This Blog is written by Simran Sheikh

INTRODUCTION

The Transfer of Property Act, 1882, governs the transfer of immovable property in India. The act provides various regulations that make a transfer legally valid and ensure that the rights of both the transferer and transferee are protected. While the act mainly deals with the transfer of immovable property, it also contains certain basic rules of transfer which are equally applicable to the transfer of movable property. Enacted in 1882, the act addresses various modes of transfer, including sale, mortgage, lease, exchange, gift, and actionable claims. It sets forth the competency, rights, and obligations of the parties involved therein. The act comprises 137 sections spread across 8 chapters.

 

HISTORIC EVOLUTION OF THE ACT

The Transfer of Property Act includes only those transfers that take place between ‘living persons’ and excludes the transfers that occur by operation of law. In India, the transfer of property by operation of law has always been governed by Personal Laws. The transfer of movable property, on the other hand, was dealt with under Chapter VII of the Indian Contract Act until the enactment of the Sale of Goods Act in 1930. Altogether, there was no codified law governing the transfer of immovable property before 1882. While some rules were prevalent in the Madras regulation of 1802, the Bengal regulations of 1798, and others, they were not sufficient to cover all types of transfers. As a result, immovable transfers in the colonial era were based on the principles of Justice, equity, and good conscience. But these principles were subject to diverse interpretations by different courts, causing chaos and confusion.

The first effort to get a uniform codified law was made by the First Law Commission. The draft bill prepared by the commission was presented before the legislative council after necessary corrections. Thus, the act came into being on 17th February, 1882. It was enforced from 1st July,1882. Since then, it has undergone several amendments.

 

CORE ASPECTS OF THE ACT

3.1  Immovable property: – Section 3

Immovable property is defined under Section 3 as property excluding standing timber, growing crops, or grass. It doesn’t state what immovable property includes. But a reading of Section 4 of the General Clause Act provides that immovable property includes land, benefits arising out of land, and things attached to the earth. So, by combining these definitions, it can be concluded that immovable property includes land, benefits from land, and things attached to earth, except-

• Standing timber
• Growing Crops
• Grass

In Shanti Bai v. State of Bombay (AIR 1958 SC 532), it was held that a tree would be considered as immovable property if its owner intended to use it for vegetation. However, if the tree was grown only to cut it down as it grows, then it would be a movable property.

 

3.2  Transfer of property – Section 5

According to Section 5, an act by which one living person transfers property to another living person/s, either in the present or future, is called a transfer of property. Thus, to constitute a transfer, there should be

1. An act by a person who wants to transfer
2. The transferor must be a living person at the time of transfer. This includes a juristic person also.
3. The property must be conveyed to the transferee and create new titles in his favour.
4. The transfer may take place immediately or in the future.
5. Property so transferred may either be movable or immovable.
6. The transferee should also be a living person and includes a child in the mother’s womb.

In the case of Sunil Sidharthbai v. Commissioner of Income Tax (AIR 1986 SC 368), it was observed by the Supreme Court that transfer of property means passing of either the entire bundle of rights, i.e., the ownership rights, or it can be transfer of only partial rights, such as the right of enjoyment of property.

 

3.3  Transferable and non-transferable property- Section 6

As per this section, all kinds of property are transferable as a general rule. However, certain properties are non-transferable: –

• Spes Successionis:

It means a ‘chance of succession’. A person cannot transfer a property that he has a chance of getting or expects to be given to him in the future, as it is a mere possibility and thus is uncertain.

Illustration: A has a chance of inheriting his mother’s property after her death. A can only transfer his share of the property after his mother dies, and that too intestate. He cannot transfer it during her lifetime.

• (b)Mere right of Re-entry

It is the right of the landlord to resume possession of the leased property when the tenant commits a breach of condition subsequent.

• (c)Easement

Easement, being the right of way over others’ land, is non-transferable apart from the land that benefits from it.

• (d)Restricted interest

A beneficial interest of a person is his right, which is given to him due to his qualifications. Therefore, such beneficial interests cannot be transferred. They are over and above trade and transaction.

Illustration: ‘A’, an advocate cannot transfer his ability of advocacy, as it is the right granted to him because of his qualification.

• (dd) Right to future maintenance

The right of a person to receive maintenance is their personal right and therefore cannot be transferred.

• (e)Mere right to sue.

The right of a person to claim compensation, the amount of which is uncertain or not fixed, as in the case of contract and tort, is not transferable. In Jaffar Meher Ali v. Budge Budge Jute Mills ((1900) 33 Cal.702), where the right to receive the contracted goods from ‘A’ to ‘B’ was shifted to ‘C’. The breach of contract by A gave C the right to sue him.

• (f)Public office/salary, pensions, and stipends.

Public office and the salary of a public servant cannot be transferred as they are beneficial interests. In Ananthayya v. Subbarao (AIR 1960 Mad.188), the promise of a younger brother to pay a certain sum of his earnings to his elder brother was not hit by this section merely on his appointment as a government servant. Similarly, under section 6(g), stipends and pensions cannot be transferred.

• (h) Against the nature of interest

No transfer can be made for an unlawful object/consideration or to a person who is legally disqualified from being a transferee, and which is contrary to the interests created thereby.

 

 3.4 Parties to transfer and their competency

       A transfer consists of two parties, one who transfers his property and the other who receives it. The former who hands over his property to another is called a transferor, and the receiving party is referred to as a transferee.

 A person transferring his property must be qualified under section 7 of the act to alienate his property. A person becomes competent to transfer if:

• He is competent to contract

A person becomes eligible to enter into a contract if he has reached the age of majority and is not a minor under the law, is not of unsound mind, and is not disqualified by law to transfer his property.

• Has authority to transfer

An individual is said to have authority when he either is the owner of the property himself, or has been authorised by its owner to whom it belongs to transfer it.

 

KINDS OF TRANSFERS

There are six types of transfers dealt with in the 1882 Act:

• Sale
• Mortgage
• Lease
• Exchange
• Gift
• Actionable claim

 

(i) Sale – Section 54.

Section 54 defines sale as the transfer of ownership of property made in exchange for money. This money or price can either be paid, promised to be paid, partly paid, or partly promised.

Thus, the sale includes:

1. Transfer of ownership of property
2. Price/ consideration.

The following are the conditions for a valid sale:

• The parties to the sale must be competent.
• The immovable property must exist during the execution of the sale deed
• Sale must be for a fixed sum mentioned under the sale deed
• The transfer of property must be made either by delivering it or by registering a deed.

            In the case of Sibendrapada v. Secretary of State, registering the instrument was considered the only way of giving effect to the sale deed by the Calcutta High Court. Further, in Hakim Singh v. Ram Sanehi (AIR 2001 AIL 231), it was pointed out that the sale cannot be held invalid only because the consideration is less than the market value of the property.

 

(ii) Mortgage- Section 58(a)

Mortgage is defined under this section as the transfer of an interest in a specific property to secure payment of the loan amount, regardless of whether the loan is existing or future debt, and which may give rise to pecuniary liability.

Thus, the essential conditions of a mortgage may be stated as:

• There must be a transfer of an interest. It is not the transfer of all interest in property. In other words, ownership is not transferred.
• The transfer must be of a specific immovable property. The property must be specified in order to identify it.
• The reason for transferring must be to secure the repayment of a loan amount.

In Bhaskar Woman Joshi v. Narayan Rambilas Agarwal (AIR 1960 SC 301), it was stated that when the language of the deed is ambiguous, the intention of the parties must be understood by studying the contents of the deed. If, however, the words are clear, it should be given effect as it is.

Kinds of mortgage:

• Simple mortgage – Section 58(b)
• Mortgage by conditional sale – Section 58(c)
• Usufructuary mortgage -Section 58(d)
• English mortgage – Section 58(e)
• Mortgage by depositing title deeds- Section 58(f)
• Anomalous mortgage – Section 58(g)

In Syndicate Bank v. Modern Tile and Clay Works, it was provided that if the original title deed is lost, then the certified copy of the deed can be deposited to create a mortgage. However, it must first be proved that the original document is lost.

 

(iii) Lease- Section 105

A transfer of the right of enjoyment of a property for a certain period, upon consideration which is paid or promised to be paid, is called a lease. The consideration can also be money, crops, or anything of value.

The lease must include the following essentials:

• There must be two parties, known as the lessor and the lessee
• Lease must be for a certain fixed time.
• Lease must be given upon some consideration.

 

A lease can be created by the dual modes referred to in Section 107:

• A lease that can be created only by registration – such as
• Year-to-year basis lease
• Lease for more than one year
• Lease by reserving the yearly rent
• Permanent lease
• Lease where registration is optional- such as
• Lease for a one-year
• Lease for less than a year
• Month-to-month basis lease

 

(iv) Exchange- Section 118

The transfer of ownership from one person to another mutually is called an exchange. The transaction between the two persons is neither money nor any of them being money only.

The essentials of exchange are:

• There must be a transfer of absolute ownership.
• It is not necessary that both the things exchanged are immovable. A movable property can be exchanged in return of immovable property.
• The lease must be completed in the manner in which a sale is completed

Illustration:

‘A’ transfers his bag of goods worth Rs. 20,000 with another bag of ‘B’ containing goods worth Rs. 15000 and Rs. 5000 cash. This amounts to an exchange.  

 

(v) Gifts- Section 122

It is the voluntary transfer of movable or immovable property from one person to another without any consideration. It is called a gratuitous transfer as it takes place without any consideration. The person making the gift is referred to as the donor, and the one receiving it is called the donee.

The following are the essentials for a valid gift:

• There must be a transfer of absolute interest in property to the donee. It implies that the transfer should be of ownership rights.
• The property must exist at the time of making the gift. There can be no gift of future property or property which the donor has a chance of succeeding.
• The transfer should be made free of consideration. It is based on mutual love and affection.
• The transfer of property by the donor must be voluntary. It must be out of free will and consent.
• The gift must be accepted by the donee either expressly or impliedly.

 In Damodaran Kavirajan v. T.D Rajappan (AIR 1992 KER. 397), the mother gifted her property to her son upon consideration that he relinquishes any rights to her future property. It was held that the deed did not amount to a gift deed.

In Munni Devi v. Chhoti (AIR 1983 AII.444), the gift deed made in favour of the daughter by the mother and the promise of the daughter in return to look after her was held to be a valid gift. The promise did not amount to consideration, and the transaction was based on mutual love and affection.

Where an old lady was made to sign two gift deeds falsely presented to her as her pension papers in the case of Surjit Singh v. Bimla Devi (AIR 2008 NOC 969(HP)), it was held that the deed was to be set aside as it was involuntary.

Methods of making a gift – Section 123.

The method of executing a gift depends on the nature of the property that is to be transferred. The two methods of gifting are:

• Registration in case of Immovable property.
• Gift by delivery of possession in case of movable property.

In Gomtibai v. Muttulal (AIR 1997 SC 127), the Supreme Court stated that if there is no written instrument to a gift, and if it is not attested by two witnesses and is also not registered, it is not a valid gift.

 

(vi) Actionable claims- Section 130

Actionable claims include unsecured money, debt, and beneficial interest. A transfer of actionable claim is the transfer of intangible and incorporeal rights in movable property.

Section 130 deals with the mode of transfer of actionable claims. It states that the transfer of actionable claims should be by writing an instrument. Thus, there can be no oral transfer of an actionable claim. Further, the instrument must be signed by the transferor. The transfer of an actionable claim either be with consideration or without it. The transfer becomes effective from its execution. A transfer is said to be executed when the transferor signs the instrument or puts his thumb impression or does so through his authorised agent.

 

CONCLUSION

The Transfer of Property Act is an important statute regulating the transfer of immovable property between living persons. An adherence to the principles enumerated in the enactment ensures safe, smooth, and lawful transfer devoid of any future legal disputes. However, the act is not exhaustive. It does not apply to all kinds of transfers. The preamble of the act states that the object of the act is to amend the existing law relating to transfer by act of parties. It does not state that the act aims at the collection and consolidation of all laws relating to the transfer of property.