Transfer of Property

Introduction to TOP Act

What is the meaning of “transfer of property” for the purpose of the Act?

[pic]The term “transfer of property” as defined by S5 means an act by which a living person conveys property in present or in future to one or more other living persons, or to himself or to himself and one or more other living persons. In this section, the term, ”living person” includes a company or association or body of individuals whether incorporated or not. Property: The word, ”property,” is used in this Act in its widest and most generic legal sense. Therefore, an actionable claim, as also the right to reconveyance land may be termed ”property”. However, the power of appointment is not a property Transfer:

The word, ”transfer,” is defined with reference to the word ”convey”. In India, the term ”transfer” is used in its wider sense. It includes the transfer of interest in the property with the conveyance of property. This word is, sometimes, used, in its wider sense, to include any form of assurances between two parties, such as mortgages, charges, leases, gifts, assents, vesting declarations etc. Living person:

These words exclude transfers by will, for a will operates from the death of a testator. In present or in future: A transfer of property may take place, not only in the present, but also in the future, but the property must be in existence. A transfer of property that is not in existence operates as a contract to be performed in the future which may be, specifically, enforced as soon as the property comes into existence.

What property can and what property cannot be transferred according to the Transfer of Property Act?

[pic]Section 6 of the Act provides that property of any kind may be transferred, except, as otherwise provided by the Act or, by any other law that is in force. Thus Section 6 provides that property of any kind may be transferred.However, it has two exceptions, which are as follows: Whenever it is provided otherwise

• By this Act itself or• By any other Act which is in forceThe Section further expressly provides ten kinds of property which cannot be transferred. • The chance of an heir-apparent succeeding to an estate, the chance of a relation obtaining legacy on the death of the kinsman, or any other mere possibility of a like nature, can not be transferred. • A mere right of re-entry ensuing from a breach of a condition cannot be transferred to anyone except the owner of the property, affected thereby. • An easement cannot be transferred apart from the dominant heritage. • An interest in the property, restricted in its enjoyment to the owner personally, can not be transferred. • A right to future maintenance, in whatsoever manner, secured or determined, cannot be transferred. • A mere right to sue cannot be transferred.

• A public office or the salary of a public officer cannot be transferred. • The stipends allowed to military, naval, air force and civil pensioners of the government and political pensioners cannot be transferred. • No transfer can be made in the following cases:

1. in so far as it is opposed to the nature of the interest affected thereby, or 2. for an unlawful object or consideration.3. to a person legally disqualified to be a transferee. The words ”Property of any kind” appearing in the above section, indicate that transferability of the property is the general rule and the right to property includes the right to transfer the property to another person. It was held, in UP State Electricity Board v.

Ram Berai Prasad & another AIR 1985 All 265, “that a property, such as coal ash, which is not in existance on the day of the contract but, would be available in due course of time, becomes potential property and, sale in respect of such a property is established by a contract. The title, in such property, passes onto the purchaser, although it is held by the seller, in the capacity of a trustee.” The onus of proof is on the person alleging that any kind of property is not transferable. However, the Act itself provides for a few exceptions that are mentioned above. Similarly, other laws of the land also set some restrictions on the transfer of property e.g.Hindu Law prohibits transfer of coparcenary property; Mohammedan Law provides transfer of Wakf.

Who are competent to transfer?

[pic]Section 7 of the Act provides that every person, competent to contract and entitled to transferable property, or authorized to dispose of property not his own, is competent to transfer such property, either wholly or in part, either absolutely or conditionally. Thus the transferor must be;

1. competent to contract, and2. have the title to the property, or the authority to transfer the property not his own, in order to be a competent transferor. 3. must have attained the age of majority according to the law to which he is subject. Therefore, the transfer by a minor and by a lunatic is void Section 11 of the Indian Contract Act defines capacity to contract as follows: • Every person is competant to contract, who is of the age of majority, according to the law to which he is subject, and, who is of sound mind and, is not disqualified from contracting by any law to which he is subject. Thus, in accordance with Indian law, a person who has completed 18 years of age can be competant to contract.

• If the transferor has no title to the property, he must have the authority to transfer. E.g. he may be an agent, acting under a power of attorney; or, the guardian of a minor duly appointed by the court: or, he may be a receiver when empowered by the court, etc. • However, an agent, who merely manages property, has no authority to transfer it. How does the transfer operates?

[pic]As a general rule, whenever a person transfers his property to another person, all the interest that a transferor has in the property is transferred to the transferree. However, if a different intention is expressed or, necessarily implied, the whole interest in the property will not pass to the transferee on the transfer of property. Section 8 further states that, when the property is land, then on transfer, it is not only land that is transferred but also the easement, annexed to the land, the rents and profits, accruing after the transfer and all things, attached to the earth, are transferred.

When a house is transferred, then with such house, the easement, annexed to the house, the rents and profits accruing after the transfer and, locks, bars, keys, doors, windows and all other things that are provided for permanent use. If the property is debt or other actionable claim, all securities are transferred to the transferee, except arrears of interest, accrued before the transfer. If the property is money or other property, yielding income, the interest or income therof, accruing after the transfer takes effect.

How far are conditions restraining alienation valid?

[pic]Section 10 of the Act states that when a property is transferred, subject to a condition or limitation, absolutely restraining the transferee or any person claiming under him from parting with or disposing of his interest in the property, such a condition or restriction is void, and not the transfer itself. However, there are two exceptions to the above section. They are as follows: • In the case of a lease where the condition is for the benefit of the lessor or those claiming under him. • Where the property is transferred for the benefit of a woman, not being Hindu, Mohammedan or Buddhist so that she shall not have power during her marriage to transfer the property.

The principle, underlying this section, is that a right of transfer is incidental to, and inseparable from, the beneficial ownership of the property. An absolute restraint on that power is repugnant to the nature of the estate and is an exception to the very essence of the grant. The restraint on alienation may be absolute or partial. An absolute restraint is void, a partial restraint is not. If the restraint is on the mode of alienation, it is not restraint within the meaning of this section. If there is a valid transfer, the condition in restraint of alienation is void and the transfer stands.

Thus the bequest of an absolute estate subject to a condition that neither the donee nor his heirs should alienate the estate except for religious purpose is valid bequest but the condition is void for repugnancy. Thus, where a deed of a gift provides that the donee or his successor had no right to transfer the property and, if they did transfer, the same would be invalid and the donor or his successor would have the right to revoke the gift and such a condition would be invalid. Validity of agreements or covenants not to alienate

An agreement for consideration that the parties, thereto, shall not alienate certain properties for a limited time will be valid. However, an agreement, preventing alienation in perpetuity or for a indefinite period, would be opposed to public policy and therefore, not valid. Thus where a deed of a gift provided that the donee or his successor had no right to transfer the property and if they did transfer, the same would be invalid and the donor or his successor would have the right to revoke the gift such a condition would be invalid.

How valid are restrictions repugnant to interest created?

[pic]Section 11 of the Act states that where, on a transfer of property, though an interest is created absolutely in favor of any person, the terms of the transfer direct that such interest shall be applied or enjoyed by him in a particular manner. The transferee, in such case, shall be entitled to receive and dispose of such interest as if there was no such direction. However, there is one exception to the above provision.

Where any such direction has been made in respect of one piece of immovable property, for the purpose of securing the beneficial enjoyment of another piece of such property, the above provisions of Section 11 do not affect such direction. For instance A makes an absolute gift of a house to B with a direction that B shall reside in it. The gift is absolute and the direction is void. B may live in the house, or not, as he pleases because such a direction is invalid. Similarly, according to section 12, if a condition is imposed that, on insolvency of a transferee or, that, on endeavour to alienate property, the transfer becomes ineffective, such a condition is void.

How far is the transfer for the benefit of an unborn person valid?

[pic]According to section 13 of the Act, a transfer to an unborn person is void, unless all the interest is given to such unborn person. E.g. if a transfer is made to A, who is unborn absolutely, it is valid only if life interest is given to A and then to B, such transfer is void. As by virtue of Section 5 of the Act, a transfer cannot be made to a non-living person. The only way to transfer property to an unborn person is to create a trust in his name. Such unborn person, as stated above, should get absolute interest in the property and, not merely vested interest.

For instance, A transfers the property of which he is the owner to B, in trust for A and his intended wife, successively, for their lives, and after the death of the survivor, for the eldest son of the intended marriage for life, and after his death for A”s second son. The interest, so created for the benefit of the eldest son, does not take effect because it does not extend to the whole of the remaining interest in the property.

Therefore, it is necessary, in such cases, that the estate must vest in some person between the date of the transfer and the coming in to existence of the unborn person. ”’A” made a gift of her property to ”’B”’- her nephew”s daughter- for life, and then to B’s male descendents, if she should have any. But, if she should have no male descendents then, it would pass to B’s daughter without power of alienation; but if there were no descendents of B, male or female, then to her nephew. B died without issue. The gift to unborn daughters, being of limited interest and subject to the prior interest, created in favor of B, was invalid under section 13 and the gift to the nephew therefore failed.

What is the ”Rule Against Perpetuity”?

[pic]The rule against perpetuity, simply, means that all devices shall be void which tend to create a perpetuity or place property, forever, out of the reach of the exercise of the power of alienation. So long as the transferees are living persons, any number of successive estates can be created. A transfer can be made to ”A” for life, to ”B” for life, and then to ”C” for life, and so on, provided ”A”, ”B” and ”C” are all living at the date of the transfer. But, if the ultimate beneficiary is someone not in existence at the date of the transfer, Section 13 requires that the whole residue of the estate should be transferred to him. If he is not born before the termination of the last prior estate, the transfer to him fails according to Section 14.

If he is born before the termination of the last prior estate, he takes the vested interest at birth and possession, immediately on the termination of the last prior estate. However, the rule against perpetuities does not require that the vesting shall take place at the birth of the ultimate beneficiary. What it does require is that the vesting cannot be delayed, in any case, beyond his reaching the age of 18 years. The result of the rule against perpetuity is that the minority of the ultimate beneficiary is the latest period at which an estate can be made to vest Illustration:

1) A fund is bequeathed to ”A” for his life and after his death to ”B” for his life; and after B’s death to such of the sons of ”B” as shall attain the age of 25. ”A” and ”B” survive the testator. Here the son of B who shall first attain the age of 25 may be a son born after the death of the testator; such may not attain 25 until more than 18 years have elapsed from the death of the longer liver of A and B; and the vesting of the fund may, thus, be delayed beyond the lifetime of A and B and the minority of the sons of B. The bequest after B”s death is void. Transfer in perpetuity for the benefit of the public:

The restriction in the Section does not apply in the case of a transfer of property for the benefit of the public in the advancement of religion, knowledge, commerce, health, safety or any other object for the bene,fit of mankind.

If a transfer is made in favour of a class, and such transfer becomes ineffective in favour of one person in that class, does the transfer, in favour of all the persons, fail?

[pic]

According to Section 15 of the Act, if a transfer is made in favour of a class and, it fails to take effect in favour of one or more persons in that class due to the reasons, stated in section 13 and 14 of the Act, the transfer, in favour of the rest of the people in the class, does not fail.Thus, the rest of the people of the class will still be able to get such property. E.g. a fund is bequeathed to ”A” for his life. After his death, it will go to B, C, D and all other children of A, who shall attain the age 25. The gift to A”s children is a gift to a class.A survives the testator, and has some children, living at the time of the testator”s death.

Each child of A,” at the testator”s death, must attain the age of 25 years (if at all) within the limits allowed for a bequest. However, A may have children, after the testator”s demise, some of whom may not attain age of 25 until more than 18 years have elapsed after the decease of A. The bequest to A”s children, therefore, is inoperative with regard to any child, born after the testator”s death, in regard to those who who do not attain the age of 25 within 18 years after A”s death.

However, it is operative with regard to the other childeren of A. If any intrest is created in a person or class of persons that is to take effect on the failure of a prior transfer to some other person or class of persons, for some reasons but, such transfer fails for the reasons, stated in section 13 and 14 of the Act, in that case, according to Section 16 of the Act, the subsequent transfer also fails. However, the restriction in Section 16 does not apply in the case of a transfer of property for the benefit of the public in the advancement of religion, knowledge, commerce, health, safety or any other object for the benefit of mankind.

Can the terms of transfer direct that income, arising from the property, should be accumulated?

[pic]The terms of transfer can direct that income, arising from the property, must be accumulated. However, Section 17of the Act provides that, if the period for which such accumulation is to be done exceeds the following:-Li)The life of the transferor, or (ii)A period of eighteen years from the date of transfer; such direction will be void to the extent to which the peroid exceeds rather than the period mentioned above. At the end of such period, the income is to be disposed of as if the period that is directed has elapsed.

However, this provision shall not affect any direction for accumulation for the following purposes:- • the payment of the debts of the transferor or any other person, taking any interest under the transferor; or • the provision of portions for children or a remoter issue of the transferor or, of any other person, taking any interest under the transfer; or  • the preservation or maintenance of the transferred, property and, such direction may be made accordingly. Transfer in perpetuity for the benefit of the public:

The restriction in the Section does not apply in the case of a transfer of property for the benefit of the public, in the advancement of religion, knowledge, commerce, health, safety or any other object for the benefit of mankind.

What is the meaning of vested interest? What is the difference between vested and contingent interest?

[pic]Section19 of the Act provides that where, on a transfer of property, an interest therein is created in favor of a person, without specifying the time when it is to take effect, or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears in the terms of the transfer.

A vested interest is not defeated by the death of the transferee before he obtains possession. Thus, a gift to ”A” on the death ”B” creates a vested interest in A, even during B”s lifetime, for there is nothing more certain than his death. But, a gift to A on the marriage of B creates, only, a contingent interest, for, B may never marry; but, that contingent interest becomes vested if and when B marries. A vested interest is different from a contingent interest as defined in Section 21.

When an interest is vested, the transfer is complete, but when an interest is contingent, the transfer depends upon a condition precedent when that condition is fulfilled. When the transfer is complete, that interest becomes vested. If that condition refers to an event which is certain to occur, the interest, dependent upon it, is not contingent but vested. If, it is an uncertain event, it is contingent. For, the condition may never be fulfilled and the transfer may never take effect. The distinction between a vested and contingent interest may seem simple, but, in practice, it is not always easy to distinguish the one from the other. The difficulty arises from the fact that, a vested interest is not, necessarily, in possession. An interest may be vested, yet, not in possession, in following three cases set out in the explanation to the section 19 of the Act i.e. 1. by a provision postponing an enjoyment; or

2. by intervention of a prior interest; or3. by provision for accumulation of income. Again, an interest may be vested although it is liable to be divested by a subsequent condition. For instance, where A executed a gift deed in favor of B, but, directed that B was not to take possession of a portion of the property until after the death of A and A”s wife. In such a case, B has a vested interest, enjoyment only being postponed until the happening of an event (in this case death of A and A”s wife) which is certain.

When does an unborn person acquire vested interest on the transfer for his benefit?

[pic]An interest created for the benefit of an unborn person vests in such a person as soon as that person is born as provided in section 20. Thus, if A settles property on himself and his intended wife for their lives, and then on the eldest son of their marriage, the son takes the vested interest as soon as he is born. It does not matter whether he is entitled to the possession during the lifetime of his parents.

When does the conditional transfer fail?

[pic]Section 23 provides that, where on transfer of property, an interest thereinis to accrue to a spectified person, if a specified uncertain event shall happen and, no time is mentioned for the occurrence of such event, the interest fails, unless such event happens before, or at the time of cessation of the intermediate or precedent interest. Section 25 provides that an interest, created on the transfer of property and, dependent upon a condition, fails, if the fulfillment of the condition is impossible, or is forbidden by law, or is of such a nature that, if permitted, it would defeat the provisions of any law, or is fraudulent, or involves or implies injury to the person or property of another or the court regards it as immoral or opposed to the public policy. Illustrations:

• A lets a farm to B on the condition that he shall walk 100 miles in an hour. This lease is void because the fulfillment of the condition is impossible. • A transfer Rs. 500 to B on condition that he shall murder C. The transfer is void because the condition in this case is forbidden by law. • A transfer Rs. 500 to his niece C if she will desert her husband. The transfer is void because the transfer in this case, if permitted, would imply injury to the person or property of another.

How should a condition precedent be fulfilled?

[pic]Whenever there is a condition precedent to the transfer of interest, according to which a transfer is to take effect on fulfillment of a condition, mentioned, then, according to section 26 of the Act, such condition is deemed to have been fulfilled when it is substantially complied with. Illustration:

A transfers Rs.5000 to B on condition that he shall marry with the consent of C, D and E. E dies. B marries with the consent of C and D. B is deemed to have fulfilled the condition.

Is the validity of a prior disposition affected by invalidity of ulterior (subsequent) disposition?

[pic]Section 30 of the Act provides that if the ulterior disposition is not valid, the prior disposition is not affected by it. Thus, it is very clear from the above provision that the prior disposition is not affected by the invalidity of the ulterior disposition. For instance, ”A” transfers a farm to B for her life, and if she does not desert her husband, to C. In such a case, B is entitled to the farm during her life as if no condition had been inserted. If a prior interest is invalid, either as offending against the rule against perpetuity, or as being illegal or impossible, under Section 25, the subsequent interest also fails. However, if the subsequent interest is invalid, the prior interest is not affected.

What is the meaning of ”election” according to the Transfer of Property Act?

[pic]Section 35 of the Act provides that where a person professes to transfer the property which he has no right to transfer, and as part of the same transaction, confers any benefit on the owner of the property, such owner must elect either to confirm such transfer or dissent from it. If the subsequent owner wishes to dissent from such transfer he shall relinquish the benefit, so conferred, and the benefit so relinquished, shall revert to the transferor or his representatives, as if it had not been disposed of. An 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 Rs 1000 to C. C elects to retain the farm. He forfeits the gift of Rs 1000. And in the same case if ”A” dies before the election, his representatives must pay Rs 800 to B out of the Rs.1000.

Who is an ostensible owner?

[pic]An ostensible owner is one who has all the indicia of ownership without being the real owner. It has been held that the possession of a manager cannot betreated as ostensible ownership with the consent of the real owner. The occupation of a menial servant does not constitute ostensible ownership.

Can a co-owner transfer his part of the share from the property owned by several joint owners?

[pic]Section 44 of the Act provides that the transferee acquires as against the other co-owners the same right that the transferor had, and is subject to any condition and liabilities shared at the date of the transfer. Illustration: B and C are co-owners of a field that is subject to a mortgage. C transfers his share to D. D has a right to joint possession with B, and has also the right to claim partition and separate possession of his share. But the share D has acquired is, still, subject to the mortgage.

The transferee of a co-sharer acquires the right of his transferor so far as is necessary to give effect to the transfer, and no further. But, if the co-sharer is in exclusive possession of any portion of an undivided holding not exceeding his own share, he can not be disturbed in his possession until partition. The transferee of a Hindu coparcener may acquire a right to joint possession or to ascertain his share by partition, but he will not acquire the status of a copartner in the family. Conditions and liabilities –

As the transferee acquires the right of the co-sharer, any conditions and liabilities affecting the share at the date of the transfer, also bind him. However, a purchaser of a share is of course not liable for the damage caused to the rest of the property by the transferor after the date of the transfer.

If a transferee of immovable property under a defective title who, in good faith, believes that he has a good title makes improvements to the property and later on, if any person having a better title evicts him from such property, can the evicted person claim reimbursement?

[pic]Section 51 of the Act provides that, the transferee has the right to requirethe person causing the eviction, either to have the value of the improvement estimated and paid or secured to the transferee, or to sell his interest in the property to the transferee at the then market value, irrespective of the value of the improvements. The Section further provides that in the above circumstances, if the transferee has planted or sown on the property crops which are growing when he is evicted, he is entitled to such crops and free ingress and egress to gather and carry them away. The principle behind this Section is an application of the equitable maxim that he who seeks equity must do equity, the conditions to be fulfilled are: • The person evicted must be a transferee;

• He must have made the improvements, believing in good faith that he was absolutely entitled to the property. Transferee: The following are the instances of transferees who have been given the benefit of the Section: • A purchaser who purchased ”bona fide” in ignorance of a mortgage; • A purchaser of a life estate, who believed that his vendor was absolutely entitled; • A purchaser who was put in possession of a larger area then he was entitled to and who, in ignorance of the mistake, made improvements on the excess area; • A transferee under an oral sale of immovable property worth RS.100 or more. Illustration:

• ”A” purchased the property of a Mohammedan minor from his mother, who was acting as the de facto guardian, believing, in good faith, that she had the authority to sell. When A was evicted by the minor, he was entitled to compensation for improvements that he had made. • A grantee of land from a Tahsildar, believing himself to be absolutely entitled, improved the land by laying out a casuarina plantation. The collector revoked the grant and evicted the grantee, but the latter was entitled to compensation for the improvements. In all these cases, the rule was applied when the transferee was evicted by the better title.

What is the meaning of ”Lis Pendens”? Is the transfer of property valid, which is made during the pendency of the suit relating thereto?

[pic]

Section 52 of the Transfer of Property Act enacts the doctrine of ”lis pendens”. Put simply, it means any right to immovable property, which is the subject matter of a legal proceeding, cannot be transferred or dealt with so as to defeat the rights of any party to the suit, except under the order of the court hearing the proceeding. This is necessary because otherwise, the plaintiff”s right in every such suit would be defeated by reason of the defendant transferring before the judgement or decree. The plaintiff would then have to file another suit against the new purchaser, and repeat the process indefinitely, because every defendant would sell to a new purchaser before the judgement or decree.

Thus, the plaintiff would never be able to succeed in his suit. State amendment: In Gujarat and Maharashtra, an amendment has been made as follows: • that the plaintiff must register a notice of pendency of such suit or proceeding, under Section 18 of the Indian Registration Act containing the following: o the name and address of the owner of immovable property or other person whose right to the immovable property is in question; o the description of the immovable property the right to which is in question; o the court in which the suit or proceeding is pending; o the nature and title of the suit or proceeding; and o the date on which the suit or proceeding was instituted. • the bar against the transfer or alienation of the property which operates after the notice is registered. Commencement of the suit –