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KLE LAW ACADEMY BELAGAVI
(Constituent Colleges: KLE Society’s Law College, Bengaluru, Gurusiddappa Kotambri Law College, Hubballi, S.A. Manvi Law College, Gadag, KLE Society’s B.V. Bellad Law College, Belagavi, KLE Law College, Chikodi, and KLE College of Law, Kalamboli, Navi Mumbai)
STUDY MATERIAL
for
PROPERTY LAW
Prepared as per the syllabus prescribed by Karnataka State Law University (KSLU), Hubballi
Compiled by Reviewed by
Dundappa B. Solapure, Principal
K.L.E.Society's Law College, Chikodi
This study material is intended to be used as supplementary material to the online classes and
recorded video lectures. It is prepared for the sole purpose of guiding the students in preparation
for their examinations. Utmost care has been taken to ensure the accuracy of the content.
However, it is stressed that this material is not meant to be used as a replacement for textbooks
or commentaries on the subject. This is a compilation and the authors take no credit for the
originality of the content. Acknowledgement, wherever due, has been provided.
V.S. Billagi, Asst. Prof.
Property Law Objectives The student shall be able to understand the different types of transfer recognized by law. They shall have a clear idea about the various types of transfer like sale, mortgage, lease, exchange gift & actionable claim. They shall also become familiar to the various requirements of a valid transfer. They shall also understand in detail the effect of various elements like conditions, election, and apportionment on the transfer. They shall also understand the status of a transfer when made by certain other persons.
UNIT-I Section 1 of the act is called as the transfer of Property Act, 1882. Section 1 gives the title of the act. It is helpful in some instances as an internal aid for the interpretation of any provision in the Act. The title gives the idea about the object of the Act, policy & purpose of the Act.
Application of the Act: the T.P Act applies to transfers by acts of parties. & not by the operation of law The act deals with transfer of property between two living persons. The majority of the act deals with transfers relating to immovable property. This act does not apply to transfer of property governed by personal law, for ex, Mohammedan Law.
Section 3 defines Immovable Property We know that property is the total wealth of a person. It may include land, buildings, mortgage rights, debts owed to him, insurance money due, cheque received, cash, etc. The Transfer of Property Act, 1882, defines immovable property as that which does not include standing timber, growing crops and grass. This is a very vast definition though, so we must look at the definition furnished by the General Clauses Act, 1897, wherein it is mentioned that immovable property includes – a) land, b) benefits arising out of land, c) things attached to the earth, or d) permanently fastened to anything attached to the earth. Also, the Registration Act defines immovable
Possession as notice If a person is actually in possession of a property, then the acquirer of the property is deemed to have notice of the title, if any, of the person in possession of the property. v) Notice to agent is treated as notice to the principal. The agent must have notice during the course of his business. If an agent fraudulently conceals the fact, then there is notice to the principal. The principal should not be a privy to the fraud. Section 5: defines the phrase Transfer of Property It is an act by which a living person conveys property in present or future or to himself & one or more living persons. The word property used in the definition means- Tangible material things e.g. land and houses. Rights which are exercised over any material things, e.g right to enjoy a property. Rights regarding repayment of debt, etc. The word transfer means a transfer of all the rights & interest in the property or transfer of one or more rights relating to the property. Therefore the phrase transfer of property means
- Transfer of things
- Transfer of one or more rights regarding a thing
- Transfer of the debt. The effect of the transfer may take place in present or in future. The property to be transferred must be in existence at the time of a transfer. The transfer of property must be from one living person to another living person. However there are exceptions to this general rule as given under section 13 & 14. The transfer of property recognizes such transfers which create a new right or title or interest in favour of the transferee. The following transfer is not governed by the T.P act: as they do not create any title in favour of the transfer.
- Partition
- A charge
- A relinquishment or surrender
- A family settlement
- Partition by family settlement.
What may be transferred: Section 6 of the N.I.Act provides for the exceptions to the rule that property of any kind may be transferred. The exceptions are: a) Spes Successionis b) Transfer of Right of Re-entry and Easement. c) Religious Office. d) Serving of Inams. e) Maintenance Right. f) Mere right to sue. g) Public Office, stipends and pensions, h) Illegal transfers.
a) Spes Successions : means 'chance of succession' such an interest cannot be transferred .The chance of a relation obtaining a legacy (by a non- testamentary instrument i.e. a Will) b) Right of Re-entry : This right pertains to the owner of the property who has transferred limited interest in the property to another. e.g. A house given on lease. When the lease is subject to a condition that the owner shall have a right of re-entry to the property in case of breach of a condition committed by the tenant. The re-entry cannot be called as a transfer within the meaning of section 5 of the T.P Act as the possession of the property reverts back to the original owner. c) Right of easement : The easementary right is a dominant right of a person on the property of another which is called the servient property, such a right cannot be sold exclusively apart from the property as this right runs with servient land. d) Religious Office cannot be transferred: A right regarding a religious office cannot be transferred .As the right is restricted in enjoyment to the holder himself; therefore he cannot transfer it to another. e.g: office of a Mutawalli of a Wakf , Mahant of a Math. e) Right to future maintenance : in whatsoever manner arising, secured or determined, cannot be transferred. A, the wife of B was receiving a
Such property must be in existence at the time of transfer, irrespective whether the transfer creates a right immediately or in future.
Rule against Inalienability. S. 10. : Absolute restraint The main principle of the Transfer of Property Act is that the right to transfer property is incidental to and inseparable from its beneficial ownership. Any condition absolutely restraining alienation is void according to the Act. S. 10 states that when a property is transferred subject to a condition absolutely restraining the transferee (or any claimant through him) from parting with or disposing of his interest in the property, the condition or limitation is void. This applies to sale, gift, exchange etc. The rule is based on Justice, equity and good conscience, and includes other transfers not covered by the Transfer of Property Act e.g. will, partition, settlement etc. Section 13 Transfer for benefit of unborn person: This section is a exception to the general rule regarding transfer between two living persons. In this section a transfer can be made in favour of an unborn person. Such a benefit to an unborn person is valid subject to certain rules under the section. The transfer made for the benefit of the unborn person shall be valid if the following rules are complied with
- No direct transfer
- Making a prior interest
- Making a absolute transfer of interest 1) No direct transfer: Under this section it transfers to a unborn person cannot be made directly. As such a direct transfer suspends the ownership in the property till the unborn person comes into existence. This is contrary to the fact that ‘the property cannot be without a owner’ at any given point of time. 2) Making a prior interest A transfer to unborn person can be made in an indirect manner. It means that a prior interest in favour of a living person must be created; it called as a life interest. Such living person shall hold the property till the unborn person comes into existence. There is no limit to the number of
successive life interest created in favour of living persons. However the unborn person must come into existence before the death of the living person holding the life interest. 3) Making a absolute transfer of interest The transfer made in favour of an unborn person must be absolute. A life interest cannot be made in favour of a unborn person. Such limited interest is void e.g - A property is transferred to ‘A’ for life, then to his first son ‘B’ for life & then absolutely to the unborn son of ‘B’. This is a valid transfer. A property is transferred to ‘A’ for life, then to his first son (unborn) for life & then to ‘A’s second son X absolutely. This transfer is invalid as there is a life interest created in favour of the first unborn son. The subsequent transfer also fails due to the failure of the prior transfer.
Section 14- Rule against perpetuity The rule against perpetuities was announced in Whitby v Mitchell. This has been suitably changed and the rule is laid down in Section 14 of theT.P.Act. Property may be tied up or made inalienable in two ways a) By imposing a condition by absolutely restraining the transferee from disposing his interest in the property. b) By creating a succession of partial future interest in favor of unborn persons so as to postpone the time when the property will vest in person absolutely. The transfer of property is void if it creates an interest which is to take effect after the life time of one or more persons living at the date of such transfer and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created, is to belong. The leading case is Cadell v. Palmer A trust was created for a term of 120 years, if 28 named persons or any of them should so long live and from the determination of that term for a further period of 21 years, and after the end of both terms, for the benefit of persons to be
Exceptions:
- Payment of debt: A direction for accumulation for the purpose of payment of the debt of either of the transferor or the transferee is valid. For e.g X makes a gift of a house to Z .The income arising from the house is 2000/ per month .X gives a direction that the rent should be applied in the payment of debts of X ,amounting to 50,00/-. The direction is valid
- Accumulation of raising portions: It a direction for accumulation of income for the purpose of providing portions for children or remoter issues of the transferor or any other person taking any interest under the transfer. Case law: Edward v. Tuck.
- Accumulation for the preservation of property: Where the direction is for the purpose of the preservation or maintenance of the property transferred.
Vested and Contingent Interest: Vested interest is defined under section 19 of the Transfer of Property Act. Interest becomes vested when the property is totally of the transferee and it can be validly transferred by him even before he had obtained possession. If the transferee dies, then his interest devolves on the legal heirs An interest created on transfer of property in favor of a person is said to be vested where i) No time is specified for it to take effect. ii) It is expressed to take effect forthwith iii) It is to take effect on the happening of an event which must happen. E.g. X makes a gift of 5 lakh rupees to Y, to be paid to ‘Y’ on the death of ‘Z’. Here the interest of ‘Y is vested as the event i.e. death of ‘Z’ is certain to happen. If ‘Y’ dies before ‘Z’ the n the right to claim the gift transfers to the legal representatives of ‘Y’. But if ‘Z’ dies in the life time of ‘Y’, then ‘Y’ is entitled to the gift of 5 lakhs as his interest is vested.
Contingent Interest Section 21 of the T.P Act defines Contingent interest. An interest is said to be contingent when it is expressed to take effect;
- On the happening of a specified uncertain event
- If a specified uncertain event shall not happen The contingent interest is an interest which is merely conditional i.e Dependent upon something which is uncertain .there is no present fixed right. For e.g: An estate is transferred to ‘P’, if he shall pay Rs.6000 to ‘Q’. ‘P’s interest is contingent until he has paid Rs. 6000 to ‘Q’. A house is transferred to ‘X’ until he shall marry and after that event to ‘Y’. ‘Y’ interest is contingent until the condition is fulfilled by ‘X’ ( i.e the act of marriage ). Void Transfers A property can be transferred subject to a condition such transfers are valid. Such conditions may be precedent or subsequent. Section 25 of the T.P Act explains such conditional transfers, Which is precedent in nature? Precedent condition means that it has to be performed for the transfer to take effect or the property to be vested. a) Condition must not be impossible to perform: the condition precedent must not be impossible to perform, if so the transfer shall become void for impossibility of performance. For e.g ‘R’ transfers his house to ‘U’ provided he touches the sky with his little finger. The condition is void as it is impossible to perform. b) The condition precedent must not be forbidden by law: if the nature of the condition is something which the law does not permit then such condition is void. c) The condition precedent is of such that if permitted, it would defeat the provisions of any law. d) The condition precedent should not be fraudulent. e) The condition precedent should not involve or imply injury to the person or property of another. f) Condition precedent should be immoral or opposed to public policy.
However, if the failure is to take effect in a particular manner, then the ulterior effect will not take effect, unless the failure is in that manner.
- In Lull v. Jones , A made an inquest to B for life and then to his children. The gift failed as B was one of the attester’s. Held, according to acceleration, the gift to B failed but, took effect in favour of the children.
- Avelyn v. Ward : A transfers Rs.5, 000/- to B on condition that he shall execute certain lease in 3 months after A's death. If he neglects, the transfer is to C. B dies in A's lifetime. Here, the disposition to 'C' takes effect.
- Underwood v Wing : A transfers his property to his wife W; if she dies in his lifetime, the property goes to 'B'. A & W die in an air -crash. It is not proved that W died before A. The transfer to B will not take effect. Bequests a sum of money to his own children who survive him. If they die before him, then bequest goes to B. A dies without issues. Held, according to acceleration, the bequest to B takes effect
Unit- II Doctrine of Election Section 35 of the Transfer of Property Act, 1882 incorporates the Doctrine of election alongside Section 180-190 of the Indian Succession Act
Election simply means choosing between two alternative rights or inconsistent rights. Under any instrument if two rights are conferred on a person in such a manner that one right is in lieu of the other, he is bound to elect (choose) only one of them. One cannot take under and against the same instrument. Principle Underlying the Doctrine of Election Allegans contraria non est audiendus: he is not to be heard who alleges things contradictory to each other. In Cooper v. Cooper Lord Hather explained the principle underlying the doctrine of election in the following words, “…there is an obligation on him who takes benefit under a will or other instrument to give full effect to the instrument under which he takes benefit ; and if it is found out that instrument purports to deal with something which it was beyond the power of the donor to dispose of , but to which effect can be given by the concurrence of him who receives a benefit under the same instrument, the law will impose on him who takes the benefit the obligation of carrying the instrument into full and complete force and effect .”
Applicability Hindu Law The doctrine was directly applied in the case of Mangaldas v. Runchhoddas. Mahomeden Law The doctrine was applied by the Privy Council in the case of Sadik Hussain v.Hashim Ali.
English Law
Such knowledge or waiver shall, in the absence of evidence to the contrary, be presumed, if the person on whom the benefit has been conferred has enjoyed it for two years without doing any act to express dissent. Such knowledge of waiver may be inferred from any act of his which renders it impossible to place the persons interested in the property professed to be transferred in the same condition as if such act had not been done. If he does not within one year after the date of the transfer signify to the transferor or his representatives his intention to confirm or to dissent from the transfer, the transferor or his representative may, upon the expiration of that period, require him to make his election; and, if he does not comply with such requisition within a reasonable time after he has received it, he shall be deemed to have elected to confirm the transfer. In case of disability, the election shall be postponed until the disability ceases, or until the election is made by some competent authority. Analysis of the Section Essential Conditions Mst. Dhanpati v. Devi Prasad and others: Before there can be election there must be:
- transfer of a property by a person who has no right to transfer;
- as part of the same transaction, he must confer some benefit on the owner of the property; and
- such owner must elect either to confirm the transfer or to dissent from it. Effect of election against the transfer Where the owner dissents from the transfer of his property –
- He must relinquish the benefit;
- The benefit intended for him would then revert to the transferor. Exception General Rule : If a person elects against the instrument, he will forfeit the whole of the benefit received under it.
Exception : If a person elects against the instrument, he will not forfeit the whole benefit but only the benefit attached in lieu of the property. (Election limited to part of benefit) Mode of election a. Implied – by conduct b. Express – election when made in express words, it is final and conclusive. NOTE : If a person acts through ignorance or mistake, the doctrine gives way. Two years’ enjoyment The presumption may be rebutted. A widow who enjoyed a provision made for her under a will in ignorance of her right of dower was held entitled to elect after a lapse of 16 years. Knowledge The section permits an interference of knowledge which may be rebutted by circumstances. Time limit for election Upon the expiration of one year from the transfer, if an election has not taken place, the transferor may compel him to make his election. If he fails to comply with this requisition within a reasonable time, he shall be deemed to have elected to confirm the transaction. Suspension of election Where the donee suffers from some disability by reason of insanity, lunacy and so forth, the election shall be postponed until the disability ceases or until the election is made by some competent authority, e.g. a guardian of a minor. Illustrations
- Illustration A transfers to B an estate to which C is entitled, and as part of the same transaction gives C a coal-mine. C takes possession of the mine and exhausts it. He has thereby confirmed the transfer of the estate to B.
- Aman is the owner of the property worth Rs.10 lakh, Bhanu is the transferor who has no rights over the property, Chandan is the
The phenomenon of appointing an ostensible owner is a principle of natural equity, which must be universally applicable, that where one man allows another to hold himself out as the owner of an estate, and a third person purchases it for value from the apparent owner in the belief that he is the real owner, the man who so allows the other to hold himself shall not be permitted to recover upon his secret title, unless he can overthrow that of the purchaser by showing, either that he had direct notice, or something which amounts to constructive notice, of the real title, or that there existed circumstances which ought to have put him upon an inquiry that, if prosecuted would have led to discovery of it. The provision for its application lays down certain requirements to avail the benefit of this section. They are:
The primary condition is that the person who is transferring the property should be ostensible owner ( as explained above) There should be either implied or express consent from the owner of the property. The transfer should be for some consideration in return. Reasonable care has to be taken by the transferee regarding the authority of the transferor to effectuate the transaction and also of the fact that he has acted in good faith. The doctrine of transfer by ostensible owner is based on the doctrine of estoppel that when real owner of property makes some one apparent to be the owner to third parties and they act upon it, he cannot go back his representation. These rules and the section are available only to immovable property and not on the movables. For determining whether a person is ostensible owner or not some practical tests could be done- Firstly, the documents concerned with the property have to be checked whether they contain the name of transferor as owner or not. Secondly , whether the person having his name in the documents of the property in question has any intention to purchase the same or not.
Thirdly , it is the most important test for determining whether a person is ostensible owner is that who is in the possession of the property and who is enjoying it. If the person who is the owner as per the records and the documents of the property in the matter at hand the chances of being it a property of an ostensible owner or he being an ostensible owner is quite less. However if the person whose name is there in the property documents is not similar then it enhances the chances of it being a property of ostensible owner who is full filing the wishes of the real owner. However enjoying the property here does not only mean the mere enjoyment of the property being in the possession of the property but includes the selling rights, right to lease out the said property and get the consideration from the same, to enjoy the benefits out of the said property etc. Enjoyment has been given a broader aspect in this aspect and particular case. Fourthly , the reason behind it being given the aspect of ostensible ownership, i.e. the reason why the real owner has not purchased same in his own name. Authority of ostensible owner and not the title is necessary Looking at examples of such transactions, a Benami transaction is one where one buys property in the name of another or in the disguise of a beneficiary transfer, without indicating an intention to benefit the other. The benamidar though has a property in his name, has no beneficial interest existing in the same. He represents in fact the real owner and as far as their relative legal position is concerned, he is a mere trustee for him. Benami transaction results in creation of a trust. The general rule and principle of the Indian law as to resulting trusts differs a little from the general rule of English law upon the same subject. In India, a benamidar is an ostensible owner and if a person purchases from a benamidar , the real owner cannot recover unless he shows that the purchaser had actual or constructive notice of the real title. But from this it does not follow that the benamidar has real title to the property, he is merely an ostensible owner thereof.
