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 force The 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, and 2. 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?

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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; or 3. 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 therein is 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 be treated 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 require the 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?

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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 -

A suit is commenced by the filing of a plaint and, appeals and execution proceedings are the continuation of the suit. Illustrations • ''A'' mortgages property first to B, and then to C. ''C''sues A on his mortgage and, pending the sui,t to B. The sale, having being made pendente lite, is subject to the decree in C''s suit. But A''s right, under the prior mortgage, is not affected. • ''A'' makes a gift of land to B. ''C'' sues A for the possession of the land. While this suit is pending, B transfers the land to D; A dies and C obtains the decree for the possession against B as the legal representatives of A. In the above circumstances, the title of D is not affected by the rule of lis pendens, subject to B''s decree, because of two reasons. Firstly, A's gift was before the suit. Secondly, B was not a party to the suit at the time of the transfer by B to D. The rule of lis pendens does not apply to any transfer made before the filing of the suit. The doctrine does not apply to immovable property.

What is fraudulent transfer?

[pic] The principle of Section 53 is based on the rule of justice, equity and good conscience. The section enumerates fraudulent transfer. 1. Every transfer of immovable property, made with the intent to defeat or delay the creditors of the transferor, comes into the category of the fraudulent transfer and therefore, they are voidable at the option of the creditors, who are so defeated or delayed. 2. Every transfer of immovable property made, without consideration with intent to defraud a subsequent transferee, comes under the category of fraudulent transfer. Therefore, it is voidable at the option of such transferee. In both circumstances, the transfer is voidable at the option of the person affected by such fraudulent transfer. The rule is adopted by Punjab where the Act is not in force. Illustrations:

1. ''A'' obtained a decree against B for the possession of certain properties and mesne profits estimated at RS. 10,000. ''B'', a month later, executed a deed of trust,settling all the property, of which he was then possessed,on his wife and children. The settlement was voidable under Section 53. 2. ''A'' sells property to B in fraud of creditors. Creditor C attaches the property in execution of a decree against

A. B objects to the attachment and C maintains his right to attach and B's objection is dismissed. B, then, sues for a declaration of his right to the property. C may plead, in defence, that the transfer to B was in fraud of creditors. A creditor's suit: A creditor's suit, to avoid a transfer, must be a suit on behalf, not only of himself, but of the whole body of creditors. This is because the debtor might, otherwise, be exposed to the multiplicity of suits by each and every creditor. It has, however, been held that it is enough if the suit is in substance, on behalf of all creditors, even though it is not a representative suit as such. A single creditor can, of course, file a suit if he is the only creditor.

Leave & License | Commentaries and Analyses   |

What amount of Stamp Duty one will have to pay on the leave and licence agreement?

[pic] Before amendment in the Bombay Stamp Act,1958 the stamp duty payable on a Leave & Licence Agreement was Rs.20/- as per Article 5 (h) of Schedule I to that Act. Under the amendment to the Act which came into effect with from May 1, 2001. Article 36A has been inserted in Schedule- I which reads as follows: • Where the leave and license agreement purports to be for more than one term of eleven months but not exceeding three such terms, - |1. |Where the amount of average annual rent + he amount of security deposit, or money advanced or to |Rs. 500/- | | |be advanced does not exceed Rs. 2,50,000/- | | |2. |Where the amount of average annual rent + the amount of security deposit, or money advanced or to|Rs. 1000/- | | |be advanced exceeds Rs. 2,50,000/- but does not exceed Rs. 5,00,000/- | | |3. |Where the amount of average annual rent + the amount of security deposit, or money advanced or to|Rs. 2000/- | | |be advanced exceeds Rs. 5,00,000/- | |

• Where such leave and license agreement purports to be for a period exceeding 3 terms as described in clause (a) with or without renewal clause the same stamp duty as is leviable on lease, under clause (a), (b) or (c) as the case may be of Article 36. The registration charge for a leave and license agreement is Rs. 1000/- only.

Is the registration of all Leave & Licence Agreements compulsory?

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Yes, the registration of all Leave & Licence Agreements is compulsory as per sec.55 of the Maharashtra Rent Control Act. The responsibility for getting the agreement registered lies with the landlord. This is a new requirement. Leave and license agreements were not required to be registered under the previous Rent Act. Any contravention of this provision is punishable with imprisonment which may extend to three months or fine not exceeding Rs. 5000/- or both. The registration charge for a leave and license agreement is Rs. 1000/- only. What is the difference between leave and licence agreement and a security deposit agreement?

[pic] Before the Maharashtra Rent Control Act, 1999 came into force, many leave and licence agreements were executed in two parts, namely, the leave and licence agreement and the security deposit agreement. The leave and licence agreement would contain all the terms and conditions other than the terms and conditions relating to the security deposit. The security deposit agreement would contain the terms and conditions of the security deposit with reference to the leave and licence agreement. In case there was no security deposit the security deposit agreement was not necessary. Can a person now i.e. after the commencement of the Maharashtra Rent Control Act, 1999; enter into two different agreements namely, a leave and licence agreement and a security deposit agreement?

[pic] One can enter into two separate agreements, namely the leave and licence agreement and the security deposit agreement even after the commencement of the Maharashtra Rent Control Act, 1999. What is the difference between having two separate agreements, namely the leave and licence agreement and the security deposit agreement and having both the agreements incorporated into one?

[pic] If one enters into two separate agreements, firstly, stamp duty is to be paid in respect of each agreement. In case of both the agreements i.e. the leave and licence agreement and the security deposit agreement incorporated into one agreement, it will be treated as a single agreement and two sets of stamp duty are not required to be paid.

Business Centre

What is a Business Centre Agreement?

[pic] A Business Centre Agreement is an agreement, whereby the owner of an equipped business premises, permits another to use his equipment and set-up, in consideration of a subscription fee. Why is a Business Centre Agreement preferred to a Leave and License Agreement, nowadays?

[pic] There are Stamp Duty risks arising out of the compulsory registration of Leave and License Agreements. These are as follows: After the passing of the Maharashtra Rent Control Act, 1999, Leave and License Agreements have become, compulsorily registerable. The Stamp Duty payable on a Leave and License Agreement is Rs. 20/-. Before a Leave and License Agreement is lodged for registration, the person, registering it, has to obtain certification from the Stamp Authority, to the effect that the document has been properly stamped. Now, the Stamp Authority has the discretion to interpret the words of the document to check whether the agreement is really a Leave and License Agreement or, whether it is a lease/tenancy/mortgage etc. disguised as a Leave and License Agreement. If the authority construes the agreement as a lease/tenancy/mortgage etc., then it is empowered to call for additional Stamp Duty on the document.

Gift

Please explain the concept of "gift".

[pic] "Gift", unlike all other alienations, is the only mode of voluntary transfer which involves no "consideration". It is a voluntary, gratuitous and spontaneous transfer of real or personal property "without any consideration" or, to put it more accurately, "without any valuable consideration." The motive, as the reason behind the act of Gift, is not tantamount to "consideration". Therefore, it is always said, the very concept of a gift is diametrically opposed to any presence of consideration or compensation. It does not imply any legal obligation upon the donee. What are the essential elements of a "gift"?

[pic] The essential elements of a gift are:- A voluntary transfer, i) a voluntary transfer by a donor to the donee ii) of certain existing, movable or immovable, property, iii) without consideration iv) duly accepted by the donee. Elaborate the expression "voluntarily and without consideration".

[pic] As observed by the Courts, the expression "voluntary" is used in its popular sense denoting the exercise of unfettered will/ free consent/an act of volition. The principles of ''free consent'' as laid down in the law of Contract would also apply to the act of "gift" in determining whether it is voluntary. Therefore, as repeatedly held by the Hon''ble Supreme Court, the law of "undue influence" would be the same in the case of a gift as in the case of an agreement.

If there is an ''undue'' influence, the gift would be void. In addition to showing that the relationship is the one wherein one person is in a position to dominate the will of the other, it must be also proved that the transaction of a gift is unconscionable. See Bireshwar vs Ashalata (AIR 1969 Cal. 111) where it was held that a gift by a person to his lawyer''s wife does not,per se, involve undue influence and is not liable to be set aside, if the gift is spontaneous. Further, the word "consideration" has been used in the same sense as in the law of contract.

A transfer made in consideration of an expectation of moral and spiritual benefit or in consideration of natural love and affection is a valid gift. In Munni Devi vs. Chhoti (AIR 1983 All 444), a gift deed of the property was executed by the mother in favour of her only daughter while the daughter promised to look after and maintain the mother throughout her life. It was held that the daughter''s promise to look after and maintain her mother was not enforceable in law as such. This gift was made on account of natural love and affection and not in consideration of the assurance or promise of maintenance, given by the daughter. Can the gift be made of a property which is not in existence, i.e. of future property?

[pic] No. The subject matter of a gift must be a certain, existing, moveable or immoveable property. It could be anything such as, goods, any right, title or interest in any immovable property, which exists, or even an actionable claim. It must be transferable within the meaning of Sec.6 of the Transfer of Property Act. A gift of the right to management is valid. But a gift of the future revenue of the village is invalid. Release of a debt is not a gift; because it does not involve any transfer of property but merely a renunciation of a right of action. A makes to B a gift comprising of two items under one and the same transaction. These two items are: a standing crop on A''s land and also a residential flat which A is negotiating to purchase from C. Is such a transaction of gift valid?

[pic] In this case, the first object of gift is an existing property while the another one is not held or owned by A the donor. The residential flat is yet to be acquired /purchased by A. This flat is "future property," in so far as A is concerned. In law, a gift can be made of only the existing property. At the same time, u/s 124 of the Transfer of Property Act, a gift, comprising of both existing and future property, is void only as to the latter. Therefore, the purported gift of the residential flat shall not affect the gift of the standing crop. As such, the gift of standing crop is legal and valid. What is "acceptance" of a gift and why is it one of the essential ingredients of a gift? When should the gift be ''accepted?''

[pic] The Donee is not bound to accept the gift in order to complete the gift. It has long been settled that the acceptance of the gift by the donee is to be presumed, until his dissent is signified. The use of the words "accepted by or on behalf of the donee" shows that the donee might be a person unable to express acceptance, as when the gift is to a minor, and it may be accepted by the natural guardian, on his behalf.

However, it is essential that the gift is accepted during the life time of the donor and while he is still capable of giving; and, also it is essential that acceptance must be made during the lifetime of the donee, for if the donee dies before the acceptance, the gift is void If a gift is made to two or more persons of whom one or more of them does not/do not accept the same, what is the impact of such non-acceptance on the interest of the donee/s accepting the same?

[pic] Under Indian Law, the presumption is that the transfer by gift to two or more persons is as the tenants-in-common i.e. each donee getting a distinct share in the property gifted. The relevant provision is contained in Section 125 of the Transfer of Property Act. Therefore, the gift will be void only to the extent of the share of such donee who does not accept it. If the gift is made to two persons jointly, and one of them does not accept it, the other cannot take the whole. Can the transaction of gift be made orally or has it to be in writing?

[pic] A gift of immovable property, irrespective of its market value etc., can be made only by an instrument in writing, signed by or on behalf of the donor, attested by at least two witnesses This instrument must be registered with the Sub-Registrar of Assurances. A gift of an immovable property made without writing or registering, is not valid.[ Ramchandrayya v. Satyanarayana, AIR 1964 SC 887 (880)] A gift of movable property does not require any writing; such a gift can be made at the option of the parties either by a registered instrument, signed in the same manner as above or, by delivery. What is meant by "settlement"? How does it differ from "gift".

[pic] Settlement is a type of gift, only in certain circumstances. The Transfer of Property Act does not define what a "settlement" is. However, Section 2 (t) of the Bombay Stamp Act defines "settlement", under which the "settlement" means any non-testamentary (testament means a will) disposition of moveable or immoveable property made: i) in consideration of marriage;

ii) for the purpose of distributing property of the settler among his family or, those for whom he desires to provide or, for the purpose of providing for some person dependent on him; iii) for any religious or charitable purpose

Can the gift be ever suspended or revoked? Can the gift be revocable by the agreement of parties?

[pic] A gift can be revoked or suspended, provided the following conditions are fulfilled: 1. the donor and the donee must have agreed, at the time of the gift, that the gift shall be suspended or revoked on the happening of a specified event; 2. Such an event must be one which does not depend upon the donor''s will; 3. The condition should not be illegal or immoral and also should not be averse to the estate, created under the gift. It should be noted that a gift, which according to the parties, may be revoked at the mere will of the donor, is void.

See Thakur Raghunathji Maharaj Vs. Rameshchandra (AIR 2001 Supreme Court 2340), where a donor executed a gift deed of land for the purpose of construction of a college building. On the same day, an agreement was executed between the parties that the land was gifted for the building of a degree college and that this building should be constructed within six months from the date of the gift deed. The Agreement provided that the gift deed shall be deemed to have come to an end and, that the donor shall be considered to be the owner of the land if the college building was not built within six months. The Court held that the gift was not absolute and/or unconditional and that the gift deed and the said agreement, forming one transaction, would have to be read together and given effect accordingly

When is the gift said to be "onerous"? Give an example of the onerous gift.

[pic] The expression "onerous" means burdened with a condition or charged with an obligation. A has two immoveable properties; one in Bombay which is mortgaged in favour of a third party for securing repayment of a certain debt. A has, also, certain property in Delhi which comprises of a valuable commercial plot of land. A gifts both these properties to B by a single gift-deed. B purports to accept the gift of Delhi property while rejects that of the Bombay property. Can B do so?

[pic] Since both the properties are gifted in the form of a single transfer to one and the same person, B has no option to accept only the Delhi property and to reject the other one. B can only accept the gift fully, i.e. both the properties. Would it make any difference, if the above Bombay and Delhi properties are gifted to B by separate and independent gift deeds?

[pic] Yes. Since the gift of both these properties are made in the form of separate and independent transfer, B has an option to take only the Delhi property (which he finds beneficial) while he can rightfully reject the gift of the Bombay property, though it may be onerous. When the gift is onerous, can the donee be bound by his acceptance?

[pic] If at the time of acceptance, the donee is a disqualified person i.e. not competent to contract viz. being a minor, he is not bound by his acceptance. However, on the removal of the disqualification i.e. if on attainment of majority and upon becoming aware of the "onerous" nature of the gift, he retains the property, then he cannot repudiate. He is, then, bound by his acceptance. What is the legal consequence in case a person gifts the whole of his property to another?

[pic] When a donor gifts the whole of his property to another person, such a donee is called "universal donee". The legal consequence of such a gift is that Donee is, personally, liable for all the debts due, and the liabilities of the donor, at the time of the gift, to the extent of the property comprised in the gift. It is important to note that the donee is liable for all the debts existing at the time of the gift but not for those coming into existence after the gift. The law, in this respect, is contained in Sec.128 of the Transfer of Property Act. The word, "debt," means "a sum payable in respect of a money demand recoverable by a legal action." The word "liability" is a term of wider import. In order to constitute a donee as a universal donee, the sum total of donor''s rights and liabilities, in his entire property, is transferred to the donee.

Can the decree-holder proceed against the property in the hands of the universal donee?

[pic] The answer is "no". The right of the creditor to follow the properties in the hands of the universal donee is a right which has to be exercised by a suit. The right which a creditor has against a universal donee cannot be exercised, merely by levying execution against the properties in the hands of the donee, under a judgment obtained against the donor. What is the difference between a "will" and a "gift"?

[pic] A will is a mere declaration of an intention, so long as the testator (i.e. person who makes the will) is alive; a declaration that may be revoked or varied according to the variations of his intention; a disposition that requires the testator''s death for its consummation; it is ambulatory and without any fixed effect until the happening of that event. On the other hand, a gift is a transfer of property that is voluntary, gratuitous and absolutely conferring immediate rights.

Whether it should be a testamentary instrument or a non-testamentary instrument will depend on two well-known tests: whether under the instrument concerned, the disposition takes effect during the lifetime of the executant or whether it takes effect after his demise. High Court, Bombay has in the matter of Bhagchand vs Trimbak Ramchandra AIR 1947 Bom 49 laid down tests to determine whether an instrument is a will or a gift. What is the distinction between "grant" and "gift"?

[pic] A grant is, ordinarily, limited to the transfer of an interest in moveable or immoveable property, made in recognition of a claim or, for a certain purpose and, may be made orally or in writing. However, in the case of gift of immoveable property or of any interest, therein, it is subject to the provisions of the Registration Act. Moreover, while no gift can be made of future property, a grant may be made. A gift is, never, completed without acceptance, but a grant requires no acceptance to complete it. A gift is voluntary and without consideration.

A grant may lack both. A gift conveys corpus; but a grant may convey only a right of the enjoyment of the property without conveying any interest in the corpus. Examples of such grants are: maintenance grants, jagirs, licenses, easements. A gift must be unconditional, while the grant may be conditional. A grant may be burdened with the performance of a service, in which case, its continuance depends upon the performance of a service. Property acquired by a gift is transferable; but one obtained by "grant," is not necessarily so. Explain in nutshell the provisions of Stamp Duty pertaining to the gift.

[pic] There are certain instruments, which although a gift of property, can be called "settlement". The Bombay Stamp Act, applicable to the whole of the State of Maharashtra, does not define what is gift; however, it defines an "instrument of trust" (See Section 2 [la] of the said Act). Section 2(t) defines a "settlement". It is not necessary to reproduce the provisions pertaining to Stamp Duty. The Stamp Duty will be chargeable as per the category in which the instrument falls. These provisions are as follows; i. Instrument of gift:

Stamp Duty is levied in the same manner and in the same quantum as is payable on a conveyance, as per the market value of the properties, which is the subject matter of the case. (See Article 34 and 25 of the said Act); ii. If the settlement is made for a religious or charitable purpose, duty is payable at the rate of Rs.10/- for every Rs.500 or part thereof, equal to the amount settled or, the market value of the property settled; iii. If the settlement is in consideration of marriage, the formula set out in the foregoing paragraph (i) will apply; iv. A deed of dower, which is executed on the occasion of or, in connection with, marriage between Muhammadans, whether executed before or after marriage, is, totally, exempt from Stamp Duty.

Exchange

What is the meaning of exchange, according to the Transfer of Property Act?

[pic] Section 118 of the Transfer of Property Act defines ''exchange'' as follows: ''When two persons, mutually transfer the ownership of one thing in exchange for the ownership of another, neither thing or, both things being money only, such a transaction is called an ''exchange''.'' The definition of exchange is not limited to immovable property. Exchange is, therefore, not only the exchange of lands, but also the barter of goods. If one of the items that is transferred is money, the transaction is not an exchange but a sale because the price is money, only. However, money, in one form, may be exchanged for money in another form. So, also, an exchange of one stamp for another is not a sale. A sale should, always, be for a price. On the other hand, in the case of an exchange, the transfer of ownership of one thing is not completed by paying a price or a promise thereof, but, only by a transfer of another thing, in return. So, a transaction, where the consideration for the transfer of certain properties is shares in a limited company, is considered to be an exchange. [Commissioner of I-Tax vs.

Motor and General Stores (P) Ltd AIR 1968 SC 200 supra] The ownership of one party must be exclusive of the ownership of the other. Therefore, a partition is not an exchange. A transfer by a husband to a wife, in discharge of her claim to maintenance, is not an exchange, as the wife transfers no ownership in anything. If the lessee surrenders a lease and, the landlord grants him the lease of another property, the transaction is not an exchange. If both parties are not the same there cannot be an exchange. Illustration: ''A'' transfers to ''B'', a house worth Rs.1, 500, and ''B'' transfers to ''A'', a field worth Rs. 1,000, and Rs. 500, cash. The transaction is an exchange. Explain the mode of transfer by exchange?

[pic] Section 118 provides that an exchange can be made only in the manner provided for the transfer of such property by sale. Since a sale of immovable property can only be effected by a registered conveyance, an exchange of tangible, immovable property of the value of Rs. 100 and more must be made by registered instrument. In the case of immovable property, an exchange is, usually, made by mutual conveyances. However, it is not necessary that there should be two separate deeds. A party receives a thing in exchange. However, he is deprived of such thing due to the defective title of the other party. What are the remedies available to the deprived party?

[pic] In case a party, receiving a thing in exchange, is deprived of such thing due to a defective title of the other party to the exchange transaction, such deprived party can avail of the remedy that is stated in section 119 of the Act. The deprived party in such a case is entitled to get back the thing that has been given to the other party during transaction, provided it still lies in the possession of the other party.However, if any contrary expression appears, the party is not entitled to such remedy. Explain the exchange of money?

[pic] Section 121 provides that on an exchange of money, each party, thereby, warrants the genuineness of the money that is given by him. In an exchange of money, there is no occasion for a warranty of title as the title to money passes, merely, by delivery to a person, who receives it, honestly. There is, however, an implied warranty as to the genuineness of the money. Therefore, a false coin or a forged currency note would involve total failure of the consideration.

Transfer of Actionable Claims

What is a significance of "Actionable Claim" and what are the legal attributes thereof insofar as the law in India is concerned?

[pic] As the expression "Actionable Claim" itself denotes, it is a claim on which action lies for certain reliefs in the law courts. It excludes, the claims which have been already adjudicated or decreed so that no further action can be based thereon and also the claims, though actionable are secured by mortgage or pledge or hypothecation. This exclusion is reflected in the definition of "Actionable Claim" contained in Section 3 of The Transfer of Property Act. Explain elaborately what the definition of "Actionable Claim" means by giving certain concrete examples in that behalf.

[pic] Essentially, an actionable claim is a claim to any debt or to any beneficial interest in movable property. Under the Transfer of Property Act, an actionable Claim excludes the claims to such debts as are secured by mortgage, hypothecation or pledge of immovable or movable and the claims to any beneficial interest in any movable property that is in the actual or constructive possession of the Claimants. Such debt or beneficial interest may be existing, accruing, conditional or contingent and it is a civil court which only can have jurisdiction to grant suitable relief/s in respect thereof. The definition though complex is logical and well reasoned.

The significance of "actionable Claim" lies in its assignability. Debts secured by mortgage etc. are excluded from the definition of "Actionable Claim" because such debts are not the claims to property but the property itself. Similarly, all claims under the contract are excluded except claims to the payment of liquidated sums of money or debt or price. Examples of "Actionable Claims"

• The benefit of a contract giving an option to purchase the land; • Claim for arrears of rent; • Claim for rent to fall due in future; • The benefit of executory contract for the purchase of goods; • An option to repurchase the properties sold;

• An endorsement on the back of a contract for the purchase of goods by the purchaser that he had sold all his rights and interest in the contract to a person named; Examples of Claims that are not actionable

• A claim which is decreed; • The right to sue for accounts and to recover money which might be found due on taking accounts from an agent; • A claim for main profits; • Relinquishment of interest of a retiring member of joint Hindu family business in favour of the continuing co-parcener/s; • A mere right to sue

Why is mere right to sue not assignable?

[pic] A debt or actionable claim must be distinguished from a mere right to sue. For eg:- upon a breach of contract for the sale of goods, nothing is left but a mere right to sue for damages, which cannot be transferred. However, before the breach, the benefit of an executory contract for the sale of goods may be generally transferred and the buyer has the right to sue for the goods. An assignment of the right to sue is opposed to public policy as is gambling in litigation. Gambling in litigation is forbidden as opposed to public policy. A right to sue for damages in tort is a mere right to sue and therefore not transferable. A right to recover mesne profits by itself is a mere right to sue, which cannot be transferred. However, where the property is sold together with a right to