when the loan that has been taken out is paid off in full. Investors can
make redemptions by selling part or all of their investments such as shares,
bonds, or mutual funds. In business and marketing, consumers often redeem
coupons and gift cards for products and services. Redemptions can trigger
capital gain or loss.

 The mortgagor can avoid consolidation by the mortgagee in the

mortgaged properties.

 The mortgagor has the right to deposit the mortgage money in the court
and so on…

Right of redemption is the right which every mortgagor possess, which is

created by virtue of the mortgage deed. This right is considered to be
inalienable, and cannot be taken away from a mortgagor by means of any
contract to the contrary. Right of redemption is discussed under section 60 of
the Transfer of Property Act, 1882. There are three important provisions made
in section 60 of the Transfer of Property Act 1882:

1. Right of redemption

2. Clog on redemption

3. Once a mortgage, always a mortgage.

Right of redemption

Right of redemption is the legal right of a mortgagor who owns real estate to
reclaim his or her immovable property once certain terms have been met.

Essential Elements

1. Legal validity of mortgage- it was decided in Vishnu Kaya vs Vishnu

Maya that where registration of mortgage is necessary there a mortgage without
registration will be considered illegal and the mortgage does not become entitled
to getting compensation on the basis of the mortgage.

2. Due to principle- the mortgagor can read the mortgage anytime after the
mortgage money speed and he can‘t be avoided from it accept the degree of the
court or any act of the court.

3. Payment of dues of money- mortgagor can pay the money to the mortgagor or
to his agent.

4. Filing of the suit- this right is compulsory because the use of the right of
redemption cannot be done without filing a suit. It can be filed by the
mortgagor or by any transferee. In Pranil Kumar vs Kishori Lal, it was held that
the purchaser of the property by auction can also file a suit of redemption
because he has his interest in such property.

Clog on Redemption of Mortgage

Clog on redemption means barrier on redeeming the mortgaged property. There

are various judgments in which it was held that right of redemption of
mortgagor cannot be finished even if the loan amount is not paid on time.
In Murarilal vs. Devkaranit, it was held that the parties cannot restrict the right
of redemption of mortgages even after the fixed period, if done so such
agreement will be void. But there are certain exceptions to it they are:

 By submission of the right of redemption or by sale or by any method by

the free transaction.

 The right can be finished by the degree of the court.

 If the right of redemption is vested in one person.

 If the mortgaged property is vested in state.

Once a mortgage, always a mortgage

It is well known principle that once a mortgage is always a mortgage, some

changes or revision can be done to it. In a nutshell, the mortgage and right of
redemption are coextensive of each other whether it is described or not.

When foreclosure of the mortgage occurs?

When the mortgagor or the property owners fail to pay their loan amount to the
mortgagee then the foreclosure of the property occurs. In other terms,
auctioning is done of the said property to recover the loan amount. The right of
foreclosure means a lender‘s ability to take possession of a property through a
legal process called foreclosure. But before foreclosure of property the lender
had to give notice to the borrower stating the same legally. If the borrower pays
the loan amount with late fine and interests after receiving notice in a specified
time then the lender has no right to forfeit the property according to section 79.

Persons who may sue for redemption of Mortgage

(section 91)

1. Any person who has any interest in, or charge upon, the property mortgaged
or in or upon the right to redeem the same;

2. Any surety for the payment of the mortgage-debt or any part thereof;

3. Any creditor of the mortgagor who has in a suit for the administration of his
estate obtained a decree for sale of the mortgaged property.

Section 92 of Transfer of Property Act talks about SUBROGATION

Subrogation means the substitution of one person or group by another in

respect of a debt or insurance claim, accompanied by the transfer of any
associated rights and duties.

The right conferred by this section is called the right of subrogation, and a
person acquiring the same is said to be subrogated to the rights of the
mortgagee whose mortgage he redeems. Nothing in this section shall be
deemed to confer a right of subrogation on any person unless the mortgage in
respect of which the right is claimed has been redeemed in full.
 Conclusion

There are various rights available to both the mortgagor and mortgagee. Right
to redemption is the right which is available to the mortgagor based on certain
conditions. Exception of the right of redemption is the right which is available
to the mortgagee if the mortgagor fails to do his duty or pay his loan in a
specified time duration. But these rights are not used in a proper way so there
is a need to implement the laws carefully for the smooth functioning of the
system between the borrower and lender. And laws also need to be amended
from time to time so that no problem occur for implementing the same.

Q18. What is Foreclosure of Mortgage?

Foreclosure is the legal process wherein a lender attempts to recover the amount
of loan. Section 67-68 of Transfer of Property Act deals with it.

Meaning

Foreclosure refers to the legal process wherein a banker/financier/lender

attempts to recover the amount of loan from a borrower who has discontinued
making payments to the lender thereby constraining the sale of assets being
used as the collateral security for the loan.

In a nutshell, mortgage lender, mortgagee or other lien holder obtains a

termination of mortgage and the borrower‘s right of redemption by the court‘s
order. Thus, through the process of foreclosure, the lender seeks to foreclose
and terminate the mortgagor‘s right to redemption.

In other words, foreclosure refers to both, a property and a process. In order for
the right of foreclosure to exist, it is mandatory to have missed payments on the
property loan consequent to which the mortgaged property must go back to the
bank (lender) and thus, becomes the real estate property. However, the process
of foreclosure is different in judicial and non-judicial states. Under judicial
foreclosure a lawsuit is filed in court however, local laws distinguish the type of
foreclosure so used.

Right to foreclosure

Whenever a loan is granted by the bank against the security of some immovable
property, such as in case of a home loan, then the borrower creates a mortgage
on the immovable property, i.e. on the property so mortgaged (here, the home).
The concept of the right of foreclosure as well as the right to redemption comes
into question in case of the mortgage. The right to foreclosure merely means a
right available to the mortgagee for the purpose of recovering his outstanding
loan amount. The relevant provisions to this subject of discussions are Section
67 and Section 68 of the Transfer of Property Act, 1882.

Under section 67, Transfer of Property Act, 1882, the right of foreclosure is
the right of the mortgagee (the bank). This right is available to the mortgagee
(lender) when the mortgage money is due and not paid by mortgager (borrower).
Thus, the accessibility to the right of foreclosure is readily obtainable to the
mortgagee on the instance when the mortgager haven‘t paid the principle and
interest amount of loan on due date. In comparison to the right of foreclosure,
the right of redemption is available to the mortgager when the amount of loan
has been paid back. i.e. the mortgager by paying back the mortgage money
possess the right to take back the mortgaged property.
In case of foreclosure of the property, the mortgagee can obtain a court decree
which debars the mortgager of his right of redemption. So, once this decree is
obtained by the mortgagee through the court, a bar will be placed on
the mortgager for using his right of redemption.

Section 67 of the Transfer of Property Act, 1882, explains the conditions where
the mortgagee can either sell the property, do its foreclosure or neither sell it
nor do its foreclosure. There are six types of mortgage namely:

1) Simple Mortgage

2) Mortgage by conditional sale

3) Usufructuary Mortgage

4) English Mortgage

5) Mortgage by deposit of title deeds

6) Anomalous Mortgage

In case of a simple mortgage, either the sale of the mortgaged property is

possible or one can individually file suit against the mortgagor whereas the
right of foreclosure is available only on the mortgage by conditional sale. Under
the usufructuary mortgage neither the right to sale nor the right to foreclosure
is available. English mortgage enumerates the right to the sale. Lastly, the right
to sell or foreclosure in case of anomalous mortgage depends upon the terms of
the mortgage. Basically, anomalous mortgage is defined as the type of mortgage
which is not simple mortgage, english mortgage, mortgage by conditional sale,
mortgage by deposit of title deeds and usufructuary mortgage. So, once the type
of mortgage is decided, ultimately the right to sell or foreclosure will also be
determined.

Once the right of foreclosure is used by the mortgagee, this consequently

extinguishes the right of redemption of the mortgager. And once the right of
redemptions is used, the right of foreclosure will be extinguished. The limitation
period is 30 years from the date the right becomes available. Also, the right of
redemption protects the rights of the mortgagor and he (borrower) can recover
loans by foreclosure or sale of the immovable property.

Following mentioned are some conditions to exercise the right of foreclosure:

1) The money must be due for payment i.e. it must not be paid till the due date.

2) There should be no existing condition in the mortgage deed mentioning the

waiving of the right to foreclosure.

3) The mortgager should not in any circumstances possess a decree of

redemption of the mortgaged property.

In instances where the mortgagee possess two or more mortgages executed by

the same mortgagor, then the mortgagee certainly possess the right to acquire a
decree of foreclosure. But, if he sues to take decree on any one of the mortgages
so available, then he would be bound to sue on all the mortgages in respect of
which the mortgage money has become due.

Q19. What is Lease under Transfer of Property Act 1882?

Introduction
In India, transfer of property is not possible for every individual because of
financial issues. The permanent or absolute transfer is a luxury for some people,
but a temporary transfer is something that has given every citizen the right of
enjoying any property. One of the modes of transferring property for a particular
period of time is Lease. Lease is a transfer of an interest in the property for a
stipulated period of time without transferring the ownership of that property. In
a lease, right of possession is transferred instead of the right of ownership.
Transferor here is called the lessor and the transferee i.e. the one enjoying the
property for a period is called lessee. Lease is governed by the Transfer of
Property Act, 1882 and it is given from Sections 105 to 117.

Definition

Section 105 states the definition of a lease which states that it is a transfer of
immovable property for a particular time period for a consideration of which the
transferee has accepted the terms surrounding the agreement.

What are the essentials of a lease?

o Parties must be competent: The parties in a lease agreement should be

competent to enter into a contract. Lesser should be entitled to a property
and have absolute rights over that property.

o Right of possession: Ownership rights are not transferred in a lease, only

the possession of the property is transferred.

o Rent: Consideration for a lease can be taken in the form of a rent or

premium.

o Acceptance: Lessee, who is to get the interest in the property after lease, has
to accept the lease agreement along with the time period and terms &
conditions imposed on the transfer.

o Time Period: Lease always takes place for a particular time period which is
to be specified in the lease agreement. It can be relaxed at the option of the
lessor.

- What happens when the lease agreement does not prescribe the time period of
the lease?

Section 106 provides for the duration of the lease in the absence of the
lease agreement. It lays down that in the absence of a contract, lease can be
ended by both parties to the lease by issuing a notice to quit. The prescribed
time period always commences from the date of receiving the notice to quit.
Following are the circumstances:

Purpose Term (Deemed) Notice Prescribed End

Agricultural or manufacturing purpose. Year to Year 6 month 1 year

Any other purpose. Month to Month 15 days 1 month

In this table, there is a distinction of two purposes in regard to Section 106 i.e.
Agricultural or manufacturing and other purposes. Hence, two things can be
derived from this table:
 1. When a lease for Agricultural or manufacturing purpose is deemed to be
of year to year, then it will attract a 6-month notice that the lease will end
on the expiry of 1 year from the date of the commencement of the lease.

2. When a lease for any other purpose is deemed to be of the month to

month, then it will attract a 15-day notice that the lease will end on the
expiry of 1 month from the commencement of the lease.

There is proviso to this section which states that the notice to quit in this
section should be written and conveyed to the party who is required to abide
by it. If this is not possible then it should be attached to a conspicuous place in
that property.

How is a lease executed?

Section 107 states about lease how made. This section covers three aspects:

1. When there is a lease of Immovable property for a term of 1 year or more

– This can only be made by a registered deed.

2. All other leases of Immovable property – Can be either made by a

registered deed or an oral agreement or settlement along with the transfer
of possession of that property.

3. When the lease is of multiple properties that require multiple deeds, it

will be made by both the parties of the lease.

In the case of Punjab National Bank v. Ganga Narain Kapur (1.), Court held
that if the lease is done through an oral agreement, then the provisions of
Section 106 will apply.

Rights and liabilities of Lessor and lessee

- Rights of the lessor are

1. A lessor has a right to recover the rent from the lease which was
mentioned in the lease agreement.

2. Lessor has a right to take back the possession of his property from the
lessee if the lessee commits any breach of condition.

3. Lessor has a right to recover the amount of damages from the lessee if
there is any damage done to the property.

4. Lessor has a right to take back the possession of his property from the
lessee on the termination of the lease term prescribed in the
agreement.

- Liabilities of the lessor

1. The lessor has to disclose any material defect relating to the property
which the lessee does not know and cannot with ordinary supervision
find out.

2. Lessor is bound by the request of the lessee to give him the right of
possession over his property.

3. Lessor can enter into a contract with the lessee if he agrees to abide by
all terms and conditions prescribed in the agreement, he can enjoy the
property for the rest of the time period without any interference with
an obligation to pay the rent later on.

- Rights of the lessee

 1. During the period lease is in effect if any alteration is made (alluvion for
the time being in force) then that alteration will come under that same
lease.

2. If a significant part of the property that has been leased is destroyed

wholly or partly by fire, by flood, by war, by the violent acts of the mob or
by any other means resulting in its inefficiency of being a benefit for the
lessee. If this happens, the lease is voidable at his option.

There is a proviso to this section that states if the damage is done due to any
act of the lessee himself, this remedy will not be available for him.

1. Lessee has the right to deduct any expenses he has made for repairs in
the property from the rent if the lessor has failed to in reasonable time.

2. Lessee has a right to recover any such payment which a lessor is bound
to make by can deducting it from the interest of the rent or directly
from the lessor. He has this right when the lessor has neglected to make
that required payment.

3. Lessee has a right to detach all things that he may have attached in the
property or earth. His only obligation is that he has to leave the property
in the same condition as he received it.

4. When a lease is of unspecified duration in the lease agreement, lessee or

his legal representative have a right to collect all the profits or benefits
from the crops which were sown by the lessee at that property. They also
have a right of free ingress and egress from such property even if the
lease ends.

5. Lessee has a right to transfer absolutely the property or any part of his
interest in that property by sub-leasing or through mortgaging. Lessee is
not independent of the terms and conditions mentioned in the lease
agreement.

- Liabilities of the lessee

1. Lessee is under an obligation to disclose all related material facts which

are likely to increase the value of the property for which the lessee has an
interest in and the lessor is not aware of.

2. Lessee is under an obligation to pay the rent or premium which is settled

upon in the agreement to the lessor or his agent within the prescribed
time.

3. Lessee is under an obligation to maintain the property in the condition

that he initially got the property on commencement of the lease and he
has to return it in the same condition.

4. If lessee gets to know about any proceedings relating to the property or

any encroachment or any interference, then lessee is under an obligation
to give notice to the lessor.

5. Lessee has a right to use all the assets and goods which are on the
property as an owner would use which is preserving it to the best of its
nature. He is although under obligation to prevent any other person from
using that asset or good for any other purpose from what was prescribed
in the lease agreement.

6. The lessee cannot attach any permanent structure without the consent of
the lessor except for the purpose of agriculture.
 7. Lessee is under an obligation to give the possession of the property back
to the lessor after the expiry of the prescribed term of the lease.

How does a Lease end?

- Determination of lease

Section 111 states about the determination of the lease, which lays down the
ways in which lease is terminated:

1. Lapse of time – When the prescribed time of the lease expires, the lease
is terminated.

2. Specified event – When there is a condition on time of lease depending

upon a happening of an event.

3. Interest – Lessor‘s interest to lease the property may cease, hence

resulting in the termination of the lease.

4. Same owner – When the interest of both lessor and lessee are transferred
or vested in the same person.

5. Express Surrender – This happens when the lessee ceases to have an

interest in the property and comes into a mutual agreement with the
lessor.

6. Implied Surrender – When the lessee enters into a contract with another
for the lease of property, this is an implied surrender of the existing lease.

7. Forfeiture – There are three ways by which a lease can be terminated:

 When there is a breach of an express condition by the lessee. The

lessor may get the possession of the property back.

 When lessee renounces his character or gives the title of the property to
a third person.

 When the lessee is termed as insolvent by the banks, and if the

conditions provide for it, the lease will stand terminated.

8. Expiry of Notice to Quit – When the notice to quit by the lessor to the
lessee expires, the lease will also expire.

- What is notice to quit and what happens after it?

Notice to quit is a formal written statement that is issued to the lessee if the
lessor desires to end the lease agreement, whether on the expiry of the duration
as stated under Section 106 or on grounds specified in Section 111.

Any lease can be forfeited as mentioned in the sub-clause (g) of Section 111, by
acceptance of the notice to quit.

But Section 112, states that if the lessor after initiating the process of
termination of the lease on the grounds of forfeiture accepts any rent from the
lessee, it will be understood that the lease will still exist and the termination
and notice to quit has been waived.

Section 113 provides two ways in which the notice can be waived, that is
expressly or impliedly.

Express Waiver of notice to quit – When a lessor accepts the rent from the
lessee after the notice to quit has been served, this is called express waiver of
notice to quit.
 1. Implied Waiver of notice to quit – When a lessor issues notice to
quit to the lessee, and upon expiry of that notice, lesser issues
another notice to quit to the lessee. The first notice to quit is
impliedly waived.

Waiver of notice also shows the intention to continue the existing lease.

- Effect of Holding over

Section 116 states about the effect of holding overlays down that if there has
been a waiver of notice to quit, it will not be called a new lease instead it will be
called as a lease on sufferance or tolerance without objecting against it. The
term ‗Holding over‘ stands for retained possession of a property which has
been leased. After this, the lease is renewable as any normal lease and in the
way prescribed in Section 106.

This section provides that if the lessor agrees to the holding over of the property
by the lessee, it will be renewed. But if the lessor does not entertain the
retained possession by the lessee, he can initiate suit proceedings against him
on grounds of trespass or tenant at sufferance.

Conclusion

Lease is a very important aspect of real life. Every person has witnessed a lease
deal involving renting of a house, car or etc. Therefore it is important for the
general public to know about the rights of every individual in a lease, and to
know about the provisions that govern lease. The lease is mentioned from
Sections 105 to Section 117, out of which Sections which may help the general
public, law students and the legal fraternity have been discussed in this article
to give clarification and a basic idea about the lease.

Q20. What is gift under Transfer of Property Act 1882?

Introduction

A Gift is generally regarded as a transfer of ownership of a property where the

sender willingly brings into effect such transfer without any compensation or
consideration in monetary value. It may be in the form of moveable or
immoveable property and the parties may be two living persons or the transfer
may take place only after the death of the transferor. When the transfer takes
place between two living people it is called inter vivos, and when it takes place
after the death of the transferor it is known as testamentary. Testamentary
transfers do not fall under the scope of Section 5 of the Transfer of Property
Act, and thus, only inter vivos transfers are referred to as gifts under this Act.

If the essential elements of the gift are not implemented properly it may become
revoked or void by law. There are many provisions pertaining to the gifts. All
such provisions, for example, types of property which may be gifted, modes of
making such gift, competent transferor, suspension and revocation of gift, etc.

What may be referred to as a gift

- Gift

Section 122 of Transfer of Property Act defines a gift as the transfer of an

existing moveable or immovable property. Such transfers must be made
voluntarily and without consideration. The transferor is known as the donor
and the transferee is called the donee. The gift must be accepted by the donee.
This Section defines a gift as a gratuitous transfer of ownership in some
property that is already existing. The definition includes the transfer of both
immovable and moveable property.

Parties to a gift transfer

- Donor

The donor must be a competent person, i.e., he must have the capacity as well
as the right to make the gift. If the donor has the capacity to contract then he is
deemed to have the capacity to make the gift. This implies that at the time of
making a gift, the donor must be of the age of majority and must have a sound
mind. Registered societies, firms, and institutions are referred to as juristic
persons, and they are also competent to make gifts. Gift by a minor or insane
person is void. Besides capacity, the donor must also have the right to make a
gift. The right of the donor is determined by his ownership rights in the
property at the time of the transfer because gift means the transfer of the
ownership.

- Donee

Donee does not need to be competent to contract. He may be any person in

existence at the date of making the gift. A gift made to an insane person, or a
minor, or even to a child existing in the mother‘s womb is valid subject to its
lawful acceptance by a competent person on his/her behalf. Juristic persons
such as firms, institutions, or companies are deemed as competent donee and
gift made to them is valid. However, the donee must be an ascertainable
person. The gift made to the general public is void. If ascertainable, the donee
may be two or more persons.

Essential elements

There are the following five essentials of a valid gift:

1. Transfer of ownership

2. Existing property

3. Transfer without consideration

4. Voluntary transfer with free consent

5. Acceptance of the gift

- Transfer of ownership

The transferor, i.e., the donor must divest himself of absolute interest in the
property and vest it in the transferee, i.e., the donee. Transfer of absolute
interests implies the transfer of all the rights and liabilities in respect of the
property. To be able to effect such a transfer, the donor must have the right to
ownership of the said property. Nothing less than ownership may be transferred
by way of gift. However, like other transfers, the gift may also be made subject
to certain conditions.

- Existing property

The property, which is the subject matter of the gift may be of any kind,
movable, immovable, tangible, or intangible, but it must be in existence at the
time of making a gift, and it must be transferable within the meaning of Section
5 of the Transfer of Property Act.
Gift of any kind of future property is deemed void. And the gift of spes
successionis (expectation of succession) or mere chance of inheriting property
or mere right to sue, is also void.

- Transfer without consideration

A gift must be gratuitous, i.e., the ownership in the property must be

transferred without any consideration. Even a negligible property or a very
small sum of money given by the transferee in consideration for the transfer
of a very big property would make the transaction either a sale or an
exchange.
Consideration, for the purpose of this section, shall have the same meaning as
given in Section 2(d) of the Indian Contract Act. The consideration is pecuniary
in nature, i.e., in monetary terms. Mutual love and affection is not pecuniary
consideration and thus, property transferred in consideration of love and
affection is a transfer without consideration and hence a gift. A transfer of
property made in consideration for the ‗services‘ rendered by the donee is a gift.
But, a property transferred in consideration of donee undertaking the liability of
the donor is not gratuitous, therefore, it is not a gift because liabilities evolve
pecuniary obligations.

- Voluntary transfer with free consent

The donor must make the gift voluntarily, i.e., in the exercise of his own free
will and his consent as is a free consent. Free consent is when the donor has
the complete freedom to make the gift without any force, fraud coercion, and
undue influence. Donor‘s will in executing the deed of the gift must be free and
independent. Voluntary act on a donor‘s part also means that he/she has
executed the gift deed in full knowledge of the circumstances and nature of the
transaction. The burden of proving that the gift was made voluntarily with the
free consent of the donor lies on the donee.

- Acceptance of gift

The donee must accept the gift. Property cannot be given to a person, even in
gift, against his/her consent. The donee may refuse the gift as in cases of non-
beneficial property or onerous gift. Onerous gifts are such where the burden or
liability exceeds the actual market value of the subject matter. Thus,
acceptance of the gift is necessary. Such acceptance may be either express or
implied. Implied acceptance may be inferred from the conduct of the donee and
the surrounding circumstances. When the donee takes possession of the
property or of the title deeds, there is acceptance of the gift. Where the
property is on lease, acceptance may be inferred upon the acceptance of the
right to collect rents. However, when the property is jointly enjoyed by the
donor and donee, mere possession cannot be treated as evidence of
acceptance. When the gift is not onerous, even minimal evidence is sufficient
to prove that the gift has been accepted by donee. Mere silence of the donee is
indicative of the acceptance provided it can be established that the donee had
knowledge of the gift being made in his favour.

Where the deed of gift categorically stated that the property had been handed
over to the donee and he had accepted the same and the document is
registered, a presumption arises that the executants are aware of what was
stated in the deed and also of its correctness. When such presumption is
coupled with the recital in the deed that the donee had been put in possession
of the property, the onus of disproving the presumption would be on the donor
and not the donee.
Where the donee is incompetent to contract, e.g., minor or insane, the gift must
be accepted on his behalf by a competent person. The gift may be accepted by a
guardian on behalf of his ward or by a parent on behalf of their child. In such a
case, the minor, on attaining majority, may reject the gift.

Where the donee is a juristic person, the gift must be accepted by a competent
authority representing such legal person. Where the gift is made to a deity, it
may be accepted by its agent, i.e., the priest or manager of the temple.

Section 122 provides that the acceptance must be made during the lifetime of
the donor and while he is still capable of giving. The acceptance that comes
after the death or incompetence of the donor is no acceptance. If the gift is
accepted during the life of the donor but the donor dies before the registration
and other formalities, the gift is deemed to have been accepted and the gift is
valid.

Modes of making a gift

Section 123 of the Transfer of Property Act deals with the formalities necessary
for the completion of a gift. The gift is enforceable by law only when these
formalities are observed. This Section lays down two modes for effecting a gift
depending upon the nature of the property. For the gift of immovable property,
registration is necessary. In case the property is movable, it may be transferred
by the delivery of possession. Mode of transfer of various types of properties are
discussed below:

- Immovable properties

In the case of immovable property, registration of the transfer is necessary

irrespective of the value of the property. Registration of a document including
gift-deed implies that the transaction is in writing, signed by the executant
(donor), attested by two competent persons and duly stamped before the
registration formalities are officially completed. In the case of Gomtibai v.
Mattulal, it was held by the Supreme Court that in the absence of written
instrument executed by the donor, attestation by two witnesses, registration of
the instrument and acceptance thereof by the donee, the gift of immovable
property is incomplete.

The doctrine of part performance is not applicable to gifts, therefore all the
conditions must be complied with. A donee who takes possession of the land
under unregistered gift-deed cannot defend his possession on being evicted.
The following must be kept in mind regarding the requirement of registration:

 Registration of the gift of immovable property is must, however, the gift is

not suspended till registration. A gift may be registered and made
enforceable by law even after the death of the donor, provided that the
essential elements of the gift are all present.

 In case the essential elements of a valid gift are not present, the
registration shall not validate the gift.

It has been observed by the courts that under the provisions of the Transfer of
Property Act, Section 123, there is no requirement for delivery of possession in
case of an immovable gift. The same has been held in the case of Renikuntla
Rajamma v. K. Sarwanamma that the mere fact that the donor retained the
right to use the property during her lifetime did not affect the transfer of
ownership of the property from herself to the donee as the gift was registered
and accepted by the donee.
- Movable properties

In the case of movable properties, it may be completed by the delivery of

possession. Registration in such cases is optional. The gift of a movable
property effected by delivery of possession is valid, irrespective of the valuation
of the property. The mode of delivering the property depends upon the nature of
the property. The only things necessary are the transfer of the title and
possession in favour of the donee. Anything which the parties agree to consider
as delivery may be done to deliver the goods or which has the effect of putting
the property in the possession of the transferee may be considered as a
delivery.

- Actionable claims

Actionable claims are defined under Section 3 of the Transfer of Property Act. It
may be unsecured money debts or right to claim movables not in possession of
the claimant. Actionable claims are beneficial interests in movable. They are
thus intangible movable properties. Transfer of actionable claims comes under
the purview of Section 130 of the Act. Actionable claims may be transferred as
gift by an instrument in writing signed by the transferor or his duly authorised
agent. Registration and delivery of possession are not necessary.

- A gift of future property

Gift of future property is merely a promise which is unenforceable by law.

Thus, Section 124 of the Transfer of Property Act renders the gift of future
property void. If a gift is made which consists of both present as well as future
property, i.e., one of the properties is in existence at the time of making the gift
and the other is not, the whole gift is not considered void. Only the part relating
to the future property is considered void. Gift of future income of a property
before it had accrued would also be void under Section 124.

- A gift made to more than one donee

Section 125 of the Act says that in case a property is gifted to more than one
donee, one of whom does not accept it, the gift, to the extent of the interest
which he would have taken becomes void. Such interest reverts to the
transferor and does not go to the other donee.

A gift made to two donees jointly with the right of survivorship is valid, and
upon the death of one, the surviving donee takes the whole.

- Provisions relating to onerous gifts

Onerous gifts refer to the gifts which are a liability rather than an asset. The
word ‗onerous‘ means burdened. Thus, where the liabilities on a property
exceed the benefits of such property it is known as an onerous property. When
the gift of such a property is made it is known as an onerous gift, i.e., a non-
beneficial gift. The donee has the right to reject such gifts.

Section 127 provides that if a single gift consisting several properties, one of
which is an onerous property, is made to a person then that person does not
have the liberty to reject the onerous part and accept the other property. This
rule is based upon the principle of ―qui sentit commodum sentire debet et
onus‖ which implies that the one who accepts the benefit of a transaction must
also accept the burden of it. Thus, when two properties, one onerous and other
prosperous, are given in gift to a donee in the same transaction, the donee is
put under the duty to elect. He may accept the gift together with the onerous
property or reject it totally. If he elects to accept the beneficial part of the gift,
he is bound to accept the other which is burdensome. However, an essential
element of this Section is a single transfer. Both the onerous and prosperous
properties must be transferred in one single transaction only then they require
the obligation to be accepted or rejected in a joint manner.

In case the onerous gift is made to a minor and such donee accepts the gift, he
retains the right to repudiate the gift on attaining the age of majority. He may
accept or reject the gift on attaining majority and the donor cannot reclaim the
gift unless the donee rejects it on becoming a major.

- Universal donee

The concept of universal donee is not recognised under English law, although
universal succession, according to English law is possible in the event of the
death or bankruptcy of a person. Hindu law recognises this concept in the form
of ‗sanyasi‟, a way of life where people renounce all their worldly possessions
and take up spiritual life. A universal donee is a person who gets all the
properties of the donor under a gift. Such properties include movables as well
as immovables. Section 128 lays down in this regard that the donee is liable for
all the debts and liabilities of the donor due at the time of the gift. This section
incorporates an equitable principle that one who gets certain benefits under a
transaction must also bear the burden therein. However, the donee‘s liabilities
are limited to the extent of the property received by him as a gift. If the
liabilities and debts exceed the market value of the whole property, the
universal donee is not liable for the excess part of it. This provision protects the
interests of the creditor and makes sure that they are able to chase the
property of the donor if he owes them.

- Suspension or revocation of gifts

Section 126 of the Act provides the legal provisions which must be followed in
case of a conditional gift. The donor may make a gift subject to certain
conditions of it being suspended or revoked and these conditions must adhere
to the provisions of Section 126. This Section lays down two modes of
revocation of gifts and a gift may only be revoked on these grounds.

- Revocation by mutual agreement

Where the donor and the donee mutually agree that the gift shall be suspended
or revoked upon the happening of an event not dependent on the will of the
donor, it is called a gift subject to a condition laid down by mutual agreement.
It must consist of the following essentials:

 The condition must be expressly laid down

 The condition must be a part of the same transaction, it may be laid

down either in the gift-deed itself or in a separate document being a part
of the same transaction.

 The condition upon which a gift is to be revoked must not depend solely
on the will of the donor.

 Such condition must be valid under the provisions of law given for
conditional transfers. For eg. a condition totally prohibiting the alienation
of a property is void under Section 10 of the Transfer of Property Act.

 The condition must be mutually agreed upon by the donor and the donee.

 Gift revocable at the will of the donor is void even if such condition is
mutually agreed upon.

- Revocation by the rescission of the contract

Gift is a transfer, it is thus preceded by a contract for such transfer. This
contract may either be express or implied. If the preceding contract is
rescinded then there is no question of the subsequent transfer to take place.
Thus, under Section 126, a gift can be revoked on any grounds on which its
contract may be rescinded. For example, Section 19 of the Indian Contract Act
makes a contract voidable at the option of the party whose consent has been
obtained forcefully, by coercion, undue influence, misrepresentation, or fraud.
Thus, if a gift is not made voluntarily, i.e., the consent of the donor is obtained
by fraud, misrepresentation, undue influence, or force, the gift may be
rescinded by the donor.

The option of such revocation lies with the donor and cannot be transferred,
but the legal heirs of the donor may sue for revocation of such contract after
the death of the donor.

The limitation for revoking a gift on the grounds of fraud, misrepresentation,

etc, is three years from the date on which such facts come to the knowledge of
the plaintiff (donor).

The right to revoke the gift on the abovementioned grounds is lost when the
donor ratifies the gift either expressly or by his conduct.

- Bonafide purchaser

The last paragraph of Section 126 of the Act protects the right of a bonafide
purchaser. A bonafide purchaser is a person who has purchased the gifted
property in good faith and with consideration. When such a purchaser is
unfamiliar with the condition attached to the property which was a subject of a
conditional gift then no provision of revocation or suspension of such gift shall
apply.

- Exceptions

Section 129 of the Act provides the gifts which are treated as exceptions to the
whole chapter of gifts under the Act. These are:

 Donations mortis causa

These are gifts made in contemplation of death.

 Muslim-gifts (Hiba)

These are governed by the rules of Muslim Personal Law. The only essential
requirements are declaration, acceptance and delivery of possession.
Registration is not necessary irrespective of the value of the gift. In case of a gift
of immovable property worth more than Rupees 100, Registration
under Section 17 of the Indian Registration Act is must, as it is applicable to
Muslims as well. For a gift to be Hiba only the donor is required to be Muslim,
the religion of the donee is irrelevant.

Conclusion

To constitute a transfer as a gift it must follow the provisions of the Transfer of

Property Act. This Act extensively defines the gift itself and the circumstances of
the transfer of such a gift. The gift, being a transfer of the ownership rights,
must be in possession and ownership of the transferee and must be existing at
the time of making the transfer. The transferor must be competent to make
such transfer but the transferee may be any person. In case the transferee is
incompetent to contract, the acceptance of gift must be ratified by a competent
person on his/her behalf. Gift of future property is void. Partial acceptance of
prosperous gifts and rejection of onerous gifts is not valid either. The
acceptance of a gift entails the acceptance of the benefits as well as the
liabilities coupled with such a gift. A gift may be revoked only by a mutual
agreement on a condition by the donor and the donee, or by rescinding the
contract pertaining to such gift. The Donations mortis causa and Hiba are the
only two kinds of gifts which do not follow the provisions of the Transfer of
Property Act.