There are certain important aspects one should know under the Transfer of Property Act 1882 which deals mostly with the immovable property. Transfer of Property Act 1882 is one of the oldest laws of the legal system, it can be said as the extended version of contracts and functions parallel to the succession laws. Whenever a person wishes to transfer any immovable property, he should be aware of its key aspects. Before the Transfer of Property Act came into existence, all the principles regarding the transfer of immovable properties was dealt and governed by the English Law and Equity laws, and the subordinate rules and Acts which were enacted by the Governor General in Council. But there were many flaws in those rules and acts and it got complicated as there was lack of uniformity in these property laws.
Hence, the Transfer of Property Act 1882 was enacted as a uniform legislation on 17th February 1882 which was applicable to the entire colony of India. The Act originally consisted of 8 chapters and 137 Sections and majorly dealt with transfer of immovable property while some of the sections such as Gift and exchange are applicable to both, movable and immovable properties. This Act was running on similar lines with the Intestate and testamentary laws of succession in India.
As per the Transfer of Property Act, the term “transfer” includes transfer through sale, mortgage, lease, gift, exchange, actionable claims etc. The Act doesn’t focus on the operation of law in form of forfeiture, inheritance, sale through execution of decree or insolvency, but explains the various kinds of transfers available among immovable and some movable properties and the rights and liabilities of the two involved parties. This Act also doesn’t apply to the transactions for disposal of property via wills or intestate succession of property.
Conditions of Transfer
Section 5 of the Transfer of Property Act 1882, defines “Transfer of Property”. It means that “transfer of property is an act by which the person conveys or transfers the property in present or future to one or more living persons or even to himself and some other persons, and thus, to transfer means to act in such manner.”
Under this section “living person” would mean a person, company or association or body of individuals whether incorporated or not, but nothing in this section shall affect any law for the time which is in force relating to transfer of property or by companies, associations or bodies of individuals.
So, some of the essential conditions of transfer of property are-
- There should be a transferor. Any person who is competent and capable for entering into a contract with a sound mind and is entitled to transfer the property or authorized to transfer the property shall be called “transferor” of such property.
- The property to whom it is being transferred is known as the “transferee” and he or she should not be disqualified by law for taking part in such a transfer.
- The property involved must be transferrable, and every property is transferrable except for the ones mentioned under Section 6 of the Indian Contract Act 1872.
Thus, these were some of the important conditions for transfer of property under the Act of 1882.
Persons Competent To Transfer
Section 7 of the Transfer of Property Act 1882 deals with the Persons competent to transfer. This concept is basically derived from the Indian Contract Act 1872 and specifies that competency of persons is quite vital in transfer of property. Only certain people are permitted to transfer property. And as per this Section, for a person to be capable for transfer of property, he or she needs to fulfil 2 conditions. They are-
- The person should be competent as per the conditions mentioned under the Contract Act 1872.
- The person who is willing to transfer the property should have the title of the particular property or authority to transfer the rights to another party, if he is not the real owner of the property.
The competency condition is derived from Section 11 and 12 of the Indian Contract Act 1872. The conditions for a person to be competent to enter into a contract are as follows-
- Majority- Section 11 of the Act mentions that any person is competent to contract who has attained the age of majority and under Section 3 of the Indian Majority Act 1875, a person who attains the age of 18 years shall be considered as major and if a guardian is appointed in his minor years, then he/she shall attain majority at 21 years.
- Sound mind- Section 12 of the Indian Contract Act states, a person who is of sound mind can become a party to the contract. Sound mind can be understood as the person has the ability to comprehend things and is able to make decision over his rights and benefits as to the effect upon his own interest. Any person who is lunatic, idiot or of unsound mind will not be considered as competent to contract and such a transfer would be declared as void.
- Persons disqualified by law- there is certain category of people who are disqualified to transfer or enter into a contract. They are insolvent person, alien party, convicts and enemy. A transfer when made by a defective guardian of minor’s property shall be considered as invalid but not under the category of “persons unqualified by law” and will be dealt under the section 11 of Contract Act.
- Transferor must be entitled to make a transfer- the person transferring the property should be authorized to do so, i.e. a real owner of the property has the right to sell the property without any obstacle, but sometimes the real owners appoint an attorney on their behalf to transfer the property for him which must be legally done.
Various Doctrines under the Act
- Doctrine of Part Performance
This doctrine finds its origin based on the principle of equity which was first introduced in England and then later on it was added to the Transfer of Property Act 1882 along with the amendment of 1929. So, this doctrine as the name suggests it states that in Law of Contract for Sale, none of the rights pass to the other party until the sale is entirely complete and both the parties have played their part. But in case, one of the parties have performed their part or does any such act in furtherance of the contract, then he or she is liable for getting a reimbursement or performance of the Act in case the other party breaches or refuses to do so.
Section 53A of the Transfer of Property Act talks about part-performance, stating that if a person makes an agreement with another and lets the other person act on behalf of the contract then an equity is created on the person which cannot be withheld on the sole grounds of absence of formality in the evidence or contract for such a transfer. Hence, it can be said that if the contract is not registered or fully completed in the arranged manner, the transferor can still not go against the transferee or anyone who is claiming on behalf of him. Although, the deed should be signed and stamped at least. This section clearly provides for the rights of the transferee and nothing in the section would affect the right of transferee for consideration, even if he was not wary of the contract of part performance.
For instance- Raj made a contract with Rita to sell his plot for Rs 1000. Raj accepts the advance from Rita towards the sale of the plot and hands over the possession of the plot to Rita. And after some time Rita is ready to pay the remaining amount but Raj refuses to accept it and asks Rita to render the plot back to him.
Here, Rita is ready to perform her part of the contract but Raj is not. In this kind of case, Rita has 2 options, either she can bring a case requiring for specific performance from Raj or ask for her advanced money with interest. It would not matter whether the sale was registered or not.
The prominent case of Doctrine of part-performance finds its origin from Walsh v. Longsdale, 1882. The facts of the case were that Walsh had taken a cotton mill on lease for 7 years from Lonsdale (owner of mill). The agreement between the 2 parties was prepared but not signed and meanwhile the rent of the mill started accumulating as Walsh was not able to keep with the quarterly payments. As per the agreement, Longsdale had demanded the advance rent for 1 year and seized the goods of Walsh when he defaulted on rent. Walsh sued him for damages.
It was decided by the House of Lords, in favour of Longsdale by stating that running a mill signified that Walsh acted as a lessee and evidence of his consent to the unsigned lease deed. But this rule is not applicable in India, as it didn’t constitute doctrine of part-performance.
In another case of Mohd Musa v. Aghor Kumar Ganguly, AIR 1914 PC 27 (30), held that doctrine of part performance was applicable in India. After a few years, there were conflicting views about the doctrine that it couldn’t be used to override the statutory provisions. Thus, finally the doctrine found its place in the Transfer of Property Act 1882 amendment in 1929 with slight modifications of from the English law of part performance.
- Doctrine of Lis Pendens
The doctrine of Lis pendens is quite old and finds its basis from English Common Law. This doctrine basically specifies that judgments regarding immovable properties would override any transfer made by the parties during pendency of litigation. The doctrine was later on adopted by equity for a better and regularized way of administration of justice. The term “lis pendens” has been derived from Latin word, “lis” means an action or suit or litigation in broader sense and the word “pendens” denotes pending.
Section 52 of the Transfer of Property Act 1882, mentions about this doctrine stating that it creates a right to be enforced for preventing any transfer made pendent lite because such transfers will not be declared void, but will be voidable and that too at the option of the aggrieved party in the proceedings ongoing, due to which the transfer is affected. So, the doctrine doesn’t invalidate the transfer made during the proceedings but the transfer becomes subject to the result of the litigation.
As per Common Law of England, doctrine of lis pendens states that if property was the subject of litigation, then the defendant-owner could transfer all or part of his or her interest in the property during the course of litigation, but this transfer should not be detrimental to the interests of the plaintiff. In short, a third party purchaser pendent lite shall be bound by the judgment of the Court for the transfer to be executed just like he or she is a party to the suit. The principle of this doctrine is based on the maxim, “pendent lite nihil innovetur” which means that nothing new should be introduced while an ongoing proceeding or litigation.
Hence, Section 52 of the Act stresses on the part that the disputed property should not be sold or dealt in by any party to the dispute pendent lite, but if at all any transfer takes place, the law will not set aside the sale completely by invalidating it, but it will render the third party subservient to the judgment of court.
In the famous case of Supreme General Films Exchange Ltd. v. Sri Nath Singhji Deo, there was a theatre attached in execution of a decree against the owner. During the attachment, the owner leased the theatre to M/s Supreme General Films Exchange Ltd. and it was held by the Apex Court that the lease was hit by the doctrine of Lis pendens and thus the lease was subservient to decree’s decision.
What Are Fraudulent Transfer?
Section 53 of the Transfer of Property Act 1882, speaks about the fraudulent transfers. Every owner has the right to transfer his property as he likes but the transfer should be made with a good intent and not a fraudulent one. Wherever, it is seen that the transfer is made with fraudulent intention the interest of the creditor or subsequent transferee gets defeated or compromised. Such a transfer made with fraudulent intention will be considered as wrong in the eyes of equity and justice, though it is valid in law.
Section 53 secures the interest of creditor wherein the transfer made is real even with a fraudulent intention, whereas in case of benami or sham transfers; the transfer is itself not real. There are certain transactions which are considered as out of the scope of fraudulent transfers. They are-
- Partition and family settlements not transferred under this Act and thus this section will not apply.
- Sham transfers or Benami transfers are outside the scope of this section.
Essential of Fraudulent Transfer
- It should be transfer of immovable property
- The transfer should be made with intention to defeat or delay the creditors interest
- The transfer should be voidable at the option of creditor so defeated or delayed.
The provisions of this sub-section will not affect the rights of subsequent transferee in good faith for consideration purposes and any such law for the time being with regard to insolvency.
In the case of Musahur Sahu and Anr v. Hakim Lal and Anr, 1915, the Privy Council held that transfer of property by a debtor to one creditor in preference of the other is not a fraudulent transfer with the intent to defeat or delay the interest of other creditors. It merely a choice of the debtor.
In the case of Abdul Shukoor Saheb v. Arji Papa Rao and Ors, the Apex Court was of the opinion that the creditor can claim the attachment of the property of the debtor in order to protect his mortgage money as a security. The creditor shall file no separate suit for attachment and the creditor may seek for attachment of the property under Section 53 of the Act.
Therefore, it can be concluded that the Act was introduced in the pre-independence era, in order to bring uniformity and one separate Statute for transfer of immovable properties. The Transfer of Property Act was passed in parallel lines with the Indian Contract Act. The Act provides for basic information and rights and liabilities of the parties in various transfers. Although, the Act has gone through many amendments to keep it updated and effective as per the new principles.
The scope of the Act is limited and only applies to those transfers by the act of parties and not by operation of law. Further, the Act deals with transfer of property inter vivos i.e. a transfer between living individuals. The Act majorly speaks of transfer among the immovable property but certain sections apply to movable property also. The Act is not exhaustive in nature.
This article is authored by Rhea Banerjee.