topa 1882 highlighted notes.pdf

SEMESTER

2

COURSE

8 - Property Laws I

BLOCK

2 - General Principles of Property Laws

BLOCK

1

AUTHOR

Mr. Krishna Shorewala

!!!

© Rainmaker Training & Recruitment Private Limited, 2011. Any unauthorised use or reproduction of this material shall attract all applicable civil and criminal law remedies.

!!

2

Learning Objectives

After you go through this material, you should be able to:

• Understand what a transfer of property is under the

Transfer of Property Act, 1882

• Enumerate the kinds of transfers that are covered under

the Transfer of Property Act, 1882

• Appreciate the kinds of transfers of property that are not

covered by the Transfer of Property Act, 1882

• Understand how a person may transfer property to himself,

if at all

• Perceive who is competent to transfer property under the

extant laws of India

• Understand how a transfer of property operates

!!!


!!

3

Introduction

With the conclusion of the Block introducing Property Laws, it is

time to delve into the general principles of property laws. This

Block generally deals with the provisions contained in Chapter II

of the Transfer of Property Act, 1882 (“the Transfer of Property

Act”).

The main overarching point to understand here is that the Transfer

of Property Act is structured to facilitate transfers. Therefore,

these general principles allow for a great deal of flexibility in the

structuring of the transfer transactions. However, since its purpose

is to promote transfers of property, Chapter II of the Transfer of

Property Act prohibits transactions structured to restrict such

transfers and make properties inalienable or illiquid. Therefore, it

is extremely important to study these various principles in some

detail. We will do so in this Block.

!!!


!!

4

Unit 1: General rules of transfer of property: What is

transferable property?

Since we were introduced to the Transfer of Property Act in Block

1, it is time to look into the general principles that govern the

transfer of properties. As mentioned above, these are found in

Chapter II of the Transfer of Property Act — more specifically from

Section 5 to Section 49 of the Transfer of Property Act. They deal

with various aspects of transfer of property including, inter alia,

what may or may not be transferred, principles and doctrines such

as the rule against perpetuity, and the doctrine of election. These

are key principles that govern all transfer of property covered by

the Transfer of Property Act, irrespective of their form. Therefore,

we will study them here.

The first issue that must be considered here is: what is a transfer

of property under the Transfer of Property Act? In other words, we

have to understand what kinds of transfers are within the purview

of this statute. Section 5 of the Transfer of Property Act provides

the answer to this. It states that the term ‘transfer of property’, for

the purposes of the Transfer of Property Act, means an act

through which a living person conveys property, whether in

present or in future, to one or more other living person, himself

or to himself and one or more such other person. From this

definition, we can identify that the key elements of a ‘transfer of

property’ are:

• There must be a convenyance (transfer) of property;

• Both the transferors and the transferees must be living

persons;

• Property may be conveyed in the present or in the future.

Therefore, even future properties may be transferred under

the Transfer of Property Act.

Illustration: A transferred certain properties to B to be held

in trust for C. The properties included certain machinery in

the mill as well as machinery to be bought in the future.

New machinery was added. A’s creditor sought to claim it

against the debts owed to him, which was contested by C.

It was held that C acquired a title over the machinery as

soon as it was acquired and A’s creditor couldn’t claim.

These were the facts of the case, Holroyd v. Marshall.i

• The transfer may be to any living person or to the

transferor himself, or to any combination of these two.

hp

Highlight

hp

Highlight

hp

Highlight

!!!


!!

5

Illustration: A owns certain properties. He seeks to create a

trust for those properties. Therefore, he can make a

settlement or trust for the properties and constitute himself

as the trustee. In this case, he is transferring the property

to himself, but in a different capacity. From an owner, he

becomes a trustee of the property.

From Section 5, it is clear that the Transfer of Property Act is

concerned with transfers inter vivos — that is, transfer between

living persons. Therefore, transfer between a deceased party and

a living person would not fall within the definition provided by

Section 5.

‘Transfer’ connotes a creation of interest in the property and mere

compromise does not amount to a transfer.iii Having said that, it is

important to note that a sale ordered by the court is not governed

by the provisions of the Transfer of Property Act since it is a sale

in invitum — that is, it is a sale made against the will of the other

party. Therefore, the transfer is by the order of the court and not

voluntarily between living persons.

Further, recall our discussion in Unit 3 of Block 1, where we noted

that there are a variety of transfers that are not covered by the

Transfer of Property Act. Some more examples of such transfers

are:

• Family Arrangements: Family arrangements entered into

for the benefit of the family and to avoid disputes are not

considered to be transfers per se. The Transfer of Property

Act does not cover such arrangements since the existence

of a dispute as to title is not a sine qua non (an essential

requirement) of a family arrangement.

Illustration: A is the head of a family and has three children

— B, C, and D. They own a large number of properties,

each of which is in the name of two or more of them. To

avoid disputes and for the well being of the family, they

enter into an arrangement where all of them divide these

properties so as to make the title for each property clearly

in favour of one person only. This would be an example of

a family arrangement where property technically changes

hands but does not fall within the purview of the Transfer

of Property Act.

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

!!!


!!

6

• Partitions: Partition agreements among members of a

Hindu joint family are also not considered to be a transfer

under Section 5 Transfer of Property Act since the essence

of such agreements is that each person gets ownership

over specific properties in exchange for his or her share in

all of the joint properties. In such cases, joint enjoyment is

changed to enjoyment in severalty. Hence, this does

amount to a ‘transfer’ and would not be governed by the

Transfer of Property Act;v

Illustration: A, B, C, and D together constitute an undivided

Hindu joint family. The family has extensive property that it

holds jointly. A seeks partition of the property and claims

his share. This would not be a ‘transfer’ because all of

them already own and enjoy the properties jointly. As you

may have known, partition only converts joint enjoyment

into enjoyment in separation. So, there is no conveyance

of the property.

• Settlement of disputed claims: Settlements of disputed

claims also do not amount to a ‘transfer’. When a dispute is

being settled, neither party is conveying a right in one

property to another who did not have it before. In the same

vein, an abandonment or relinquishment of a claim will not

constitute a ‘transfer’.vii

Illustration: There is a piece of land measuring six acres.

Both A and B have made claims over the property. Instead

of having the dispute decided upon, they decide to enter

into a settlement wherein A takes two acres and B takes

four acres of the land. This would be a settlement of a

disputed claim, and therefore, would not amount to a

transfer.

• A transfer in favour of the Almighty: A transfer made in the

name of God does not amount to a ‘transfer’ either. This is

so because no God can be treated as a living person

within the meaning of Section 5 of the Transfer of Property

Act.ix

Transfers in the future

Once we are clear on this, the next issue is the meaning of the

term ‘future’ under Section 5 of the Transfer of Property Act.

Further, let us also examine if the term ‘future’ refers to the time of

hp

Highlight

hp

Highlight

hp

Highlight

!!!


!!

7

the transfer or the nature of the property.

With respect to Section 5 of the Transfer of Property Act, the

Hon'ble Supreme Court of India has held that the phrase ‘in

present or in future’ qualifies the term ‘conveys’ and not the term

‘property’.xi The term ‘conveys’ means the transfer of the property

from one person to another. Therefore, here the term ‘in present

or in future’ qualifies the word ‘conveys’ — that is, the act of

transferring the property and not the property itself. Therefore, it

allows for parties to enter into a contract to transfer existing

property not only in the present, but where the conveyance takes

place in the futurexiii. Section 5 does not refer to the conveyance of

‘future property’ — that is, property that is acquired only after the

transfer transaction. However, unless hit by Section 6 of the

Transfer of Property Act, which deals with certain kinds of

transfers that are prohibited under the Transfer of Property Act,

such transfers are also valid and enforceable in India. We will

discuss Section 6 in detail later on in this Unit.

In such cases, the rule in Holroyd v. Marshallxv would apply. If a

transferor agrees to transfer real and personal property that is not

in his possession at the time when the transfer is purportedly

made, receives consideration for the same and thereafter, comes

in possession of the property answering to the description in the

contract at a later stage, the contract would transfer the beneficial

interest to the transferee immediately after the transferor acquires

the property. The primary requirement for such a contract to be

enforced, however, is that the property must be sufficiently

specified in the contract or instrument of transfer.xvii

The final issue worth considering here is whether, and how, a

person can transfer property to himself? Section 5 of the Transfer

of Property Act clearly contemplates a situation where a person

may transfer the property to himself. No person can, or is likely to

simply transfer property to himself. However, if a person transfers

the property in a certain capacity and receives it himself in another

capacity, then such a transfer is permissible. Let us look at an

illustration to help you understand this better.

Illustration: A is the trustee of a trust, X. A also owns certain lands

in his individual capacity. Now, from the above discussion, it

implies that A may execute a transfer where the lands would be

transferred from him, in an individual capacity to himself, but in the

capacity of a trustee of that trust, X. In such a transfer, although

the transferor and the transferee are the same person, the latter

takes the property in a capacity other than the former and hence,

hp

Highlight

hp

Highlight

hp

Highlight

!!!


!!

8

such a transfer is valid under Section 5 of the Transfer of

Property Act.

With this, we conclude our discussion on what a ‘transfer of

property’ means. The next broad area to discuss is what may be

transferred under the Transfer of Property Act and for this we

must look at Section 6 of the Act.

What may be Transferred?

Section 6 of the Transfer of Property Act is a curiously drafted

section. Although titled, ‘What may be transferred’, it is mainly

about what may not be transferred. It provides that property of any

kinds may be transferred except as provided by the Transfer of

Property Act or any other law in force at the time being. After that,

it lists out the transactions that are prohibited under the Transfer

of Property Act. Let us look at some these:

• Spes succesionis: A mere chance of an heir-apparent

succeeding to an estate, the chance of a relation obtaining

a legacy on the death of a kinsman, or any other similar

possibility cannot be transferred. This is because these are

mere spes succesionis or ‘chance of succession’, which do

not amount to an interest in the property and cannot be

made the subject matter of a ‘transfer’.xix

In India, the principle goes one step further and even a

contract to assign a spes succesionis is a nullity. A

‘contract to assign’ is as much within the purview of

Section 6(a) of the Transfer of Property Act as an actual

assignment, according to the Privy Council. The provision

would be futile even if the contract were valid and

enforceable.xx

Illustration: A is the nephew of B, who owns certain

properties. As B has no children, he expects to succeed to

the entire estate of B. Consequently, A sells a part of his

right to the property to C. Later, A succeeds to the

property. The question is whether C can claim the property

from A. The answer is no, since at the time of the transfer,

A did not have any interest in the property other than a

mere chance of succession. Therefore, the transfer is

inoperative even if he succeeds subsequently.

The right of a Hindu reversioner in case of a Hindu women

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

!!!


!!

9

holding a limited estate over the property is also an

example of spes successionis and it cannot be

transferred.xxi

However, a spes successionis should be distinguished

from a future interest in property, such as contingent or

executory interest. These are more than mere possibilities

as they are coupled with interest, and hence, may be

transferable.xxii

Illustration: A and B were co-widows and held a widow’s

estate over their deceased husband’s property jointly.

They entered into an agreement whereby they divided the

property equally on the condition that neither would have a

right of survivorship over the property after the other dies.

A died. The court held that this was more than a mere

spes succesionis. The right of survivorship was incidental

to a limited estate the co-widows enjoyed. Hence, it was a

future interest contingent on the death of the other widow

and was alienable. Further, because it was relinquished, B

would not be able to claim A’s share in the estate!

• Right to Re-Entry: A mere right of re-entry for breach of a

condition subsequent cannot be transferred to anyone

other than the owner of the property thereby affected

under Section 6(b) of the Transfer of Property Act.

Therefore, if a lessee commits a breach of the lease

covenant, the lessor may only reverse a right of re-entry to

himself. He cannot transfer that right by itself apart from

the estate to which it is attached. However, when the

lessee breaches the lease terms and, as a result, incurs

forfeiture of the land, and the lessor leases the land to

another with the right to take possession, such a transfer

will be held to be valid. This is so because it is a transfer of

more than a mere right of re-entry. In this case, it is a

transfer of the reversion following upon the incursion of

forfeiture.

• Easement: According to Section 6(c) of the Transfer of

Property Act, an easement cannot be transferred apart

from the dominant heritage. The dominant heritage is the

main property to which the easement is attached.

Easement is a right to use the property or a part of the

property granted for the complete and proper enjoyment of

the dominant property. It arises with continued use of the

hp

Highlight

hp

Highlight

hp

Highlight

!!!


!!

10

property. It is a right incidental to the ownership of the

dominant heritage and passes with it. It cannot be

detached from it.

Illustration: A owns a huge bungalow near the seaside.

There is an easementary right attached to a bungalow to

use the path adjoining it leading up to the main road. In

such a case, the easement — that is, the right to use the

path — cannot be alienated from the dominant heritage to

which it is attached, that is, the bungalow.

• Personally enjoyable interests: Interests in property that

are restricted in their enjoyment to the owner personally

cannot be transferred. These interests are such that only

the specific person or office can enjoy them and hence,

they are inalienable. A service inam — that is, the

discretionary grant of property for the purpose of

conducting services in exchange for returns from the

property — is an example of this.

Illustration: When the government granted a service inam

to the ancestors of a person, alienation by that person of

the property was held to be void and he was allowed to

recover the property back from the transferee.xxiii Similarly,

the right to manage a temple is a personally enjoyable

right and cannot be transferred.xxiv

• Right to Future Maintenance: Section 6(dd) of the Transfer

of Property Act prohibits the transfer of a right to future

maintenance. This right is irrespective of how it arises, is

secured, or is determined. The provision was inserted by

way of an amendment in order to resolve a conflict of

decisions where the Calcutta High Courtxxv held that a right

to future maintenance fixed by decree was not transferable

but the Madras High Court held to the contrary.xxvi

However, it is important to note that maintenance in

arrears is transferable.

Illustration: A is the wife of B. The court passes a decree in

her favour granting a monthly maintenance of Rupees Five

thousand from her husband. The maintenance amount is

unpaid and in arrears for six months. A then transfers the

maintenance in arrears as well as the maintenance

payable for the next one year in favour of C. The transfer

of arrears is valid but the transfer of future maintenance is

invalid under Section 6(dd) of the Transfer of Property Act.

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

!!!


!!

11

• Mere right to sue: Under Section 6(e) of the Transfer of

Property Act, a mere right to sue is not transferable.

Please keep in mind that the operative word here is ‘mere’.

This is indicative of a situation where the transferee

acquires nothing more than a bare right to sue. The

causes of action arising in tort or in relation to a breach of

contract are bare rights to sue and hence, are not

transferable.

However, if the interest is more than a bare right to sue,

then it is transferable. In this regard, a mere right to sue

should be distinguished from an actionable claim. When

the beneficial interest in a contract is transferred and that

subsequently gives rise to a claim in damages, it will be

valid as a transfer of an actionable claim.xxvii However,

when the assignment of contract is made after the breach

occurs, it is only mere right to sue, and hence, excluded by

virtue of Section 6(e) of the Transfer of Property Act.xxviii

So how does one know whether it a mere right to sue or an

actionable claim? The test for distinguishing an actionable

claim from a mere right to sue is whether the claim is for a

precise and ascertained amount or an unliquidated sum. In

case of the former, it is an actionable claim, and in the

latter case, it is a mere right to sue.xxix Further, when any

property is transferred and along with it is a right to sue,

the transfer is valid.xxx Thus, when insured goods were

damaged in transit, the insured claimed the insurance

amount and, under the doctrine of subrogation, transferred

all the interest in the destroyed goods to the insurance

company. This transfer was more than a mere right to sue

and the insurance company was allowed to successfully

sue the transport company.xxxi

• Public office or salary: Under Section 6(f) of the Transfer of

Property Act, the office held by a public servant or the

salary derived from the office is not transferable. As you

may have realised, such transfers are prohibited because

there is a strong public interest attached to the

performance of a public office.

• Stipends and pensions: Similarly, stipends received by

members of the armed forces and pensions received by

civil and political pensioners of the Government of India

are also not transferable under Section 6(g) of the Transfer

of Property Act.

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

!!!


!!

12

• Illegal transfers: Section 6(h) of the Transfer of Property

Act prohibits three kinds of transfers:

• Transfers opposed to the nature of the interest affected

thereby: This essentially means that a person with a

mere life interest cannot alienate as though such person

was the owner of the property.

Illustration: A transfers a property to B for B’s lifetime,

and then to B’s first son. Here, B has a life interest in the

property. He has the right to enjoy the property during

his lifetime. On his death, it passes to his first son.

Therefore, B cannot transfer the property in favour of

another as though B was the owner because it is

opposed to the nature of his interest in the property.

• Transfer for an unlawful object or consideration: A

consideration that is excluded by virtue of Section 23 of

the Indian Contract Act, 1872 (“the Contract Act”) cannot

be transferred. Recall having learnt in Course 3 that

Section 23 of the Contract Act stipulated what

considerations and objects are lawful and what are not.

Therefore, a transfer of property in exchange for future

illicit cohabitation would be hit by this prohibition.

However, irrespective of such a transfer being invalid, if

the immoral purpose has already been achieved, then

the transferor cannot recover the property.

• Transfer to a person legally disqualified to be transferee:

This is self-explanatory. Therefore, if a person does not

have the capacity to contract, he would ordinarily be

disqualified from entering into a contract to transfer

property. Hence, the transfer itself would be invalid in

such a case.

Illustration: A is an insane person. B thinks he is sane

and transfers his property to A. Such a transfer is not

valid as A is incompetent to contract on account of his

insanity.

• Miscellaneous: Finally, Section 6(i) of the Transfer of

Property Act prohibits certain other forms of transfers,

namely, transfer by tenant of an un-transferable right of

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

!!!


!!

13

occupancy, or by the farmer of an estate with respect to

which there has been a default in the payment of revenue.

Thus, we have seen that there are a number of transactions that

form exceptions to the general rule allowing all forms of transfer of

property. These exceptions are important for a variety of practical

and public policy reasons. Therefore, it is important to keep them

in mind at all times when dealing with this area of law.

Persons Competent to Transfer

Now that we know what cannot be transferred under the Transfer

of Property Act, it is also imperative that we understand who is

competent to transfer property under this statute.

Section 7 of the Transfer of Property Act deals with persons

competent to transfer. Under this provision, to be competent to

transfer property, a person must have the following qualifications:

• Competence to enter into contracts; and

• Entitlement to the property; or

• Authority to dispose such property that is not is own.

If these qualifications are fulfilled, then a person may transfer the

property — either in whole or in part — absolutely or conditionally,

in any circumstance, manner or extent allowed and prescribed by

any law in force at the time of the transfer, provided that the

property is transferable of course.

The primary requirement is that a person should be competent to

contract in order to transfer the property. Recall having learnt

about persons competent to contract in Course 3. At the cost of

being repetitive, a minor, that is, a person below 18 years of age is

not competent to contract,xxxiii and any lunatic or person of

unsound mind cannot transfer property under Section 7 of the

Transfer of Property Act. It may be important to note that, a minor,

however, can be a transferee of property in case of a mortgage in

his favourxxxiv or a salexxxv , but not a lease. This is because a lease

would entail an obligation on the minor to pay rents and undertake

other obligations under the lease agreement.xxxvi

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

!!!


!!

14

Operation of Transfer

Once we know that there is transferable property and a person

has the capacity to transfer it, the next question that arises is: how

does the transfer operate? When a property is transferred, which

parts of it are automatically included in the transfer? The answer is

found in Section 8 of the Transfer of Property Act. This section

deals with the operation of transfers. The provision states that

unless provided otherwise expressly or by necessary implication,

a transfer passes to the transferee all the interest that the

transferor is then capable of in the property and all the incidents

thereof. This is the general rule. After that, the provision gives

many specific instances and provides an illustrative list of what

would be transferred in each instance.

For instance, in the case of land, any easements annexed to it,

rents and profits accruing from it, and all things attached to the

earth are transferred with the land. In case of machinery attached

to the earth, the immovable parts go with it. Where the property is

a house, the easements annexed, the rent accruing, and the

fixtures provided for permanent use, such as bolts and doors are

automatically transferred. Where the property is money or other

property yielding income such as leased property, the interest or

income accruing from it is also presumed to be transferred.

However, these rules will obviously not apply where the parties

have entered into contracts that provide to the contrary, either

expressly or by necessary implication.

Oral Transfers

The final issue for this Unit is: how is a transfer to be effected?

Section 9 of the Transfer of Property Act provides that a transfer

may be effected orally — that is, without writing — in any case in

which writing is not expressly required by law, such as immovable

property valued under Rupees One hundred. This provision

becomes relevant when we come to registration of property in the

final Block and we shall examine it in greater detail then.

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

hp

Highlight

!!!


!!

15

Conclusion

With this, we conclude this Unit on the general rules of transfer

of property. Once you have an understanding of these rules, we

must then look at specific rules that govern transfers generally.

Transfer transactions may be carried out with varied nuances.

For each of these, there are different principles applicable.

These principles shall be the subject matter of our study for

the remaining Units in this Block.

-x-x-

!!!


!!

16

Suggested Reading

Books

• Justice Ramanujam (ed.), G.C.V. Subbarao’s Transfer of

Property Act, 15th ed., C. Subbiah Chetty & Co, Chennai,

2005.

• G.P. Tripathi, The Transfer of Property Act, 1882, 15th ed.,

Central Law Publications, Allahabad, 2005.

• Poonam Pradhan Saxena, Property Law, 2nd ed.,

LexisNexis Butterworths, New Delhi, 2011.

• S.M. Lahiri, The Transfer of Property Act (Act IV of 1882),

11th ed., India Law House, New Delhi, 2001.

!!!


!!

17

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!i Holroyd v. Marshall (1862) 10 HLC 1. iii P. John Chandy and Company Private Limited v. P. Thomas, AIR 2002 SC 2057 and Dr. Mahesh Chand Sharma v. Raj Kumar Sharma, AIR 1996 SC 869. v Radhakrishnayya v. Sarasamma, AIR 1951 Mad 213. vii Khunnilal v. Govind, 33 All 356 P.C. ix Narasimha v. Venkatalingam, 50 Mad. 687 (F.B.). xi Jugal Kishore v. Raw Cotton Company, AIR 1955 SC 376 xiii Sumsuddin .v. Abdul Husein, (1909) 31 Bom 172 xv See, Holroyd v. Marshall (1862) 10 HLC 1 xvii Also see, Talby v. Official Receiver, 13 App Case 543. xix Stockly v. Parsons (1890) 45 Ch. D. 51. xx Ananda Mohan v. Gaur Mohan, AIR 1923 PC 189. xxi Amrit Narayan v. Gaya Singh 45 Cal 590 (PC). xxii See May Yaitt v. Official Assignee, (1930) P.C. 17. xxiii Anjaneyulu v. Sri Venugopala, 45 Mad 620. xxiv Raja Varma v. Ravi Varma 1 Mad 235 (P.C.). xxv Asad Ali v. Haider Ali, 38 Cal. 13 xxvi Thimmanayanim v. Venkatappa, (1918) Mad. 713 (F.B.) xxvii Jaffer Meher Ali v. Budge Budge Jute Mills Company, 38 Mad 308. xxviii Hirachand v. Nem Chand, 47 Bom 719. xxix See Manmath Nath Mullick v. Hedait Ali, 11 Pat 266 (1932) xxx See Shankarappa v. Khatumbi, 56 Bom 403 (mesne profits). xxxi See United India F&G Insurance Company v. P. Transport Carriers, AIR 1986 AP 31. xxxiii See Mohori Bibi v. Dharamdas Ghosh, 30 Cal 539 (PC); Raja Balwant Singh v. Rao Maharaji Singh, 34 All 296 (PC). xxxiv See Raghavachariar v. Srinivasa Raghavachariar, 40 Mad 308 (FB). xxxv Subba Reddy v. Guruva Reddy, 1930 Mad 425, xxxvi Pramila v. Jogeshar, 3 Pat. LJ 518.

topa 1882 highlighted notes.pdf

Documents