Transfer of Property Act 1882 PDF

THE TRANSFER OF CHAPTER 1 PROPERTY ACT, 1882 CHAPTER COVERAGE Introduction & Its Elements Movable & Immovable Property Reversion & Remainder...

THE TRANSFER OF CHAPTER 1 PROPERTY ACT, 1882 CHAPTER COVERAGE Introduction & Its Elements Movable & Immovable Property Reversion & Remainder Some Doctrine’s:- Rule Against Inalienability Doctrine Of Accumulation Of Income Transfer For The Benefit Of Unborn Person Vested And Contingent Interest Doctrine Of Election Doctrine Of Lis Pendens Doctrine Of Fraudlent Transfer Doctrine Of Holding Out Doctrine Of Feeding The Grant By Estoppel Doctrine Of Past Performance. Detailed Provision relating to Mortgage, Charge, lease, Tenancy, Sale and Gifts Actionable Claims  ECL THE TRANSFER OF PROPERTY ACT 1882 The term transfer means a process or an act by which some property is handed over to another. Para 1 of Section 5 defines transfer or property as follows: WHAT IS TRANSFER Transfer of property 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 and one or more other living persons: and to transfer property is to perform such act. ESSENTIAL ELEMENTS OF TRANSFER OF PROPERTY 1. Transfer: The essence of the term transfer is transfer of property within the meaning of Section to convey. It therefore implies conveyance of 5. property by a person entitled to it to a person a) Family arrangements having no title to it. b) Settlement of disputed claim c) Release relinquishment and surrender 2. Living person: A transfer usually involves d) Partition. two distinct living person. The term living person includes a company or association or body of 4. Property: the term property is not defined in individuals, whether incorporated or not. the act Section 9 of the Act however says that property of any kind may be transferred. This 3. Conveyance: Section 5 while defining the means the term property is used in the act in very term transfer of property says that transfer of wide sense and is left open for Judicial property means an act by which a living person Interpretation. conveys property. 5. In present or in future: Transfer of The word conveys is used in Section 5 in a very property may take place in present or in future but wide sense. The following do not constitute a the property must be in existence. IMMOVABLE AND MOVABLE PROPERTY Movable property The Act does not define movable property but it may be said that any property which is not immovable property is movable property. Section 2 (9) of the Registration Act 1908 defines movable property as including standing timber growing crops and grass , fruit upon and juices in trees and property of every description except immovable property. IMMOVABLE PROPERTY The act does not define immovable property As per Section 2 (6) of the registration Act Section 3 only states that immovable property 1908, the expression immovable property is does not include standing timber, growing crops defined to include land, building, hereditary or grass etc. allowances, right to ways , right of ferries, fisheries or any other benefit arise out of land and According to Section 3 (26) of the General thing attached to earth but does not include clauses Act 1897, immovable property includes standing timber, growing crops or grass. land, benefits arise out of land, thing attached to Immovable property includes not only physical the earth or permanently fastened to anything objects like land and building but also every attached to the earth: benefit arising out of it and every interest in it. 2  ECL DHEERAJ TYAGI Recognized as immovable Property Does not recognized as immovable property A right to way A copyright A right of ferry Standing timber A right of fishery Growing crop Right to receive future rents and profit of Grass ESSENTIALS OF A VALID TRANSFER 1. Property must be transferable (Sec-6) 4. Consideration and object must be lawful The general rule is that subject to exceptions [Section 6 (h) (2)] mentioned in Section 6, every kind of property can be transferred. 5. Transfer must not be opposed to nature of interest [Section 6 (h) (1)] 2. Transferor must competent (Section 7) The following cannot be transferred: Every person competent to contract and entitled to transferable property or authorized to dispose of transferable property not his own is competent I. Res communes: i.e., thing of which no one in to transfer such property either wholly or in part particular is the owner such as light, air, water of rivers or the Sea. and either absolutely or conditionally in the circumstances to the extent and in the manner allowed and prescribed by any law for the time ii. Res extra commercium: i.e., thing thrown being in force. out of commerce such as things dedicated to public or religious uses…… ex.- pooja's Prasad. Persons who cannot assign 6. Transfer must be in the prescribed their interest [Section 6 (i)] manner [Section 9] A tenant having an un-transferable right of The transfer of property must be made in the occupancy cannot assign his interest as manner and form prescribed by the Act. such tenant. The farmer of an estate in respect of which default has been made in paying revenue The following transfers, in cannot assign his interest as such farmer. which writing is must 3. Transferee must be competent [Section Sale of immovable property of the 6 (h) (3)] value of Rs. 100 or more. As a general rule every living person, even a Simple mortgage irrespective of the minor can be transferee or property. But, amount secured. person legally disqualified cannot be a All other mortgages for Rs. 100 or more transferee. 3  ECL THE TRANSFER OF PROPERTY ACT 1882 Q PROPERTY WHICH CANNOT BE TRANSFERRED a) Chance of an heir apparent or “SPES The right of pujari in a temple to receive SUCCESSIONIS” [Section 6 (a)] offerings Explanation:- The technical expression for the The office of a mohunt of mutt. chance of an heir apparent succeeding to an estate is called “spes successsionis” which means a means chance of succession e) Right of future maintenance (I) Chance of relation obtaining a legacy on the [Section- 6](d)] death of a kinsman. A right to future maintenance is solely for the personal benefit of the person to whom it is granted, and it cannot be transferred. b) Right of re-entry [Section 6 (b)] Example-The right of Hindu widow to Explanation:- This is right which the lessor has maintenance, is personal right hence cannot against the lessee for breach of an express be transfer. condition of the lease which provides that on its breach the lessor may re-enter. f) Mere Right to sue [Section 6 (e)] A mere right to sue cannot be transferred. This c) Transfer of easement [Section6 (c)] prohibition is based on the ground of public policy. Explanation:-Easement means an interest in The object of this prohibition is to prevent land owned by another that entitles its holder to a trafficking in litigation. specific limited use or enjoyment. g) A public office cannot be transferred nor d) Restricted interest or personal interest the salary of a public officer. [Section 6 (d)] Explanation:-The case which fall under this head include the following: h) Stipends allowed to military, naval , air force and civil pensioners of the government and political pensions. REVERSION AND REMAINDER(USED IN ENGLISH LAW) REVERSION REMAINDER It is the residue of an original interest which is left When the owner of the property grants a limited after the grantor has granted the lessee a small interest in favour of a person or persons and gives estate. the remaining to others, it is called a “remainder”. For example:-A the owner transfer the property to B for life and then to C. Here the interest of B is For example:- Rampat has given a property on limited for life and after B death property is lease for 5 years to Dheeraj Tyagi Classes. Now transferred to C. In this case the granter has after end of 5 years property will revert back to transferred some interest to Mr.B. and remaining Rampat. This is called reversion. interest to C. this remaining interest is known as Remainder. 4  ECL DHEERAJ TYAGI Difference between Reversion and Remainder In the case of a “remainder”, the property will not come back to the owner, but it goes over to the other person. In the case of a “reversion”, the property will come back to the original owner after the expiry of lease. Some rule's and doctrine used in this act are discuss below Restraint on transfer or Rule against inalienability SEC:- 10,11,12 AS PER THIS RULE APPLICATION OF SEC-10 APPLICATION OF SEC-11 APPLICATION OF SEC-12 CONDITION RESTRINING RESTRICTION ON ATTEMPTED ALIENATION. ENJOYMENT ALIENATION 1. Condition restraining alienation Examples of absolute restraint (Section-10) A transferred property to B and his heirs with a Alienation means conveyance or transfer of covenant that if the property is alienated, it should property to another. Public policy requires that revert back to A. This restrain is void. property should be freely alienable. A right of alienation is incidental to and inseparable from 2). Restraint on enjoyment (Section11): the beneficial ownership of property. Rule is such when property is transferred all rights Consequently, a transferor should not be allowed are transferred, and there must not be any to put a clog or restriction on the right of a conditions which put restriction on property. transferee so as to be repugnant to the absolute interest of the transferee in the estate Section 10 Example: - A sells his house to B he adds a lays down the rule in this regard as follows ; condition that B only shall reside in the house the condition is invalid. Restraint on alienation of property is of two types:- a)Absolute, or b)Partial 3).Condition making interest determinable on insolvency or attempted alienation Absolute restraint or alienation of property is (Section 12): void. Partial restraint qualified as to time, place Section 12 embodies the rule, that if a person or person may be valid and binding. transfer's property to anyone subject to a condition that if the transferee becomes insolvent the property should revert back to the transferor such condition is void. 5  ECL THE TRANSFER OF PROPERTY ACT 1882 DOCTRINE OF ACCUMULATION OF INCOME (SEC 17) Section 17 does not allow accumulation of income II. The provisions of portions for children or any from the land for an unlimited period without the other person taking interest in the property income-being enjoyed by the owner of the under the same transfer, and property. The laws allow accumulation of income III. The preservation or maintenance of the for certain period only. The period for which such property transferred. accumulation is valid is:- Example : A settles the sum of Rs. 5, 000 for the benefit of B on 1st January, 1979 and directs the The life of the transferor; or period of trustee to invest the money in units of the Unit eighteen years from the date of transfer, trust of India and to deliver the total accumulated income and the units to B on the turn of the Any direction to accumulate the income beyond century. the period mentioned above is VOID. B would be entitled to the accumulated income and the units before the stipulated period, i.e. on EXCEPTION 1st January, 1997 i.e. 18 years after 1st January, 1979. The accumulation of incomes is valid up to I. The payment of the debts of the transferor or 31st December, 1996 and would be void beyond any other person taking any interest under the the period. transfer, or TRANSFER FOR THE BENEFIT OF UNBORN PERSON Section 13 may be analyzed as under:- (d) The unborn person must be given the whole of the remaining interest of the transferor in the (a) No transfer can be directly made to an unborn property. person. Examples: A transfers property, of which he is (b) The interest in favour of the unborn person the owner, to B in trust for A, and his intended must be preceded by a prior interest. It is not wife successively for their lives, and after the permissible to confer only a life estate on such death of the survivor, for the eldest son of the person. intended marriage for life, and after his death for A's Second Son. (c) The prior interest must be also created by the The interest so created for the benefit of the same transfer. eldest son does not take effect, because it does not extend to the whole of A's remaining interest in the property. 6  ECL DHEERAJ TYAGI VESTED AND CONTINGENT INTEREST VESTED (Section 19) CONTINGENT INTEREST (SECTION 21) Vested Interest: The term 'Vested' is thus used in “Where, on a transfer of property, an interest two senses, i.e. therein is created in favour of a person to take effect only on the happening of a specified (a) Vested in possession, or uncertain event, also known as “condition (b) Vested in interest only precedent” or if a Specified uncertain event shall not happen, such person thereby acquires a An interest is said to be 'Vested in possession' contingent interest in the property. when it is a right to present possession of Such interest becomes a vested interest, in the property. An interest is said to be 'Vested in former case, on the happening of the event, in the Interest only' when it gives a present right to the latter, when the happening of the event becomes future possession or enjoyment of property. impossible.” Example: A transfers his land to B for life and Contingent interest is not heritable although it is then to C, B in this case, has vested interest in transferable. possession. He has the immediate right to the possession of land. C has also vested interest in Examples: property is given to A for life and then the land even during the lifetime of B with a to B, if he marries C. B should marry C before A present fixed right to enjoyment of land on the dies. If he does so, his interest is converted into death of B, the interest of C is not subject to any vested interest. Before B marries C his interest is uncertain conditions, as B is bound to die sooner contingent. or later. If C dies before B, C's heirs will inherit the land. Vested interest is not defeated by the death of the transferee: DIFFERENCE BETWEEN VESTED INTEREST AND CONTINGENT INTEREST: Basis Vested Interest Contingent Interest Fulfillments of Vested Interest does not depend Contingent Interest' depends upon the Conditions: upon the fulfillment of any condition, fulfillment of some condition precedent which may or may not happen. Right of There is a present immediate right Contingent Interest' right of enjoyment is to Enjoyment though its enjoyment may be accrue on the happening of an event which postponed to some future date is uncertain. Effect of Vested Interest is not defeated by Contingent Interest' does not take effect in transferee's the death of the transferee before the event of the transferee's death before death he obtains possession. the fulfillment of the condition. Transferability Vested Interest is both transferable Contingent Interest' is not transferable, but and heritability as well as heritable. whether it is heritable or not depends on the nature of the contingency. 7  ECL THE TRANSFER OF PROPERTY ACT 1882 DOCTRINE OF ELECTION (sec 35) A man cannot blow hot and cold at same moment of time. This principle is underlying the doctrine of election The person, who is at point of is that a man is not to be heard who says two election rejects the property things contradictory to each other. than property will revert back to In other words a man cannot approbate and transferor and he will reprobate or blow hot and cold. compensate the disappointed In simple words, it means that a man taking a person. AND if transferor dies benefit under an instrument must also bear the before election than his representative will burden. satisfies the disappointed person. Example: A transfers his house to B, by a gift and in Example: The farm of Meerut is the property of C the same gift deed asks B to transfer his shop to C. and worth Rs. 800,000. A by an instrument of gift If B wants to have the house, he must transfer his professes to transfer it to B, giving by the same shop to C. B is now put to election. He may elect to instrument Rs. 10,00, 000 to C. C elects to retain have the house in which case he will have to the farm. He forfeits the gift of Rs. 1, 000,000.00. transfer his shop to C, or he may reject the transfer If A dies before the election, his representative in which case neither he gets the house nor the must, out of burden of transferring the shop to C. Rs. 1,000,000.00 pay Rs. 800, 000.00 to B. WHEN ELECTION IS POSSIBLE The question of election arises only when a transfer is made by the same document. if the transferor makes a gift of property by one deed and by another asks the done to part with his own property then – “NO QUESTION OF ELECTION” WHEN ELECTION IS SAID TO BE MADE Election can be made express or implied by Period of election:- If the owner does not within conduct. one year after the date of transfer signify to the transferor or his representative his intention to Example: A transfers to B an estate C is entitled confirm or to dissent from the transfer, the and as part of the same transaction gives C a transferor or his representatives may upon the coal mine. C takes possession of the mine and expiration of period, require him to make election. exhausts it. He has thereby confirmed the If the owner does not comply with such requisition transfer of the estate to B. within a reasonable time after he has received it, he shall be deemed to have elected to confirm the transfer. WHEN ELECTION TO BE MADE BY EXPRESS MODE BY IMPLIED MODE CAN BE DONE IN :- WRITTEN FORM CAN BE DONE BYACT OF PARTIES. OR, ORAL FORM. 8  ECL DHEERAJ TYAGI election generally to be made within ‘reasonable period’ of time ie. within 1year. If within one year no decision is taken by the person who is put on election then, it is to be treat as, deemed rejection. The time of one year is only applicable in case of ‘express mode’. CONDITIONAL TRANSFER When an interest is a created on the transfer of divests the right upon the happening or non- property but is made to depend on the fulfillment happening of event. of a condition by the transferee, the transfer is For example:- A transfer a certain property to B known as a conditional transfer. provided that B will not run a CS institute like Dheeraj Tyagi classes for 5 years. Mr.B has not Such a transfer may be subject to a condition run a CS institute for further 5 years from the date precedent or a condition subsequent. of transfer. This is condition subsequent. If the interest is made to accrue on the fulfillment Difference between condition precedent and of a condition, the condition is said to be condition subsequent condition precedent. In condition precedent, the condition comes For instance, A agree to sell his land to B if B before the interest; whereas in condition marries C. This is a condition precedent. subsequent, the interest is created before the Condition subsequent is one which destroys or condition. DOCTRINE OF LIS PENDENS (Sec.52) Nothing new can be added Condition necessary for the doctrine: during the pendency of a suit These must be pendency of a suit or proceeding. LIS means dispute, LIS PENDENS means a The suit or proceeding must be a right to pending suit, action, petition. immovable property is directly and Specified in The doctrine of LIS PENDIS is expressed by the question. maxim“ut lite pendente nihil innovetur “which The suit of proceeding must be pending in means nothing new should be introduced during competent Court. the pendency of a suit. Example:- A court returned a plaint on the ground Example : There is a dispute between A and B that it had no pecuniary jurisdiction.A fresh plaint with regard to ownership of property X. A files a was field in a proper court two years later.In the suit against B in a law court. A may either win or mean time, the defendant gifted the property to lose the suit.If he wins he gets the property.If he his wife and son. Held the gift was not affected by loses B gets the property.Now assume during the lis pendens as there was no suit pending in a pendency of the suit.A professing to be the competent Court at the time of alienation. owner of the property Sells it to C.If the suit ends in A's favour, no difficulty arises.If it ends in B's favour. C cannot retain the property C is bound by There must be transfer of property in dispute by the decree of the court and must return the any party to the litigation. property to B.He cannot even take the plea that The alienations must affect the rights of the he had no notice of the pending litigation.This is other party to the suit or proceeding. the doctrine of LIS PENDENS. 9  ECL THE TRANSFER OF PROPERTY ACT 1882 A suit in foreign court cannot operate as LIS PENDENS and also this doctrine not applicable on moveable property. DOCTRINE OF FRAUDLENT TRANSFER (Sec.53) A debtor may sometimes, with intent to defer or (ii) Transfer with intent to defraud delay his creditors, transfer his property to one of subsequent transferee: - Every transfer of his friends or relative's.He may also do so in immovable property made without consideration fraud of a subsequent purchaser. If there is any with intent to defraud a subsequent transferee such transfer, it can be avoided under Sec. 53 shall be voidable at the option of such transferee. which consist of two sub section dealing with the two situations just refers to: Further no transfer made without consideration shall be deemed to have been made with intent to (i) Transfer with intent to defeat delay the differed by reason only that a subsequent transfer creditors – Every transfer of immovable property for consideration was made. made with intent to defeat or delay the creditors of transferor shall be void able at the option of any creditor so defeated or delayed. DOCTRINE OF HOLDING OUT TRANSFER BY OSTENSIBLE OWNER OR ESSENTIALS OF TRANSFER BY DOCTRINE OF HOLDING OUT ( SEC-41) OSTENSIBLE OWNER OR DOCTRINE HOLDING OUT Where with the consent express or implied of the person interested in immoveable property a 1. The transferor is the ostensible owner. person is the ostensible owner of such property and transfer the same for consideration, the 2. He is so by the consent express or implied of transfer shall not be voidable on the ground that the real owner. the transfer was not authorized to make it , 3.The transfer is for consideration and provided that the transfer after taking reasonable care to ascertain that the transferor had power to 4. The transferor has acted in good faith taking make the transfer has acted in good faith. reasonable care to ascertain that the transfer has power to transfer. 5. If any one of these elements is absent the transferee is not entitled to the protection of this section. The section makes an exception to the rule that a person cannot confer a better title than he has. 10  ECL DHEERAJ TYAGI DOCTRINE OF FEEDING THE GRANT BY ESTOPPEL (SEC-43) Applicability:- Where a person fraudulently or Example:- A Hindu ,who has separated from his erroneously represents that he is authorized to father B, sells to C there fields X ,Y and Z transfer certain immoveable property and representing that A is authorized to father the professes to transfer such property for same.Of these fields.Z does not belong to A ,it consideration ,such transfer shall at the option of having been retained the contract of sale may the transferee ,operate on any interest which the require A to deliver? Z to him.Thus where a transferor may acquire in such property at any grantor has prop orated to grant an interest in time during which the contract of transfer subsists. land which he did not at that time possess ,but subsequently acquire ,the benefit of his Non Applicability:- Nothing in this section shall subsequent acquisition goes automatically to the impair the right of transferees in good faith for earlier grantee or as it usually expressed feeds consideration without notice of the existence of the estoppels. the said option. ESSENTIALS:- IN ORDER TO INVOKE THE SECTION THE “TRANSFEREE” MUST PROVE THAT (I) There was a representation the fraudulent or erroneous. (ii) It was to the effect that the transferor is entitled to transfer the immoveable property. (iii) The transferor is found to have subsequently acquired the interest which he professed to transfer. (iv) The transfer of property was for consideration. (v) The transferee has not rescinded the contract. (vi) The transferee acted in good faith for consideration and without notice of the rights under the prior transfer. DOCTRINE OF PART PERFORMANCE Applicability :- A contract for the sale of land has 2. It must be consideration. been entered into between A and B the transferee 3. The contract should be in writing and signed by has paid the price entering into possession and is the transferor himself or on his behalf. willing to carry out his contractual obligations. 4. The terms necessary to constitute transfer must be ascertainable with reasonable As registration has not been effected.The certainty from the contract itself transferor seeks to evict B from the land.Can he 5. The transferee should have taken the do so. No, B will not be allowed to suffer simply possession of the property in part because the formality of registration has not been performance of the contract. through. 6. The transferee must have fulfilled or ready to Essentials fulfill his part of the obligations under the 1. There must be a contract to transfer contract. immoveable property. 11  ECL THE TRANSFER OF PROPERTY ACT 1882 RULE AGAINST PERPETUITY (SEC. 14) The rule against perpetuality prohibits the vesting In the simple words, “perpetuity period” is the life of interest beyond a certain reasonable period. or lives in being and the further period of minority of a person. It prescribes the maximum period within which a future interest must vest, and if the vesting is There can be any number of transfers between postponed beyond such period, the vesting is void living major persons, but if the ultimate, transferee for remoteness. Such maximum period is called is a minor, the ultimate transfer to him should the perpetuity period. transfer all of the interest in the property to h i m. T h i s i s t o e n s u r e t h a t t h e property is not As per Sec. 14 the perpetuity period consists of inalienable for any indefinite period after the death the life time of one or more persons say A, B and of the original transferor. C, all living at the date of transfer of property and the further period of minority of a person, say the Following are the exceptions to the rule against eldest son of C, (who shall be in existence at the perpetuity: expiration of that period) to whom the interest is to belong. a) Gift or Charity. b) Personal agreement i.e.; agreement which do not create any interest in the property. c) Contracts for perpetual renewal of leases. TRANSFER TO TAKE EFFECT OR NOT ON FAILURE OF PRIOR INTEREST (SEC. 16) Sometimes an interest is intended to take effect For e.g. A transfers his property to B and his after or upon the failure of a prior interest by intended wife successively for their lives and reason of rules contained then to their eldest son for in sections 13 & 14. In such a case when the his life and then to C. The prior interest in prior interest fails, the subsequent interest also favor of the son of B fails u/s 13 & therefore fails. the subsequent interest in favor of C also fails. SALE OF IMMOVABLE PROPERTY “ Sale “ according to Sec. 54 is a transfer of Mode of sale ownership in exchange for a price paid or promised , or part –paid and part promised. 1. By registered instrument: - Sale in the case of tangible immovable property of the value of ESSENTIAL OF SALE Rs.100 or more or in the case of a reason or other intangible thing, can be made only by a registered Transfer of ownership. instrument. The SUBJECT MATTER of sale is immoveable property. 2. By delivery of possession:- If value of The consideration must be in money property is less than Rs.100 in value. Price. 12  ECL DHEERAJ TYAGI MORTGAGE Meaning:- It relates to transfer of intrest in 3. Usufructuary mortgage:- The word 'usufruct' immoveable property from one person to another means the right of enjoying the use and as a security for money. advantages of another person's property.In case of usufructuary mortgage , the mortgagor delivers Types of mortgage possession of the mortgaged property.He further Sec. 58 classified the mortgage into the following authorities the mortgagee to receives the rents six types. and profits accruing from the property and to appropriate the same in lieu of interest and the 1. Simple mortgage. principal sum. 2. Mortgage by conditional sale. 4. English mortgage:- Here, property first sell in 3. Usufructuary mortgage. favour of mortgagee, if mortgagor repay amount, then sale will become void, otherwise will become 4. English mortgage. absolute In that case, if mortgagee now sell 5. Mortgage by deposit of title deeds. property to recover his loan so for any shortage in repayment mortgagor is personally laible. 6. Anomalous mortgage. 1. Simple mortgage:- In case of simple 5.Mortgage by deposit of title deeds :- Where a mortgage, the mortgagor without delivering the debtor declares to a creditor or his agent prossession of the mortgaged property, gives a documents of title to property , with intent to person undertaking to the mortgage to repay the create a security. amount due under the mortgage. 6. Anomalous mortgage: - A mortgage which 2. Mortgage by conditional Sale:- Here, does not belong to any of the above categories is mortgagor, first sell the property, in favour of called an anomalous mortgage. mortgagee, with a condition to revert it back to him, if he is repay his loan with interest, otherwise mortgagee will become absolute owner. SUB MORTGAGE AND PUISNE MORTGAGE (i) Sub-mortgage:- When a mortgagee further (ii) Puisne mortgage: Puisne (pronounced as mortgages the property mortgaged with him by pyunii) mortgage is the second mortgage by way of security the mortgage is called a sub- the mortgagor himself on a property which is mortgage. already subject to mortgage. The word puisne means 'junior in rank or next in order. Example :- Mr.A mortgages his house to Mr.B for a sum of Rs. 20,000. If Mr.B further Example- Mr. A Mortgages his house worth Mortgage that property then he creates sub- Rs. 50,000 to Mr. B for Rs. 20,000.He is need mortgage. of more money creates another mortgage in favor of Mr C PME on the same house for a further sum of Rs. 15,000. The second mortgage is a puisne mortgage. 13  ECL THE TRANSFER OF PROPERTY ACT 1882 SOME OF OTHER PROVISION RELATED TO MORTGAGE Priority of debt on mortgage:- Example of Marshaling :- O the owner of The general rule of priority of different mortgages three properties P1 , P2 P3 mortgages them to on the same property is that the successive M subsequently O mortgage the property P1 to mortgage is paid after the prior mortgage has B here B has right of marshalling i.e. been satisfied. But where the prior mortgages he can compel M to satisfy his suffers from fraud, misrepresentation, the mortgage debt out of properties P2 subsequent mortgage shall have priority over and P3 so far as it will extend. prior mortgagee. Marshaling by subsequent mortgagor Subrogation:- Under Section 91 of the T.P. Act, (Section.81) :- If the owner of two or more enumerates the persons who may sue for properties mortgages them to one person and redemption. The primary right to redemption is then mortgage one or more of the properties to given to the mortgagor under Section 60, but in another person , the subsequent mortgagee is in addition to the mortgagor certain other persons the absence of a contract to the contrary , entitled are also entitled to redeem. to have the mortgage-debt satisfied out of the property or properties and sold to him , so far as a) Any person who has any interest in the same will extend , but not so as to prejudice the rights of the mortgage of person claiming b) Any surety for the payment of the mortgage- under him or of any other person who has for debt. consideration acquired an interest in any of the properties. c) Any creditor of the mortgagor. RIGHTS AND LIBILITIES OF MORTGAGOR RIGHTS OF MORTGAGOR a) Right of redemption (Sec.60):- The first and any provision inserted in the mortgage deed to the most important right of the mortgagor is the prevent, evade or hamper redemption is void. right to redeem i.e., take back the mortgaged Any condition which prevent the mortgagor property by paying the mortgage money at any from redemption the property is called “clog” on time after the stipulated date for repayment. the equity or right of redemption and is void. But the mortgagor is not entitled to redeem before the mortgage money becomes due on c) Right of partial redemption:- A mortgage, as the date fixed for repayment of the loan. a rule, being one and indivisible for the debt and every part of it, the mortgage cannot Example:- A borrows money on a mortgage and redeem piecemeal; he must redeem the whole agrees to pay it back after 5 years. A has won a property. lottery and wants to pay the loan at the end of 3 But Section 61 of the act gives a right of partial years and redeem his property. He cannot to do, redemption stating that “a mortgagor who has because the right to redeem arises only when the executed two or more mortgages in favour of money has become due at the end of 5 years. the same mortgagee shall, in the absence of a contract to the contrary, when the principal b) Right against clog or equity of money of any two or more of the mortgages has redemption:- Clog means prevent mortgagor become due, be entitled to redeem any one from redeeming the property and it is void. such mortgage separately or any two or more of Right of redemption or equity of redemption is such mortgages together. the essence of a mortgage, and 14  ECL DHEERAJ TYAGI Example:- A mortgages property X to B and Rs.1,000.A redeem the first mortgage of Rs.2000 obtains a loan of Rs.2,000.A again mortgages the or he can redeem both together. same property to B and obtains a further loan of LIABILITIES OF MORTGAGOR 1. Covenant for title. 2. Covenant for payment of public charges. RIGHTS AND LIBILITIES OF MORTGAGEE RIGHT OF MORTGAGEE LIABILITIES OF MORTGAGEE 1. Right to foreclosure or sale. 1. Only one suit for several mortgage 2. Right to sue for mortgage –money. 2. Liabilities of mortgagee in possession a) Management 3. Right of sale without intervention of the b) Collection of rents and profits court. c) Payment of revenue etc. d) Repairs 4. Right of appoint receiver. e) Insurance DIFFERENCES IN MORTGAGE AND PLEDGE Mortgage Pledge 1. It relates to immovable property. 1. It relates to movable property. 2. There is a transfer of an interest in some 2. There is only obligation to repay money. specific immovable property. 3. The possession of property which 3.The property on which mortgage is is pledged is handed over to the created may or may not be transferred to creditor pledge. the mortgage. 4. This is just not possible in case 4. There is no bar on creating a number of of pledge. mortgage on one property. CHARGE Sec. 100 of Act defines a charge as follows “When specified an it must be absolutely clear as to what immovable property of one person is by act of property is exactly charged. It the description of parties of operation of law made security for the the property is vague and indefinite, the charge payment money to another, and the transaction will be void for uncertainty. does not amount to a mortgage , the letter person is said to have a charge on the property and all the (ii) The immovable property must serve as provisions which herein before contained which security for the payment of money. apply to a simple mortgage shall so far as may be , apply to such charge” (iii) The charge may be the act of parties or it may come into existence by operation of law. The essentials of a charge:- (iv) The provisions of the Act which apply to a (i) It must be in receipt of immovable property simple mortgage, so far as may be apply which must serve as a security.the property on also to a charge. which charge is created must be specific and 15 ECL THE TRANSFER OF PROPERTY ACT 1882 DISTINCTION BETWEEN MORTGAGE AND CHARGE Mortgage Charge 1. It is transfer of an interest in specific 1. It does not involve transfer of any interest in the property although it serves as a immovable property made by a security for the payment of the loan. mortgagor as a security for the loan. 2. It may be created by act of parties or 2. It is created by act of parties. by operation of law. 3. It can be enforced against any 3. It cannot be enforced against bone fide transferee whether he takes it transferee for consideration having no with or without notice or mortgage. notice of charge. 4. In a mortgage the mortgage can 4. A charge –holder cannot foreclose the foreclose the mortgaged property. property on which he has a charge. 5. In a mortgage ,there can be security He can however get the property sold as well as personal liability as in a simple mortgage. 5. In a charge created by act of the parties when a particular property is specified the remedy of the charge-holder is against the property only. DISTINCTION BETWEEN CHARGE AND LIEN Charge Lien 1. It may created by act of the 1. It can arise only be operation parties or by operation of law of law 2. It is confirmed only to immovable 2. It may confirmed both to movable property and immovable property Extinguishment of charge A charge can be extinguished by – 1. A decree of the court obtained by the charge –holder 2. Act of parties this includes (a) Release of the debt or security or (b) Novation or (c) Merger. 16  ECL DHEERAJ TYAGI LEASE Meaning and nature of lease:According to (3) It is made for consideration which is either Section 105, a “lease” of immoveable property is premium or rent or both. a transfer of a right to enjoy property. Since it is a transfer to enjoy and use the property. (4) The transfer must be accepted by the transferee. Essential Formalities for lease:- For years to year lease, (1) It is a transfer of a right to enjoy immoveable registered instrument is required, while in case of property. lease of less than 1 year, oral agreement is required. (2) Such transfer is for a certain time or perpetuity. TENANCY Definition In case of tenancy the right to enjoyment of a particular property is basically transfer from one person to another person for a price/consideration/premium and for the limited period of time. the relationship originated among two person in this case is known as tenancy. Types Of Tenancy Tenancy From Year Tenancy By Tenancy At Will To Year Sufferance In This Case Tenancy If Tenant Stays In Property If Tenant Stays In Property Is Granted For Specified of Landloard After The Expiry Of Landloard After The Expiry Of Specified Time But of Specified Time And Give Time And without consent of after expiry of time Him Rent As Per His Will property still in possession And Consent Of Landloard his landloard of tenant only which gives is taken. rent to landloard. Tenancy At Will. Tenancy By Sufferan Year To Year Tenancy 17  ECL THE TRANSFER OF PROPERTY ACT 1882 TYPE OF TENANCY Following are the various types of tenancies In this example, A lets the house on tenancy from year to year to B while in case when after a) Tenancy from year to year:- A tenancy expiry of certain period C continue to holds the from year to year may be made by a grant of land house with the consent of A will be considered as from year to year. The tenancy is for a year to a tenancy at will. start with but after the expiration of one year the lessee continues to be in possession and pays c) A tenancy by sufferance:- This is a the rent to the landlord, the tenancy is regarded tenancy which is created by fiction of law. If a as a year to year tenancy. tenant continues to be in possession after the determination of the period of the lease without b) Tenancy-at-will:- During a period when the the consent of the landlord, he becomes a tenant tenant is in possession after the expiry of the by sufferance. period, if the tenant stays with the consent of the landlord till such time as further periods is fixed or Notice for termination of tenancy:- In case a fresh contract is made, the tenant is called a year to year, 6 months notice is required and if it tenant-at-will. is less than 1 year than only 15 days notice is required. No notice in case of tenancy by COMMON EXAMPLE sufferance. A lets a house to B for 5 years, B sublets the Determination of lease or when lease comes house to C at a monthly rent of Rs.100.The five to an end years expire, but C continues in possession of the house and pays the rent to A.C's lease is By lapse of time renewed from month to month By the happening of a special event like:- Mergers By surrender By forfeiture DIFFEREANCE BETWEEN 'LEASE' AND 'LICENCE' Lease Licence A licence is merely a personal right A lease is a transfer of interest 1. and does not amount to any interest in land in immoveable property. A lessee has to be served with A licensee is not entitled to 2. notice to quit before eviction. any such notice. 3. A lease is generally transferable A licence is not transferable. 4. A lease is generally not revocable A licence is always revocable 18  ECL DHEERAJ TYAGI EXCHANGE (Sec-118) GIFT HOW EFFECTED “When two persons mutually transfer the 1. Gift of immovable property:- For the ownership of thing for the ownership of another purpose of making a gift of immovable property ,neither thing or both things money only the the transfer must be effected by a registered transaction is called an exchange “ instrument signed by or on behalf of the donor and attested by at least two witnesses. GIFT (Sec-122) “ Gift” is transfer of certain existing movable or 2. Gift of movable property :- For the purpose immovable ,property made voluntarily and without of making a gift of movable property, transfer may consideration , by one person , called the donor to be effected either by a registered instrument of another ,called the donee and accepted by or on profession or by deliver. behalf of the donee. SUSPENSION OF REVOCATION Such acceptance must be made during the OF GIFT (SEC. 126) lifetime of the donor and while he is still capable of giving. Grounds for suspension of revocation 1. By agreement Essentials of a gift 2. By rescission 1. Transfer of ownership 2. Property must be in existence CONDITIONAL GIFT 3. Voluntary transfer 4. Without consideration Like any other transfer under the Act a conditional 5. Acceptance by the donee gift can also be made.A gift which comes into existence on the fulfillment of a condition precedent is a conditional gift and is valid. UNIVERSAL DONEE (SEC. 128 ) Where a gift consists of all the properties of the The liability on the universal donee is limited to donor, the donee is called a universal donee. the extent of the property received by him. ONEROUS GIFT (SEC.127) If a gift of a thing which is burdened by an Example – A has shares in X a prosperous joint obligation, the gift is called on onerous gift The stock company and also shares in Y , a joint stock donee may not accept such a gift. It a gift made company in difficulties.Heavy calls are expected of several things any one or more of the things in respect of the shares in Y. A gives B all his gifted may be burdened by some obligation.In shares in joint stock company X and Y refuses to such a case the position of the donee is as accept the shares in Y.He cannot take the shares follows in X. 1. When there is a single transfer:- When a 2. Where there are two or more separate gift is in the form of a single transfer to the same transfer– Where a gift is in the form of two or person of several things , of which one is , and more separate and independent transfers to the the others are not , burdened by an obligation , same person of several things , the donee is at the donee can take nothing by the gift unless he liberty to accept one of them and refuse the accepts it fully. others , although the former may be beneficial and the letter onerous. 19  ECL THE TRANSFER OF PROPERTY ACT 1882 Example:- A having a lease for a term of years 3.Onerous gift to disqualified person :- A of a house at a rent which he and his donee not competent to contract and accepting representatives are bound to pay during the term , property burdened by any obligation is not bound and which is more than the house can be let for by his acceptance ,But if , after becoming gives to B the lease and also as a separate and competent to contract , and being aware of the independent transaction , a sum of money B obligation , he retains the property given , he refuses to accept the lease.he does not , by his becomes so bound. refusal forfeit the money. ACTIONABLE CLAIM ‘Actionable claim' means a claim to any debt , Simple stated an 'actionable claim' means a claim other than dept secured by mortgage of to immovable property or by hypothecation or Any unsecured debt or pledge or movable property whether such debt is Any beneficial interest in movable property not existent accruing conditional or contingent “ in the possession of the claimant The debt or beneficial interest may be existent accuring conditional or contingent. WHAT IS A DEBT ? The following it would be noted are not actionable (ii) A right of recover the amount which may be claim: found to be due on taking an account. (i) A right to recover damages for the breach of contract. THE FOLLOWING ACTIONABLE CLAIMS a) A claim to recover arrears of rent due. c) A claim under life insurance policy that has matured. b) A claim to the provident fund that is standing to the credit of a member of the provident fund and that has become due. QUESTION FROM ICSI BOOK Q1. Discuss the object of the Transfer of property Act. Distinguished between immoveable and moveable property. Q2. What is the subject matter of transfer under the T.P. Act. Discuss property which cannot be transferred. Q3. Define a mortgage. Discuss various types of mortgages. Q4. What is the rule against perpetuity. Q5. Write a short note on i) Vested and contingent interest. ii) Actionable claims. 20