Property

SARA DHARWADKAR

SCOPE OF THE ACT

‘Act of Parties’

●​ It applies to and governs the transfers by act of parties only.

●​ It does not govern transfers that take place due to operation of law.
●​ Accordingly, it does not govern transfers of property through court auction forfeiture,
acquisition or due to insolvency proceedings or government grants.
●​ It also does not govern transfers of property through intestate or testamentary succession.

BASIC OBJECTIVES

●​ Provides a definite, clear and uniform law for the transfer of immovable property by ‘act
of parties’, i.e. transfer between living persons (transfer inter vivos).

●​ Has modified and made changes in some of the rules which existed before this
enactment.

●​ Provides a law parallel to the already existing laws of testamentary and intestate transfer.

●​ The TPA has completed the Code of Contract. Prior to this Act, although there was Code
(enacted law) for the contracts, there was no enacted law for the transfers which used to
take place in furtherance of a contract.

SALIENT FEATURES

Section 2 : Saving of Certain Enactments, Incidents, Rights, Liabilities, etc:

1. Not Exhaustive – The Act does not cover all aspects of property law; courts can apply equity,
justice, and good conscience where it is silent.

2. Transfer by Operation of Law Excluded – Transfers arising by inheritance, insolvency, or

court decrees are not governed by this Act.

3. Transfer Mainly of Immovable Properties – The Act primarily deals with immovable property,
while movable property transfers are governed by the Sale of Goods Act, 1930.

4. Legislative Competence – Parliament and State Legislatures can regulate property transfers,
but only states can legislate on agricultural land.
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5. Muslim Law – The Act does not override Muslim personal law, which governs property
transfers such as Hiba (gift).

6. Savings of Certain Incidents and Rights – The Act preserves customary rights, including rights
of tenants, co-owners, and mortgagees.

7. Territorial Limitations – The Act applies only to the whole of India except Jammu & Kashmir,
Nagaland, and tribal areas unless extended by special notification.

8. Special Laws to Oust the Jurisdiction of the TPA – Certain laws, like tenancy laws and land
reforms, override the provisions of the Transfer of Property Act.

PROPERTY

Property has a variety of meanings.

It is closely related to ownership or title.
In some contexts, it is used to mean the thing over which ownership is exercised.

Widest meaning : includes all legal rights possessed by a person. A man’s property is all that is
his in the eye of law.
​
Narrower meaning : Does not include all that a person has, but only his proprietary rights, as
opposed to his personal rights.
Proprietary rights constitute his estate and property.
A man’s land, chattels, shares, debts due to him are considered his property, but personal rights
concerned with his status or personal conditions such as his life, liberty or reputation, etc are not
his property.

Narrowest meaning : Includes only corporeal property, i.e. the right of ownership in a material
object, or that material object itself.

Definition:
Property is the highest right a person can have over land, goods, or rights.

Types of Property:

●​ Corporeal – Physical assets like land, goods, chattels.

●​ Incorporeal – Intangible rights like trademarks, copyrights, patents.
●​ Rights in Personam – Transferable rights such as debts and contractual obligations.
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Key Characteristics:

●​ Has monetary value.

●​ Can be transferred, inherited, or injured.
●​ Does not depend on another’s courtesy (absolute right).

Jura In Re Propria (Rights in Propria) Jura In Re Aliena (Rights in Aliena)

These are rights of ownership in one’s own Rights over a property owned by someone
property. else.

These can be in material things or These can be in material things or immaterial

immaterial things. things.

Material things (corporeal property) Lease

Land, chattels, etc. Servitudes
Securities
Immaterial things (incorporeal property) Trust
Patents, copyrights, trademarks, designs, etc.

Modes of Acquisition of Property :

1. Possession – The simplest mode of acquiring property; when a person physically controls an
object or land, they may gain rights over it. Possession can be actual (direct physical control) or
constructive (control through legal recognition).

2. Prescription – A right acquired over time due to continuous and uninterrupted use. If a person
enjoys property openly and without objection for a legally prescribed period, they may claim
ownership (e.g., easements like the right to a pathway).

3. Agreement – Property can be acquired through contracts, sales, leases, or gifts where
ownership is transferred by mutual consent under legal terms (e.g., buying a house through a sale
deed).

4. Inheritance – Property passes to legal heirs upon the owner’s death as per personal laws
(Hindu Succession Act, Muslim Law, etc.) or testamentary succession (as per a valid will).

Moveable and Immoveable Property :

Why study the difference ?

The Act does not define the term property, but only gives a definition of immovable property.
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The primary reasons why the study of the character of property, i.e., whether it is movable or
immovable is relevant, is due to the difference in procedural formalities in the transfer, and the
different time stipulated in the law of limitation in having recourse to the litigative system in case
of disputes.

1.​ Scope of the TP Act, 1882:

The Act lays down general rules for the transfer of both movable and immovable
property, but specifically governs the transfer of immovable property.

2.​ Procedure for Transfer:

Immovable Property: Requires a written document, execution by the transferor,
attestation, and registration. Without these, no legal right is transferred.
Movable Property: Can be transferred by mere delivery of possession along with the
intention to transfer ownership.

3.​ Stamp Duty Requirement:

Transfer of immovable property requires valuation and stamp duty payment.
The registrar can take action if there is a shortfall in stamp duty.

4.​ Law of Limitation:

Immovable Property: A suit must be filed within 12 years from the cause of action.
Movable Property: A suit must be filed within 3 years; otherwise, it will be dismissed as
time-barred.

Definitions

Moveable Property - Section 2 (7) of the Sale of Goods Act

‘Goods’ means every kind of movable property

Includes :
●​ stock and shares
●​ growing crops
●​ grass
●​ things attached to or forming part of the land which are agreed to be severed before sale
or under the contract of sale.
Except : actionable claims and money
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Section 3 : Interpretation Clause - Immovable Property

Immovable Property - Section 3 of the Transfer of Property Act

Immovable Property includes:

●​ Land
●​ Benefits to arise out of land
●​ Things attached to the earth
●​ Permanently fastened to anything, which is attached to the earth.
(a) rooted in the earth, as in the case of trees and shrubs;
except - standing timber, growing crops and growing grass.
(b) imbedded in the earth, as in the case of walls or buildings;
(c) attached to what is so imbedded for the permanent beneficial enjoyment of that to
which it is attached eg. windows

Timber Trees and Standing Timber

Thus if a timber tree is to be considered ‘standing timber’ i.e. movable property:

(a) It must be a timber tree.
(b) It has reached a particular stage where its wood is ready to be used as timber.
(c) It is intended to be cut reasonably early.
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Shanta Bai v. State of Bombay, 1958

Facts:

●​ Ganpat Lad (A), the owner of a forest, executed an unregistered lease in favor of his wife,
Shanta Bai (W), for ₹26,000 for 12.5 years.
●​ The lease allowed her to cut and take bamboo, fuel wood, and teak but prohibited cutting
teak below 1.5 feet girth.
●​ In 1950, the Madhya Pradesh Abolition of Proprietary Rights Act was enacted, vesting
ownership of the land in the State.
●​ W was stopped from cutting trees, so she claimed compensation from the government.
●​ When she was denied permission to cut trees, she petitioned under Article 32 of the
Constitution.

●​ Shantabai argued that the right granted to her was in standing timber, which is considered
movable property. Since movable property does not require registration, her contract
should be legally valid.
She contended that the agreement was not a lease of the land, but a simple contract
allowing her to cut and take away trees.
Shanta Bai maintained that her right was independent of the land and only concerned the
trees, making it a contract for goods (movable property) rather than an interest in
immovable property.

●​ The state argued that the right granted to her was in timber trees (not standing timber),
making it an interest in immovable property.
Since the contract was for 12 years, it was not just a right to cut trees but to benefit from
their growth over time.
Since they were not immediately ready for cutting and were still drawing nourishment,
they were not timber trees, but standing timber, which are immovable property.
This meant it was a lease or a profit à prendre (benefit from the land), which must be
registered to be legally valid - She was not entitled to compensation.

Supreme Court :

Whether the right granted was over standing timber (movable property) or timber trees
(immovable property)?

The Supreme Court ruled that the right granted was in immovable property.
The court applied the distinction between timber trees and standing timber.

●​ The right lasted 12 years, meaning the trees were still growing and drawing nourishment
from the soil.
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●​ The intention was not to cut them immediately, but to let them grow further before being
felled.
●​ This indicated a beneficial interest in the land itself (profits a prendre) classifying the
right as an interest in immovable property.

Was the property moveable or immovable ?

Since immovable property rights require a registered document, and the lease was unregistered,
Shanta Bai’s claim failed, and she was not entitled to compensation.

Himachal Pradesh v. Motilal Pratap Singh & Co, 1981

Facts:

●​ The government of Himachal Pradesh entered into a contract with Motilal Pratap Singh
& Co. regarding deodar, kail, and rai trees which are commonly used for building
purposes.
●​ The contract earmarked trees for cutting after ensuring they had reached the required
growth, following silvicultural (scientific forest management) principles.
●​ Some of these trees were felled immediately, while others were to be cut within a short
period of time.
●​ Another part of the contract related to land with bamboo clumps and trees, where the
trees were not meant to be cut within a short period, but were allowed to stand for 10
years.

Supreme Court :

Whether the contract concerned movable or immovable property, and whether the transaction
required registration ?

Deodar, Kail, and Rai Trees (Cut Within a Short Time) → Standing Timber → Movable Property
●​ Since these trees were intended to be felled shortly, they were classified as standing
timber.
●​ The court ruled that standing timber is movable property, meaning that no registration
was required for their sale.

Bamboo Clumps and Trees (Left Standing for 10 Years) → Immovable Property
●​ Since the bamboo and other trees were allowed to remain rooted in the land for a long
duration (10 years), they were not standing timber but timber trees.
●​ This meant they were immovable property, requiring proper registration under the
Transfer of Property Act.
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Doctrine of Fixtures

To understand under what circumstances a chattel (movable) becomes a fixture (immovable), we

have to understand the doctrine of fixtures.

The English maxim quicquid plantatur solo, solo cedit (whatever is built into or embedded into
the soil becomes part of the land) does not automatically apply in India.

In India, if a person lawfully occupies a property and attaches something to the land, two rules
apply :

●​ Right to remove: The person can remove the fixture when leaving, provided they restore
the land to its original condition.
●​ Right to compensation: If the improvement remains and benefits the landowner, the
person is entitled to compensation.

Tests to Determine Whether a Chattel Becomes a Fixture :

1.​ Mode of Attachment and Consequences of Removal

If an item is simply placed on the land by its weight, it remains movable (e.g., a heavy
machine placed on the ground).

If an item is fixed using cement, bolts, or welding, it becomes immovable.

If removing the item would cause substantial damage, it is considered a fixture.

2.​ Object or Intention of Attachment

If the purpose of attachment is permanent, it becomes a fixture.

If the object was placed temporarily, it remains a chattel.

3.​ Who Made the Attachment

If the landowner attaches an item, the presumption is that it becomes part of the land.

If a tenant or licensee attaches something, it is presumed to remain movable unless there

is clear evidence of permanent attachment.
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Duncan Industries Ltd v. State of Uttar Pradesh, 2000

Facts:

●​ Duncan Industries Ltd sought to transfer its entire fertilizer business, including land,
buildings, plant, and machinery.
●​ The conveyance deed explicitly mentioned that plant and machinery were movable and
had already been delivered to the transferee.
●​ While calculating stamp duty, only the value of land and buildings was considered,
excluding plant and machinery.
●​ The Sub-Registrar filed a complaint, leading the Collector to reassess the stamp duty,
adding the value of plant and machinery.
●​ The Collector held that the machinery was permanently embedded into the land and
should be treated as immovable property. Accordingly, additional stamp duty and a
penalty were imposed.
●​ The company challenged this decision in court, arguing that the machinery was movable
property and did not require inclusion in the conveyance deed.

Judgement:

High Court:

●​ The High Court ruled that the machinery was permanently embedded into the earth to
operate the fertilizer factory. The purpose of the embedding was not to remove or sell the
machinery separately.

Supreme Court:

●​ Test for Fixtures v. Movables – The intention behind embedding machinery in the land is
crucial. If it is meant to be permanent, it is an immovable property.

●​ Operational Necessity vs. Permanence – If machinery is attached only for efficient

operation and can be removed easily, it remains movable. However, if it is permanently
affixed and cannot be removed without altering the structure, it becomes immovable.

●​ The fertilizer plant was set up permanently and could not be removed without destroying
its function.
●​ The conveyance deed was structured in a misleading manner to reduce stamp duty
liability.
●​ The Supreme Court ruled that the plant and machinery were immovable properties, and
the Collector’s stamp duty assessment was valid.
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Bamdev Panigrahi v. Monorama Raj, 1974

Facts:

●​ A (original owner) operated a touring cinema business (Kumar Touring Talkies) on land
obtained through possessory mortgage.
●​ He built a temporary cinema structure and pandal and installed a cinema projector and
diesel engine, embedding them in the earth for operational purposes.
●​ The business was entrusted to B, who later colluded with the landowner to take over the
mortgage in his own name.
●​ In 1961, B denied A’s claim of ownership over the cinema equipment.
●​ In 1966, A’s widow filed a suit for ownership of the cinema business and equipment
●​ If the cinema equipment was immovable, the suit was valid.
●​ However, if it was movable, it was time-barred under the 3-year limitation period.

Supreme Court: The projector and diesel engine were held to be movable property, as they were
temporarily affixed to the land.

●​ Temporary Nature of Fixtures – The intention behind the attachment determines its
nature. If the attachment is temporary, it remains movable property.
●​ Purpose of Use – Since the business itself was touring (not permanent) and the
government license was valid only for one year, the installation was never meant to be
permanent.
●​ Land Ownership Factor – Since A was not the landowner, his affixation of machinery
was not for permanent benefit of the land.
●​ Barred by Limitation – Since A’s widow filed the case in 1966, more than 3 years after B
denied ownership in 1961, the suit was time-barred under the Limitation Act.

Examples of Immovable Property

●​ Land
●​ Benefits arising out of land
●​ Things attached to earth
●​ Things permanently fastened to anything attached to earth
●​ Hereditary allowances and offices
●​ Right of way
●​ Right of lights
●​ Right to ferry
●​ Right to fishery
●​ Fruit bearing trees
●​ Standing trees
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●​ Timber trees which are in the process of growth and are taking nourishment from the soil
for its sustenance.

Examples of Movable Property

●​ Stock and Shares

●​ Growing crops and grass
●​ Standing timber
●​ Power (water, electricity, and gas): Law Commission of India in its 8th Report, 1958.
The Commissioner of Sales Tax, MP v Madhya Pradesh Electricity Board AIR 1970 SC
732.
●​ Electronic TV signals
Jabalpur Cable Network Pvt Ltd v ESPN Software India Pvt Ltd AIR 1999 MP 271.
●​ Lottery tickets: They are not goods.
H Anraj v Govt of Tamil Nadu AIR 1986 SC 63.
Sunrise Associates v Govt of NCT of Delhi AIR 2006 SC
●​ Incomplete film
State of Tamil Nadu v ThiruMurugan Bros AIR 1988 SC 336.
●​ Motor vehicles, ships, vessels, aircraft
●​ Royalty, copyright, trademarks, patents
●​ Fixed deposit receipts
State Bank of India v Smt Neela Ashok Naik AIR 2000 Bom 15.
●​ Old and rare coins
Moss v Hancock (1899) 1 QB 111.
●​ Goodwill
●​ Computer software
St Albans City & District Council v International Computers Ltd [1996] 4 All ER 481.
Tata Consultancy Services v State of Andhra Pradesh (2004) 271 ITR 401 (SC).
●​ Mineral, sand, gravel
●​ Domestic animals
●​ A decree for arrears of rent
●​ A right to recover maintenance though charged on land
●​ A decree for sale of immovable property
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Section 3 : Interpretation Clause - Attestation

General Principles for Transfer of Immovable Property

1. Execution – Proper written deed signed by the transferor.

2. Attestation – Must be attested by at least two witnesses.

3. Registration – Must be duly registered.

Attestation How Done

Attestation means witnessing the execution of a document by at least 2 competent witnesses.

Witnesses must:

●​ See the executant sign or put a mark OR

●​ See another person sign on behalf of the executant in their presence and direction OR
●​ Receive a personal acknowledgment from the executant.
●​ Witnesses must sign in the presence of the executant but need not be present together.

Conflicting Judicial Opinions

●​ Calcutta & Madras High Courts followed English law (attestation requires witnessing
execution).

●​ Bombay & Allahabad High Courts allowed personal acknowledgment-based attestation.

Privy Council in Shamu Patter v. Abdul Kader (1908) : Ruled that attestation must involve
witnessing execution, invalidating earlier decisions.

Transfer of Property (Validating) Act, 1917 restored personal acknowledgment-based attestation.

TP Act Amendment (1926, 1927) inserted the current definition of “attestation,” making it
retrospective.

Scribe

A scribe (writer of the document) is not an attesting witness unless they sign explicitly as one.

Registrar as Attesting Witness

A Registrar/Sub-registrar can attest only if:

1. They intend to attest (animo attestandi).
2. They see execution or get an acknowledgment.
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M.L. Abdul Jabbar Sahib v. M.V. Venkata Sastri (1969) – A registrar signing in official capacity
is NOT an attesting witness unless proven otherwise.

General Mode of Attestation

No particular form of attestation is required.

A mere signature is sufficient.
Law does not require attesting witnesses to sign in a specific place on the deed.
However, it must be clear from the document that the witnesses are signing as attesting
witnesses.

Attestation must always be subsequent to execution.

Attestation as Proof of Consent

Attestation ≠ Consent : A witness merely testifies to execution, not that they agree to the
transaction and that it was made with consent. However, if a witness has knowledge of the
contents and still attests, it may suggest implicit consent.

Section 3 : Interpretation Clause - Notice

“a person is said to have notice” of a fact when he actually knows that fact, or when, but for
wilful abstention from an enquiry or search which he ought to have made, or gross negligence,
he would have known it.

Notice means knowledge of a fact affecting a property transaction.

A transferee who has notice of an existing right must honor it.

Types of Notice

(i) Actual Notice

Direct knowledge of a fact.
Must be clear and definite (not based on rumors or vague statements).
Eg: A person attesting a deed cannot claim ignorance of its execution.

(ii) Constructive Notice (Implied Notice)

Knowledge imputed by law if a person, acting prudently, ought to have known the fact.
Courts presume knowledge in the following cases:
1. Wilful abstention from inquiry – If circumstances suggest suspicion, failing to investigate will
be deemed notice.

2. Gross negligence – Extreme carelessness that an ordinary person would avoid.

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3. Registration of documents – If a transaction is registered, it is deemed to be in public

knowledge.

4. Actual possession – A buyer is expected to check who is in possession of a property before

purchasing.

5. Notice to an agent – If an agent receives notice, the principal is deemed to have notice.
●​ Notice should have been obtained in the capacity of an agent.
●​ Notice should have been obtained during the course of agency business.
●​ Notice should have been a matter material to the transaction/ agency business.
●​ Notice should not have been fraudulently concealed by the agent, from the principal.

General Rule: “Actual Notice to a Deed is Constructive Notice of its Contents”

If a person is aware of the existence of a document, they are assumed to know its implications.
This extends to documents referenced within the main deed.

Consequences of Notice

If a purchaser has actual or constructive notice of an existing right or claim, they are bound by it.

Eg. Father (F) leaves property to son (S) with a condition to pay maintenance to daughter (D). S
sells property to X without fulfilling this duty. If X had notice of D’s right, he is bound by it.

A bona fide purchaser without notice acquires a good title free from prior claims.

Lloyd’s Bank v. PF Guzdar & Co.

X mortgages property to Bank A but takes back title deeds under false pretenses. X then
mortgages the same property to Bank B.

Bank B, having properly examined the title deeds, is not guilty of negligence. Bank A, by
releasing the title deeds, was negligent and lost priority.

Registration of Documents/Transactions As Constructive Notice

Legislative History: The principle that registration operates as constructive notice was introduced
in 1929. Before that, judicial interpretations varied on whether registration itself constituted
notice.

A purchaser is deemed to have notice of a registered sale deed from the date of its registration.
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The burden is on the transferee to search the records at the registrar’s office. Failure to inspect
registers imputes constructive notice of prior registered transactions.

Application:

Only where registration is compulsory.

Examples where registration is not mandatory:
• Partition deeds (can be oral).
• Equitable mortgages.
• Gifts of movable property (e.g., pasupu kumkuma gifts in certain traditions).

Only applies to a subsequent transferee, not prior transferees.

Conditions for Constructive Notice:

1. The instrument must be registered and completed as per the Indian Registration Act, 1908.
2. The document must be entered or filed in books maintained under Section 51 of the Act.
3. The transaction details must be correctly indexed under Section 55 of the Act.

Actual Possession As Constructive Notice

Conditions for actual possession to operate as constructive notice:

●​ The property should be in possession of someone other than the owner/transferor.

●​ Possession must be actual and lawful (not just symbolic or constructive).
●​ The occupant should have control over a substantial portion of the property.

Bhagwan B Kedari v. Dwarkanath K Bagare

GP - Moveable & Immovable Property
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Chapter 2

Section 5 : “Transfer of property” defined.

“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, or to himself and one or more other
living persons;

“To transfer property” is to perform such an act.

The Transfer of Property Act, 1882 governs transfers only between living persons (inter vivos).

Definition of “Living Person” includes:

a.​ Natural persons

- individuals

b.​ Juristic persons

-​ Companies : Since a company or an association is included in the definition, a company
can transfer property. However, such transfers are not governed by this section.
-​ Associations
-​ Bodies of individuals (whether incorporated or not)

●​ Who is NOT a “Living Person” ? - Idol of God, Temple, Court, Government

If property is dedicated to God or an idol, the transfer is not governed by the TP Act,
1882 but by religious or charitable endowment Acts.
Any grant or transfer of land by or on behalf of the Government is exempt from the
provisions of this Act.

●​ Why is a will (testamentary transfer) not a transfer of property?

A Will is NOT a transfer under the TP Act, 1882 because it operates after the death of the
testator. - the transfer is not inter – vivos.
Instead, Wills are governed by the Indian Succession Act, 1925 and so on.

What kinds of transfers are covered or not covered under TP Act:

Conveyance : Conveyance of property involves the creation of a new title or interest in favor of
the transferee.
Effect - The transferor is divested of the right being conveyed, and the transferee acquires it for
the first time under the instrument of transfer.
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The following do not constitute a “transfer” under the Transfer of Property Act, 1882 because
they do not create a new title or interest - there is no conveyance:

1. Family Settlement – A family settlement is not considered a “transfer of property” under the
Transfer of Property Act, 1882. Instead, it is a form of dispute resolution among family members
regarding property rights without the creation of new rights.
●​ Ramdev Food Products Pvt. Ltd. v. Arvindbhai Rambhai Patel & Ors : A dispute arose in
a family-run spice business between Arvindbhai and his brothers over ownership rights to
trademarks. The Supreme Court recognized the MoU as a family settlement, emphasizing
that it was an internal arrangement to resolve disputes and did not constitute a transfer of
property under the Transfer of Property Act, 1882.
●​ Sadhu Madho Das v. Pandit Mukand Ram : Addressed the validity of alienations made by
limited owners under Hindu law. The Supreme Court emphasized that family
arrangements are favored by courts as they promote harmony and amicably resolve
disputes within families. They are not considered transfers.

2. Partition – Merely divides existing rights; no new right is created. It is a process by which
joint enjoyment is transformed into an enjoyment severally.

3. Compromise – Settlement between parties of doubtful claims without creating a new right.

4. Surrender – Merging of a lesser or smaller interest with a greater interest in such a manner that
the greater interest is not enlarged. The limited right is extinguished and merges into the superior
interest.
Eg. A tenant surrenders their lease to the landlord, giving up their tenancy rights.

5. Relinquishment – Giving up one’s rights or interests. Its effect is extinction of one’s rights in a
property; there is no intention that the person relinquishing his interest is conveying that interest
in favour of another person.

6. Power of Attorney – A General or Special Power of Attorney does not transfer ownership; it
only authorizes someone to act on behalf of the owner. Immovable property can only be lawfully
transferred through a registered sale/conveyance deed, not through PoA, Will, or Sale
Agreement.

Surrender v. Release : Release is considered Transfer of Property.

Surrender – Merging of a lesser or smaller interest with a greater interest in such a manner that
the greater interest is not enlarged. The limited right is extinguished and merges into the superior
interest.
Eg. A tenant surrenders their lease to the landlord, giving up their tenancy rights.
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Release – A release occurs when a person holding a larger interest allows a smaller interest to
expand, effectively enlarging the rights of the other party. The smaller interest is converted into a
full ownership right (if the release is absolute).
Eg. A co-owner of property executes a release deed, relinquishing their share in favor of another
co-owner, thereby making the latter the sole owner.

Section 6 : What May Be Transferred - Transferability of Property

The term property has nowhere been defined in the Act. It is used in the widest and most generic
sense.

●​ Law prefers alienation over accumulation.

●​ The general principle is transferability with non - transferability as the exception.

General Rule : Property of “any kind” may be transferable.

Exception : Except as otherwise provided by this act or any other law.

10 instances of non transferability of property :

1.​ Spes - Successionis : Mere expectation of inheriting property in the future, not a present
or vested right. Since it is speculative and uncertain, it cannot be transferred under the
Transfer of Property Act, 1882. Transfers of such an expected inheritance are void ab
initio (from the beginning).

●​ Chance of an heir apparent succeeding the estate : ‘Heir apparent’ is an English term and
is based on the maxim nemo est heres viventis which means that a living person does not
have any heir.

Why ?

1.​ Property may not exist at death

2.​ Heir apparent may die first
3.​ No certainty regarding property or person inheriting

●​ Chance of a relative obtaining the legacy of a kinsman

●​ Any other mere possibility of a like nature

Under muslim law : Hiba-bil-Iwaz (gift with consideration), a person can transfer
existing rights, but not future expectations.
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Badrinath v. Punna, 1979 : In this case, a dispute arose regarding the right to receive
future offerings at a religious place. The Supreme Court ruled that the right to receive
future offerings. The case established that the rights to receive temple offerings are
transferable and heritable. This distinction is crucial because it means that such rights are
not considered spes successionis.

2.​ Right of Re - Entry : It is a right to resume possession of property when a condition

(condition subsequent) in an agreement is violated.
Eg. It arises in cases like leases where the landlord can reclaim the property if the tenant
breaches a condition.
Such right is a non-transferable right - The right only belongs to the owner or the person
who granted the lease, he cannot transfer it to a third party.

3.​ Easement Apart from Dominant Heritage : An easement is a right which the owner or
occupier of certain land possesses for the beneficial enjoyment of that land, to do and
continue to do something, or to prevent and continue to prevent something from being
done, in or upon, or in respect, of certain other land that is not his own.
Dominant Heritage and Owner:
●​ Land for which beneficial enjoyment exists
●​ Owner and occupier of such a land
Servient Heritage and Owner:
●​ Land on which such ‘burden’ is imposed
●​ Owner and occupier of burdened land
Eg. An easement is attached to the dominant heritage and cannot be sold separately from
it. If A has a right of way over B’s land, A cannot sell that right alone without selling his
own land.

4.​ Restricted Interest : Some rights are personal and cannot be transferred or inherited.
Eg. Pre-emption rights between family members, priestly offices or the right to perform
religious duties, service tenures like hereditary temple caretakers (shebaits) or managers
of waqfs (mutawallis).

5.​ Right to Future Maintenance Whatsoever Cannot Be Transferred : A person entitled

to maintenance cannot transfer that right to another. It applies regardless of whether
maintenance is granted under a will, deed, court decree, or compromise.
Eg. Widow v. Self Maintenance
If property is given to a Hindu widow for maintenance, she can transfer that property.
However, she cannot transfer her right to receive maintenance itself.
If a person sets up a trust for their own maintenance, it is not a mere right to maintenance
but a property right. Such a fund can be transferred, unlike a bare right to maintenance.
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6.​ Mere Right to Sue : A right to sue is a personal right of the aggrieved party and cannot
be transferred to another person. This would encourage litigation for profit rather than
justice.
Eg. Actionable claims - tortious, defamation, breach of contract.
Mesne profits : A claim for profits already accrued.
Assignment of a decree.
When is a right to sue transferable ?
a.​ If a property is transferred along with the right to recover damages, the
assignment is valid.
b.​ A landlord can transfer their right to receive rent, even if past rent arrears are
included.
c.​ In land acquisition cases, if compensation is due, the right to claim enhanced
compensation is transferable (Rishi Raj v. Harish Gulati)

7.​ Public Offices and Salary : A position appointed for discharging a public duty cannot be
transferred and salary derived from such office cannot be transferred before or after it
becomes payable.
Salary is a personal right, linked to services rendered, and its transfer is prohibited to
prevent financial exploitation of public officers.
Exception -
Pension : unpaid is non transferable but paid is transferable.
Bonus and rewards are transferable.

8.​ Stipends and Political Pensions : Military, Naval, Air Force & Civil Pensioner Stipends
are non-transferable.
Political Pensions including pensions to political prisoners or those granted under treaties
with sovereign nations.
Exceptions :
Bonuses and rewards
Allowances in place of land grants
Land granted instead of pension
Jagirs

Pensions v. Political pensions

Pensions are not transferable unless they are paid.
Political pensions are never transferable.

9.​ Transfers Opposed to Nature of Interest :

Certain things cannot be transferred because their nature does not allow ownership or
exclusive control.
●​ Natural elements : air, light, space, and sea
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●​ Things dedicated for public use : temples, mosques, public parks

●​ Regalia : Crown property , heirlooms, and debutter property (property dedicated
to deities)
●​ Service inam : land or property granted for religious or service duties

If the transfer involves an unlawful purpose, it is void under Section 23 of the Indian
Contract Act, 1872.
●​ Transfer is prohibited by law
●​ Transfer is for immoral consideration
●​ Property transferred to commit a crime
●​ Transfer made in fraud of creditors
●​ Property sold with the intention of defeating tax laws

Certain persons cannot be transferees under the Transfer of Property Act, 1882
●​ An enemy of the state
●​ A corporation not authorized to hold property
●​ Convicted criminals (in certain cases)
●​ Judges, lawyers and courts cannot purchase actionable claims
●​ Public officials incharge of a sale of land cannot purchase it themselves
●​ A minor cannot contract, but can receive property if the transaction benefits them.
-​ A mortgage in favor of a minor who paid the full amount is valid.
-​ A lease executed by a minor is void since it requires legal capacity.

10.​Untransferable Rights of Property :

Some tenants, especially under agricultural tenancy laws, have occupancy rights that are
personal and non-transferable.
●​ If a farmer has leased land for cultivation but has defaulted on government
revenue payments, he cannot transfer his rights. The government may take over
the land due to non-payment.
●​ If an estate is under the Court of Wards’ management (e.g., when the owner is a
minor or legally incapacitated), the lessee cannot transfer their leasehold rights.

Section 7 : Who May Transfer ? Persons Competent to Transfer

Every person competent to contract, and entitled to transferable property, or authorised to

dispose of transferable property not his own, is competent to transfer such property either wholly
or in part, and either absolutely or conditionally, in the circumstances, to the extent and in the
manner, allowed and prescribed by any law for the time being in force.
SARA DHARWADKAR

1.​ Property must be transferable (Section 6) and transfer must be done in the circumstances,
to the extent and in the manner, allowed and prescribed by any law for the time being in
force.

2.​ The transferor must be competent to contract under the Indian Contract Act, 1872.
(Section 6 (h))
●​ Not a minor
●​ Of sound mind
●​ Not disqualified by law

3.​ The transferor must

●​ Own the property
●​ Be authorized to transfer someone else’s property (e.g., a trustee, agent, or guardian)

4.​Who cannot transfer :

●​ A person of unsound mind
●​ A person legally disqualified
●​ A minor : A minor cannot contract, but can receive property if the transaction benefits
them.
- A mortgage in favor of a minor who paid the full amount is valid.
- A lease executed by a minor is void since it requires legal capacity.
●​ Judges, lawyers and courts cannot purchase actionable claims
●​ Public officials incharge of a sale of land cannot purchase it themselves

Section 8 : Operation of Transfer

General Rule of Transfer : A transfer of property conveys all interests the transferor can pass
unless expressly or impliedly stated otherwise. If no contrary intention is expressed, all interests
transfer automatically.

This includes legal incidents attached to the property.

●​ Land: Easements, rents, profits, attached objects (e.g., trees, wells).

●​ Machinery attached to the earth: Moveable parts included.
●​ House: Easements, rent, locks, keys, bars, doors, windows, and permanent fixtures.
●​ Debt or actionable claim: Includes securities but excludes past arrears of interest.
●​ Money or income-generating property: Future interest/income included.
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Section 9 : Oral Transfer

A transfer can be made orally unless the law expressly requires it to be in writing.

Where writing is not necessary under the TPA, the property may be transferred orally, i.e. only
by delivery of possession.

Oral transfer is valid when :

1. Partition of joint family property.

2. Surrender of lease rights.
3. Mother releasing interest in joint family property.
4. Grant of land for life to settle maintenance claims.
5. Marriage settlements (contract to settle property in consideration of marriage).
6. Relinquishment of rights by a joint family member.
7. Recovery of a share in immovable property.
8. Court decrees based on a family settlement in a composite deed.
9. Grant of Guzara (maintenance rights in certain cases).

A written, attested, and registered document is necessary for the following transfers:

1.​ Sale of immovable property exceeding Rs. 100 (S. 54)

2.​ Exchange of immovable property exceeding Rs. 100 (S. 118)
3.​ Sale of reversion or other intangible property irrespective of its value (S. 54)
4.​ Mortgages (except mortgage by deposit of title deeds) when the principal money is more
than ₹100. (S. 59)
5.​ Gifts of immovable property, irrespective of value. (S. 123)
6.​ Leases for more than 1 year or where advance rent exceeds 12 months. (S. 107)
7.​ Actionable claims - registration not necessary however, must be in writing (S. 130)
8.​ Assignment deeds transferring title above ₹100 must be registered.

●​ Oral transfer is invalid if writing is legally required.

●​ Unregistered documents are unenforceable if writing is required.
●​ The onus is on the person claiming the oral transfer to prove it.
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Section 10 : Condition Restraining Alienation (Condition Subsequent)

Where property is transferred subject to a condition or limitation absolutely restraining the

transferee or any person claiming under him from parting with or disposing off his interest in the
property, the condition or limitation is void.

However, there are 2 exceptions where such a condition is valid:

●​ Leases : If a landlord leases out property and puts a condition that the tenant cannot
transfer the lease, this condition is valid.
●​ Married women (not being Hindu, Muslim, or Buddhist) : If property is transferred to a
woman, she can be restricted from transferring it during her marriage.

When a person owns property, they generally have 3 fundamental rights:

1. Right to Title – The legal recognition that they own the property.

2. Right to Possession & Enjoyment – They can use it as they wish, live there, rent it out, or do
whatever is legally permitted.

3. Right to Alienation – They can sell, gift, mortgage, lease, or donate it.

Even if the transferee agrees to such a condition, it has no legal effect. They can still sell the
property, and no one can challenge it in court.

Illustration : A owns a house (X) and sells it to B. A adds a condition in the transfer deed that B
can never sell the house to anyone and must always keep it. B agrees but later sells the house to
C. A sues B, saying that B violated the contract, and the sale to C is void.

A will not succeed. Conditions absolutely restraining the owner from alienation are void.
However, the original sale from A to B remains valid and is unaffected. Only the condition /
limitation is void.

Absolute and Partial Restraint

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Categorisation Of Restraints

●​ Restraints on transfer for a particular time :

The condition that the transferee would not sell it for 5 years or 10 years or for any time
period whatsoever would be void.

Exception : It is for a short time period and is coupled with a benefit to the transferor,
such as an option of re-purchase, at a consideration stipulated in the contract.

●​ Restraints directing control over consideration/money : void.

●​ Restraints with respect to persons/transferee : Where the transferor puts a condition

directing the transferee that should he want to sell the property, he must sell only to a
specific person named by the transferor in the deed or to a group of persons, such a
condition would be void. But if the condition is that he should not sell it outside his
family or even community, then it will be valid as partial restraint, provided both
transferor and transferee are members of the same family or community.

Gayashi Ram v Shahabuddin : the court ruled that a clause preventing the transferee from
transferring the property to anyone except the transferor or their heirs, and imposing a
penalty for violation, created an absolute restraint on alienation, making it void.

Zoroastrian Co-operative Housing Society Ltd v District Registrar Co-operative Societies

: the Bombay High Court held that a byelaw restricting membership, transfer and
property alienation to non-Parsis violated Section 10 of the TP Act, making it void.
However, the Supreme Court overturned this, ruling that a qualified restriction, like
requiring prior consent to transfer property only to eligible members, is not an absolute
restraint and doesn’t violate Section 10.

●​ Restraints with respect to sale for particular purposes or use of property : void.
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Section 25 : Conditional Transfer (Transfer is void when condition is 6 things)

An interest created on a transfer of property and subject to a condition fails if the fulfilment of
the condition is

1.​ impossible
2.​ is forbidden by law
3.​ is of such a nature that, if permitted, it would defeat the provisions of any law
4.​ is fraudulent,
5.​ involves or implies injury to the person or property of another
6.​ the Court regards it as immoral or opposed to public policy.

Types of Conditional Transfers

In property law, a conditional transfer occurs when the transfer of property is subject to certain
conditions. These conditions can be categorized into 2 types:

1.​ Condition Precedent: A condition that must be fulfilled before the transfer of property
takes effect.

●​ Validity: For a condition precedent to be valid, it must be lawful, possible to

perform, and not opposed to public policy.

●​ Invalid Conditions: If the condition is impossible, illegal, immoral, or against

public policy, both the condition and the transfer become void.

2.​ Condition Subsequent: A condition that must be fulfilled after the transfer has already
taken place.

●​ Restraint on Alienation: If a condition subsequently imposes an absolute restraint

on the transferee’s right to transfer (alienate) the property, such a condition is
generally void.

●​ Validity of Transfer: Even if the condition is void, the transfer itself remains valid,
and the transferee retains full ownership rights.
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Section 11 : Condition Repugnant To Interest Created (Condition Subsequent)

Where, on a transfer of property, an interest therein is created absolutely in favour of any person,
but the terms of the transfer direct that such interest shall be applied or enjoyed by him in a
particular manner, he shall be entitled to receive and dispose of such interest as if there were no
such direction.

Exception :

1.​ Transfer is not absolute - leases and mortgages.

2.​ Where any such direction has been made in respect of one piece of immovable property
for the purpose of securing the beneficial enjoyment of another piece of such property.
Section 40

Covenants are conditions or directions that the transferor may impose upon the transferee to
secure better enjoyment of his own property.

A condition of this kind may be seen as a covenant which can be either positive or negative.

Positive and Negative Covenants :

Legal Term:

Positive Covenant – Known as “Burden on the Land.”

Negative Covenant – Known as “Benefit of a Covenant.”

Nature:
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Positive Covenant – Requires the transferee to take some action.

Negative Covenant – Requires the transferee to refrain from doing something.

Financial Burden:

Positive Covenant – Involves a financial burden on the transferee.

Negative Covenant – Does not impose a financial burden.

Binding Effect:

Positive Covenant – Does not run with the land; does not bind subsequent purchasers for value
provided that they do not have notice.
Negative Covenant – Runs with the land; binds subsequent purchasers, whether they had notice
or not if gratuitous.

Example:

Positive Covenant – The transferee must maintain a drain on the land by carrying out necessary
repairs from time to time.
Negative Covenant – A covenant to leave open a four-feet-wide space adjoining A’s own land
and not build upon it.

Absolute Interest :

Absolute interest indicates that the transferor vested through a specific conveyance all the rights
that he had in the property in favour of the transferee, without retaining any right in his own
favour such as, a transfer by way of sale, exchange or an unconditional gift.

Section 11, therefore, does not apply to those transfers, through which, the transferor conveys,
one or some rights in the property to the transferee, while retaining some rights in his own
favour, such as a lease or a mortgage.

Distinction Between Section 10 and 11 :

Section 10 relates to the power of the owner to alienate the property, and makes total restraints
on it void.

It may apply when transfer is partial / absolute.

Section 11 protects the power of the owner to enjoy the property in any manner whatsoever,
without there being any dictation from anyone.

Applies only when transfer is absolute.

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Section 40 : Burden of Obligation Imposing Restriction On Use of Land (Condition

Subsequent)

Section 40 primarily focuses on protecting the rights of the original owner (A) even after they
have sold the property. If A sells a part of their land to B with a condition that B will not obstruct
a specific path, B is bound by this condition to ensure A can still enjoy their property. Even
though A no longer owns the land, they retain the right to enforce this condition as it benefits
their enjoyment of their property.

The second part of section 40 addresses the scenario where B sells the land to a third party (C). If
C is aware of the condition (notice), or if C receives the land as a gift (gratuitous transferee), they
are bound by the same condition.
However, if C is a bona fide purchaser without notice of the condition, they are not bound by it,
and the original owner (A) cannot enforce it against them.

Tulk v. Mohaxy : A sold a garden to B with a condition to maintain it as an open space. B later
sold it to X, whose deed did not mention this condition, but X knew about it. X attempted to
build on the land, arguing the covenant was a personal obligation and not binding on him. The
court ruled that since X had notice of the original agreement, he could not disregard it, ensuring
restrictive covenants run with the land to protect property owners’ interests.

Section 12 : Condition Making Interest Determinable On Insolvency or Attempted

Alienation (Condition Subsequent)

Section 12 states that if a property is transferred with a condition that the transferee’s interest will
end upon insolvency or an attempt to transfer, such a condition is void. This ensures that the
transferee retains full ownership rights without unreasonable restrictions.

Exception :

Lease - A lease agreement can include a condition stating that the lease will terminate if the
lessee becomes insolvent. This is valid because the lessor retains an interest in the property.
However, if the lessee assigns (transfers) the lease to someone else before becoming insolvent,
the condition no longer applies since the lessee is no longer the party holding the lease.

Purpose :

Prevention of Creditor Deprivation : If a person becomes insolvent, their property vests in an

official receiver to settle debts. A clause preventing this would unfairly block creditors from
claiming the property.

Note :
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●​ Section 10 may apply to absolute or partial transfers.

●​ Section 11 and 12 applies only to absolute transfers.

Section 13 : Transfer for the Benefit of an Unborn Person

Where, on a transfer of property, an interest therein is created for the benefit of a person not in
existence at the date of the transfer, subject to a prior interest created by the same transfer, the
interest created for the benefit of such person shall not take effect, unless it extends to the whole
of the remaining interest of the transferor in the property.

The interest created for the future beneficiary (the person who does not yet exist) can only take
effect if it extends to the whole of the transferor’s remaining interest in the property. This means
the transferor must give up all their remaining interest in the property for the future interest to be
valid.

You cannot transfer directly to an unborn person ; this is in violation of Section 5 and is not a
transfer between living persons. - You can only transfer for the ‘benefit’ of an unborn person.

For the purposes of this section, unborn means someone who has not even been conceived.

Transfer for the benefit of an unborn person can be created by :

1.​ Creating A Trust :

The property is transferred to the trustees, who, though possess the title to the property,
hold the property in trust for the benefit of the class of beneficiaries who can be ‘unborn
persons’.

2.​ Creating A Life Estate :

The person intending to transfer the property for the benefit of an unborn person, should
first create a life estate in favour of a living person and after it, an absolute estate in
favour of the unborn person.

Till the person, in whose favour a life interest is created is alive, he would hold the
possession of the property, enjoy its usufruct i.e. enjoy the property.

During his lifetime if the person, (who on the day of creation of the life estate was
unborn) is born, the title of the property would immediately vest in him, but he will get
the possession of the property only on the death of the life holder.
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Life Interest v. Absolute Interest

Life interest is only for enjoyment and use. ​

Absolute interest is for enjoyment, use and alienation.

Section 20 : When Unborn Person Acquires Vested Interest On Transfer For His Benefit

Unless a contrary intention appears from the terms of a transfer, where, on a transfer, an interest
is created for the benefit of a person not in existence, the moment he is born he acquires a vested
interest in it, although he may not immediately be entitled to enjoy it, as the property may be in
possession of the life estate holder. But the vesting of property takes place at his birth.

●​ The title of the property of the unborn child vests in him immediately after his birth.
●​ He gets the possession only upon the death of the individual who holds prior life interest
created by the same transfer.

Note :

●​ Life interest can be created successively in favour of several living persons at the same
time however, the ultimate transfer must be of absolute interest. Eg. A transfers property
to B for life, and after him, to C, and then to D again for their lives and then absolutely to
B’s unborn child UB.

What if B’s life interest ceases before the unborn is born ? - Reverts

The vested interest remains with A.

The life estate reverts back to A from B.

What if the unborn dies before B’s life interest ceases ? - Follows usual course

The vested interest is vested in the unborn once he is born and will go to his legal heirs.
The life interest will also go to the heirs of the unborn upon the death of B.

Girijesh Dutt v. Data Din : A made a gift of her property to

B for her life

If B has son : absolute
If B’s has daughter : life
If B childless : to X

Transfer from A to B and B’s sons were held valid. However, the transfer to B’s daughters
invalid because you cannot create life interest in favour of unborn persons - hit by Section 13.
SARA DHARWADKAR

Section 14 : Rule Against Perpetuity (Read with Section 20)

Perpetuity means “forever” or “indefinitely long.”

A transfer is said to be in perpetuity when it creates an interest in property that is meant to last
indefinitely, beyond a legally permissible time. The law does not allow property to be tied up for
an uncertain and excessive period, ensuring its free transferability.

A transfer of property cannot create an interest that:

Takes effect after the lifetime of one or more persons living at the time of transfer
AND
Extends beyond the minority (i.e., before reaching full age) of a person who is alive when the
prior interest expires.

Essentials :

1.​ There is a transfer of property.

2.​ Transfer for the benefit of an unborn person who is given absolute interest.
3.​ The unborn person receives the property only after a life/limited interest of living
persons.
4.​ The ultimate beneficiary must come into existence before the death of the person with life
interest.
5.​ Such vesting of property can only be delayed up to:
The lifetime of existing persons + The minority (18 years) of the unborn person, but no
further.

The language of the transfer deed determines if it is valid, not actual events that occur later.
Eg. If a deed appears to comply with the rule but later circumstances change, this does not affect
the deed’s legality.

Hindu Law and Muslim Law have their own customary rules regarding inheritance and property
succession, which sometimes differ from the statutory rule against perpetuity. Hindu or Muslim
personal laws do not specifically override the rule, the general principle under the Transfer of
Property Act, 1882, and the Indian Succession Act, 1925, will apply.

Section 114, Indian Succession Act 1925 : A person cannot bequeath property to an unborn
person beyond a specific time frame (i.e., after the lifetime of a living person plus the minority of
the unborn person).

A Muslim can bequeath only up to 1/3rd of their property by will (without heirs consent), so the
issue of perpetuity rarely arises.
SARA DHARWADKAR

English Law : “Rule against remoteness of vesting.” It sets a maximum “perpetuity period” of
“a life in being plus 21 years” for the property to vest. The English rule also applies to trusts,
while the Indian rule applies primarily to transfers of property.

Exceptions :

Some transfers are exempt from this rule, meaning they can continue indefinitely:

1. Public Welfare Transfers (religious, charitable trusts, wakfs, etc.)

2. Personal Agreements (e.g., contracts that do not involve property transfer)

3. Right of Pre-Emption

Ram Baran Prasad v. Ram Mohit Hazra

●​ The case involved a dispute over the right of pre-emption (the right to purchase property
before it is sold to someone else).
●​ The plaintiff (Ram Baran Prasad) claimed a right of pre-emption over a property that had
been transferred to a third party.
●​ The defendant (Ram Mohit Hazra) argued that the pre-emption right was void under the
rule against perpetuity (Section 14 of the Transfer of Property Act, 1882).
●​ The Supreme Court held that a right of pre-emption does not create an interest in the
property. Instead, it is merely a personal right that allows a party to purchase the property
before it is sold to someone else.
●​ Since the right of pre-emption does not transfer ownership or create a future interest, it
does not violate Section 14 of the Transfer of Property Act.
●​ The Court distinguished between a contractual right (such as pre-emption) and a property
transfer; the rule against perpetuity applies only to property transfers, not personal
agreements.

4. Charges on Property (e.g., mortgages)

5. Leases (since they do not create absolute ownership)

Valid Transfer :

●​ A transfers his land to B for life, and after B’s death, it will go to C (B’s son, who is
already born).
●​ A transfers property to B for life, and after B’s death, to B’s unborn child (C). C must be
born before B dies. If C is born, but is still a minor (under 18) when B dies, the law
allows the transfer to be delayed maximum until C turns 18.

Invalid Transfer :
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●​ A transfers his land to B for life, and after B’s death, the land will go to B’s grandson
(who is not yet born).

What are the final principles that emerge when you read Section 13, 14 and 20 together ?

S. 13 An unborn person cannot directly own property at the time of the transfer. The property
must first be given to a living person (life estate holder) until the unborn person comes into
existence. The unborn person must get the absolute ownership of the entire interest of the
transferor once they are born - vesting at birth, enjoyment may be postponed.

S. 14 Such unborn persons must get the property within a fixed time: Within one lifetime + 18
years (minority of the unborn person).

S. 20 Under section 20, it has been provided that unless a contrary intention appears from the
terms of a transfer, where, on a transfer, an interest is created for the benefit of a person not in
existence, the moment he is born he acquires a vested interest in it, although he may not
immediately be entitled to enjoy it, as the property may be in possession of the life estate holder.
But the vesting of property takes place at his birth.

The term, ‘unless a contrary intention shows’, means that this rule of vesting of property at birth
can be changed by the transferor, and he can stipulate the specific time of vesting of property in
favour of the beneficiary. However, he cannot stipulate a time of vesting which goes beyond the
period of perpetuity i.e., lifetime of a living person or more than one living persons and the
attainment of 18 years of the person not in existence on the date of the transfer, but who would
be born at the time when the life estate comes to an end and would be the ultimate beneficiary.

Section 15 : Transfer to Class Some of Whom Come Under Sections 13 and 14

If a property is transferred to a class of persons, but for some members of the class the transfer is
invalid (due to rules in Sections 13 & 14), the transfer only fails for those individuals and
remains valid for others.

Legislative History :

Prior to 1929, if even a single transfer within a class was void (e.g., due to perpetuity violations),
the entire class transfer failed.

After the 1929 amendment, the law was changed to preserve the valid portion and only reject the
invalid one.

Relation with Section 115 of the Indian Succession Act, 1925 :

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Section 115 of ISA is equivalent to Section 15 of TPA but applies to wills instead of transfers. It
ensures that if a bequest to a class is partially invalid, only the invalid part fails, and the rest
stands.

Section 16 : Transfer to Take Effect on Failure of Prior Interest

If a transfer fails due to Sections 13 or 14, any subsequent transfer that was meant to take effect
after or upon the failure of the first transfer also fails.

This rule is based on the principle that a condition following a void condition or a transfer
dependent upon a void transfer is in itself void, even though if seen independently, it may be
valid.

Because it was intended to take effect upon failure of a transfer not permitted in law, this would
in itself become inoperative.

Exception : Alternate Transfer

Eg. A makes a transfer of his property to B, and then to B’s children on their attaining the age of
21 years. He further provides in the same deed, that if B has no child then he may make the gift
in favour of anyone he likes. The transfer for the benefit of B’s unborn child was void as
offending the rule of perpetuity, but the transfer at the pleasure of B is an alternative and
independent transfer that would commence from B, and not A, and therefore would be valid.

Relation with Section 116 of the Indian Succession Act, 1925 :

Section 116 of the Indian Succession Act is identical to Section 16 of the TP Act.

A testator bequeaths property to A for life, then to A’s sons when they turn 25, and after them to
B. Since the gift to A’s sons is void under Sec 114 of the Indian Succession Act, the bequest to B
also fails.

Section 17 : Direction for Accumulation of Income

A direction to accumulate income is valid only for the longer of the following two periods:

The lifetime of the transferor OR 18 years from the date of transfer, whichever is longer.

If the accumulation is directed for a period exceeding this limit, the direction becomes void for
the excess period. After the permitted period, the property and its income must be disposed of as
if the accumulation period had ended.
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Eg. Suppose A transfers property to B in 1960 with a direction that its income should be
accumulated for 50 years. A dies in 1962. The maximum allowed accumulation period is 18
years from 1960, i.e., till 1978. After 1978, B is free to use the income as they wish.

Exceptions :

1.​ Payment of Debts : If the income accumulation is directed for the repayment of debts of
either the transferor, or any person taking an interest under the transfer.

2.​ Benefit of Children or Remoter Issue : If the income is accumulated for the benefit of
children or grandchildren of either the transferor, or any person taking an interest under
the transfer.

3.​ Preservation or Maintenance of Property : If the income is to be accumulated for property

maintenance, the direction is valid.

Effect on Validity of Transfer :

●​ If the accumulation period exceeds the permitted limit, only the excess period is void.
●​ The transfer itself remains valid.
●​ The transferee can ignore the void part and use the income freely.

Section 117 of the Indian Succession Act, 1925 mirrors Section 17 of the TP Act but applies to
wills.

Section 18 : Transfer in Perpetuity for Public Benefit

The law permits perpetual transfers for public purposes, ensuring continued public welfare
without legal obstacles.

Restrictions related to the

●​ rule against perpetuity (S.14)
●​ remoteness of vesting (S.16)
●​ accumulation of income (S.17)
do not apply to transfers for public benefit.

The section differentiates between personal/commercial transfers and those made for public
welfare. The latter is not subject to rigid limitations.

If a transfer is partly for individuals and partly for public welfare, the individual portion is void,
but the welfare portion remains valid.

Essentials :
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●​ Transfers must serve broad and unspecified classes of people, not specific individuals.
●​ The transfer must be for public welfare purposes.

Examples include:

●​ Religion – Construction of religious sites, performance of ceremonies, endowment for

prayers.

Exception : Advancement of Religion - A gift for “dharma” is void due to vagueness. A

gift for spreading Hinduism was held invalid.

●​ Knowledge – Establishment of schools, colleges, universities, libraries.

●​ Commerce – Public halls, trade guilds for economic betterment.
●​ Health – Hospitals, dispensaries, trauma centers, yoga/nature care centers.
●​ Safety – Funds for disaster relief, emergency response services.
●​ Other Objects Beneficial to Mankind – Aid for the underprivileged, community centers,
welfare funds.

M. Kesava Gounder v. D.C. Rajan

A trust was created for:

1. Erecting a statue of the donor’s father. - invalid (not for public welfare)
2. Paying school fees for four students. - valid
3. Trust income to be divided among heirs. - void (violation of Section 14)

CONTINGENT INTEREST AND VESTED INTEREST

Section 19 - 24

Section 19 : Vested Interest

A vested interest arises when a transfer of property creates a right in favour of a person without
specifying a time or by specifying that it takes effect:
1. Immediately (forthwith).
2. On the occurrence of an inevitable event (e.g., reaching a certain age).

This is unless a contrary intention appears from the terms of the transfer.

Even if enjoyment is delayed (e.g., due to a life interest given to another), the interest remains
vested.

The interest does not get defeated even if the transferee dies before taking possession. The vested
interest passes to his heirs and does not lapse.
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A vested interest is not affected by the following provisions in a transfer:

a.​ Postponement of Possession : If the beneficiary’s right to enjoy the property is delayed, it
does not mean the interest is contingent. Eg. A’s property is transferred to B, but B will
only receive possession after A’s death.

b.​ Prior Life Interest : If another person has a life interest before the transferee, the
transferee’s interest is still vested. Eg. A transfers property to B, but X has a life interest.

c.​ Accumulation of income.

d.​ Substitution Clause : If the transfer states that on the occurrence of a certain event, the
property passes to someone else, it does not make the first interest contingent. Eg. “If B
dies without children, the property will pass to C. B still has a vested interest, and only if
the event (death without children) occurs will C’s interest take effect.

Vested Interest Liable to Be Divested Subsequently : The transfer takes place immediately,
creating a vested interest in the transferee. However, the transferee may lose this interest later if a
specific condition is not met. Eg. A transfers property to B, but if B remains unmarried till 35,
the gift is forfeited.

Section 20 : When Unborn Person Acquires Vested Interest On Transfer For His Benefit

Unless a contrary intention appears from the terms of a transfer, where, on a transfer, an interest
is created for the benefit of a person not in existence, the moment he is born he acquires a vested
interest in it, although he may not immediately be entitled to enjoy it, as the property may be in
possession of the life estate holder. But the vesting of property takes place at his birth.

●​ The title of the property of the unborn child vests in him immediately after his birth.
●​ He gets the possession only upon the death of the individual who holds prior life interest
created by the same transfer.

Note :

●​ Life interest can be created successively in favour of several living persons at the same
time however, the ultimate transfer must be of absolute interest. Eg. A transfers property
to B for life, and after him, to C, and then to D again for their lives and then absolutely to
B’s unborn child UB.

What if B’s life interest ceases before the unborn is born ? - Reverts

The vested interest remains with A.

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The life estate reverts back to A from B.

What if the unborn dies before B’s life interest ceases ? - Follows usual course

The vested interest is vested in the unborn once he is born and will go to his legal heirs.
The life interest will also go to the heirs of the unborn upon the death of B.

Girijesh Dutt v. Data Din : A made a gift of her property to

B for her life

If B has son : absolute
If B’s has daughter : life
If B childless : to X

Transfer from A to B and B’s sons were held valid. However, the transfer to B’s daughters
invalid because you cannot create life interest in favour of unborn persons - hit by Section 13.

Section 21 : Contingent Interest

When an interest is created in favor of a person, but its vesting is dependent on a future uncertain
event, it is called a contingent interest. The property does not transfer immediately but only if
and when the specified event happens.

Eg. A transfers property to B, provided that B marries C. Here, B’s interest in the property is
contingent on his marriage to C. If B never marries C, the property does not pass to him.

Exception : If the transferor grants income from the property to the beneficiary while they wait
for ownership, the interest becomes vested (not contingent).

Difference between Contingent Interest and Vested Interest

Difference Between Vested and Contingent Interests

Basis Vested Interest Contingent Interest

Creates an immediate right, either for The right depends on the occurrence of a
Nature of present enjoyment or future enjoyment future uncertain event. The interest vests
Interest and / or possession. only if that event happens.
Uncertain as it depends on a future event
Certainty Certain and not dependent on a condition. that may or may not happen.
Transferable with limitations.
Transferability Transferable immediately. Eg. A transfers property to B if B gets
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married before 35. B sells this interest to

C. Now, C steps into B’s position - if B
marries before 35, C will get the property.
If B remains unmarried beyond 35, C gets
nothing (just like B would have).

Heritable - if the person entitled to the Not heritable - if the person dies before the
Heritability vested interest dies, it passes to their heirs. condition is fulfilled, the interest is lost.
Attachment by Can be attached and executed against in a Cannot be attached because of its uncertain
Court court decree. nature.
“A transfers property to B for life, then to “A transfers property to C if C marries
C.”→ C has a vested interest even if C’s before 30.” → C’s interest is contingent on
Example possession is postponed. marriage before 30.

Difference between Contingent Interest and Vested Interest Liable to Be Divested Subsequently

Contingent Interest = No present right; only arises if the event happens.

Eg. A transfers property to B if B marries before turning 35.

Vested Interest Liable to Be Divested = Present right exists but can be lost later.
Eg. A transfers property to B, but if B remains unmarried till 35, the interest will lapse.

Difference between Contingent Interest and Spes Successionis

Contingent Interest = A future interest in property dependent on an event (may become a legal
right).

Spes Successionis = A mere hope of inheriting property in the future, which can never be legally
enforced or transferred.

Similarity : Both are not heritable or attachable.

Difference :

●​ Transferability : Contingent interest is transferable.

●​ Extent of uncertainty : Greater in spes successionis.
●​ Enforceability : Contingent interest is, spes successionis isn't.

Rajesh Kanta Roy v. Shanti Debi, 1957

Facts:
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A woman had 3 sons. S1, S2 and S3. S1 died.

A trust was subsequently created that would come into force when :
1.​ Discharge of debt. (uncertain event)
2.​ After the death of the father. (certain event)

Another condition was that should S2 and S3 die, then the interest would pass to their heirs.

S1’s widow claimed that she could enforce a decree of maintenance against the property of S2
and S3 since the interest was vested.

Issue: What kind of interest did S2 and S3 hold in the property - vested or contingent?

●​ If their interest was contingent, it could not be attached by the court.

●​ If it was vested, W could attach it to recover her maintenance if it was meant for S1 as
well.

Judgement:

S1 and S2 had a ‘vested interest’ in the property.

Their ownership was already fixed, even though they would get possession only after A’s debts
were paid and A died. Because their interest was heritable, their legal heirs could inherit their
share if they died before getting possession.

Since S1 & S2’s rights were heritable and attachable they were vested rights. However, W had
no claim because S3 had died before the trust was created, so he was never included in the trust.

Kokilambal v. N. Raman

Facts:

An heirless husband and wife brought up their nephew ‘Varadan’ as their own - they also wished
to adopt him. After the husband passed away, the wife executed a deed of settlement in favour of
‘Varadan’ which gave him certain rights in the property :

●​ Collect rental income

●​ Pay tax
●​ Carry out repairs

He was also entitled to the enjoyment of the house upon her death. She also alienated her right to
independently alienate the property and the property could only be alienated jointly.

Unfortunately, before her death, Varadan passed away.

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Consequently, she withdrew this deed of settlement and drew another in favour of her brother’s
daughter. Varadan’s brother laid claim to the property stating that Varadan had acquired vested
interest via the deed of settlement and the woman could not unilaterally withdraw such a deed.

Issue : What kind of interest did Varadan 2 hold in the property - vested or contingent?

Judgement:

The court held that Varadan held contingent interest in the property. The lady did not transfer her
entire right but merely limited it. one. The Supreme Court, however, held that as A had retained
some rights in the property herself, and had not completely relinquished all her rights over it, it
meant that no absolute ownership was created in favour of B during her life. The same was
therefore not heritable and the claim of B’s brother was dismissed.

Section 22 : Transfer to the Members of a Class Who Attain a Particular Age

When property is transferred to a group of people (a class), but only those who reach a certain
age are entitled to receive the interest, then:

●​ Only those who actually attain that age will get the interest.
●​ Those who do not reach the required age will never get any share in the property.

The interest remains contingent until the beneficiary attains the required age.

Eg. A transfers property to all of B’s children who reach the age of 25. If any of his children dies
at 20, that child does not get such interest.

Exception of S.21 does not apply : If the transferor grants income from the property to the
beneficiary while they wait for ownership, the interest becomes vested (not contingent). Even if
income is given in the meantime, their interest remains contingent because the condition must
still be met.

Section 23 : Transfer Contingent on Happening of a Specified Uncertain Event

An interest in property is contingent upon an uncertain event happening in the future. If no time
is specified for when the event should happen, the interest will fail unless the event happens
before or at the same time as the preceding (intermediate) interest comes to an end.

●​ When there is a prior interest (e.g., life interest) and a subsequent contingent interest.
●​ Contingent interest is based on a specified uncertain event.
●​ No time is specified - then
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●​ The event on which the contingent interest depends must happen either before or when
the prior interest ends. Otherwise the transfer fails because the property cannot remain in
limbo.

Relation with Section 124 Indian Succession Act, 1925 : If a bequest is made on the condition
that an uncertain event happens and no time is specified, the legacy fails unless the event
happens before the property is to be distributed.

Eg. A will states: ‘I give my property to B if B becomes a doctor.’ If B has not become a doctor
by the time the estate is distributed, B gets nothing.

Section 24 : Transfer to Such of Certain Persons As Survive at Some Period not Specified

If the transfer says the property goes to “such of certain persons as shall survive” but does not
specify when, then:

●​ The property will be given to whoever is alive at the time the prior interest ends.
●​ If one of the intended recipients dies before that, they get nothing.

Relation with Section 125 Indian Succession Act, 1925 : If a will says that property is to go to
certain persons who survive at an unspecified time, then: The property will go to those alive at
the time of distribution, unless the will states a different intention.

CONDITIONAL TRANSFER

Section 25 - 30, 33 and 34

Condition Precedent and Condition Subsequent

Condition Precedent = No rights until the condition is fulfilled.

Suspends the vesting of interest until fulfilled.
The transfer is incomplete until the condition is satisfied.
Eg. A agrees to sell his land to B only if B pays the full price within 6 months. If B fails to pay,
the transfer never happens.
Section 25, 26.

Condition Subsequent = Rights already exist but can be lost if the condition is fulfilled.
Terminates a vested interest upon occurrence of an event.
The transfer is complete, but the interest may be divested if the condition occurs.
Eg. A sells land to B, but if B fails to construct a house within 2 years, the land will revert to A.
If B does not construct the house, he loses the land.
Section 27, 28, 29.
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Section 25 : Conditional Transfers

Void Conditions

An interest created on a transfer of property and dependent upon a condition fails if

1.​ the fulfilment of the condition is impossible,
2.​ or is forbidden by law,
3.​ or is of such a nature that, if permitted, it would defeat the provisions of any law,
4.​ or is fraudulent,
5.​ or involves or implies injury to the person or property of another,
6.​ or the Court regards it as immoral or opposed to public policy.

Type of Condition and Effect on Transfer

●​ Condition Precedent : Must be fulfilled before transfer takes effect : If void, the entire
transfer is void.

●​ Condition Subsequent : Must be fulfilled after transfer takes effect : If void, only the
condition fails, but the transfer remains valid.

Relation with the Indian Succession Act, 1925

●​ Section 126: Bequests upon impossible conditions are void.

●​ Section 127: Bequests upon illegal or immoral conditions are void.

Section 26 : Condition Precedent

If a transfer of property imposes a condition precedent, it is considered fulfilled if it has been

substantially complied with.

Eg. A transfers a house to B on the condition that B must get written approval from X, Y, and Z
before moving in. Before B could ask, Z passed away. B gets written approval from X and Y.
Since getting Z’s approval is now impossible, B has substantially complied with the condition.
The transfer is valid.

●​ Strict Condition : If complete compliance is impossible, substantial compliance is

sufficient. If complete compliance is possible, it must be strictly followed.

●​ Time Specific Conditions : If a condition requires fulfilment within a stipulated time, it

must be followed exactly, or the transfer is invalid.

Transfer Unaffected If Third Parties Change Their Mind : A’s will states that B will receive ₹5
lakh if he marries with the consent of X, Y, and Z. B gets their written consent before marriage.
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After B’s marriage, X, Y, and Z revoke their consent and claim the transfer is invalid. Once the
consent was given, the condition was fulfilled. Later withdrawal of consent does not matter, and
B will receive the money.

No Formal Method Necessary : For the fulfilment of the condition, no specific or formal method
is necessary. Where the conduct is apparent and the intention is clear, then whichever method is
adopted by either the transferee or the persons mentioned in the transfer deed, the compliance
would be valid.

Relation with Section 128 Indian Succession Act, 1925 : If a will imposes a condition to be
fulfilled before the legatee can take a vested interest in the thing bequeathed, the condition shall
be considered to have been fulfilled if it has been substantially complied with.

A’s will states that B can inherit property only if B marries with the approval of A’s executors. B
marries while A is still alive.A later expresses approval before passing away. Since A himself
approved the marriage, the legacy is valid despite the condition.

Section 27 : Conditional Transfer to One Person Coupled With Transfer To Another On

Failure of Prior Disposition - ‘Rule of Acceleration’

This section primarily deals with conditional transfers where an interest is first created in one
person’s favor, and a secondary interest is created for another in case the first transfer fails.

The key takeaway is that if the first transfer fails for any reason not related to illegality, the
second transfer takes effect.

Such Subsequent Transfer Is Valid When :

●​ If the first transfer fails due to natural reasons (like death or non-fulfillment of a
condition), the second transfer takes effect. ​
Eg. A transfers property to B on the condition that B must do X. If B dies before fulfilling
the condition, the property goes to C.

●​ Failure of a prior transfer due to unforeseen reasons still allows the secondary transfer to
take effect.
Eg. A transfers ₹500 to B on the condition that B signs a lease after A’s death, and if not,
it goes to C. If B dies before A, C gets the ₹500.

Such Subsequent Transfer Is Invalid When :

●​ If the failure of the first transfer is due to illegality (like violating Section 13 or 14 of the
Transfer of Property Act), then the second transfer also fails.
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Eg. A transfers property to an unborn person (violating Section 13). The secondary
transfer to C also fails.

●​ If the first transfer was meant to fail in a specific way, but fails in another way, the
second transfer does not take effect.
Eg. A transfers property to his wife, with a condition that if she dies before him, the
property goes to B. If both die at the same time in an accident, the property does not go to
B because the wife’s death before A could not be proven.

Relation with Section 129 Indian Succession Act, 1925 : The principle of acceleration applies in
wills too. If a bequest (gift in a will) fails due to unforeseen circumstances, the next-in-line
beneficiary gets it. Eg. The principle of acceleration applies in wills too. If a bequest (gift in a
will) fails due to unforeseen circumstances, the next-in-line beneficiary gets it.

Section 28 : Ulterior Transfer Conditional On Happening / Not Happening Of Specified

Event

A transfer of property can be made to one person, with a condition that if a specific uncertain
event happens (or does not happen), the property will then pass to another person.

This creates a conditional subsequent transfer that can divest the first transferee of their interest.

Eg. If X marries within five years, the property goes to A; but if he does not, it goes to B. Here,
B’s right arises only if X does not marry within five years.

Relation with Section 130 Indian Succession Act, 1925 : If the will states that a second bequest
takes effect only if the first bequest fails in a particular manner, then the second bequest won’t
take effect unless that exact failure happens.

Section 29 : Fulfillment of Condition Subsequent

If a transfer is subject to a condition subsequent, then the ulterior disposition (i.e., transfer to
another person) takes effect only if the condition is strictly fulfilled.

This follows the principle that conditions subsequent must be interpreted strictly, meaning there
is no room for flexibility.

If a person claims a property under a transfer or will, they are bound by its conditions. Not
knowing about the condition (due to negligence or illness) does not excuse its non-fulfilment.
The only exception is if a person was prevented by force from performing the condition.
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Eg. A legacy is given to X, provided that if he marries without B’s consent, it will go to Y. X
claims he did not know about the condition and marries without B’s consent. The court will not
excuse X, and the property will go to Y.

Relation with Section 132 Indian Succession Act, 1925 : It states that an ulterior bequest (a gift
over) does not take effect unless the condition is strictly fulfilled.

Difference between 28 and 29 :

Section 28 : “You might get the property later, depending on what happens.”

Section 29 : “You have the property, but if you break a rule, you will lose it.”

Section 30 : Prior Disposition Unaffected By Invalidity of Ulterior Disposition

If the ulterior disposition is not valid, the prior disposition is not affected by it.

Eg. A transfers a farm to B for her life, and, if she does not desert her husband to C. B is entitled
to the farm during her life as if no condition had been inserted.

Relation with Section 133 Indian Succession Act, 1925 : If the ulterior bequest is not valid the
original bequest is not affected by it.

Relation with Section 16:

Section 16 ensures property does not remain in limbo if a prior interest fails. Section 30 ensures a
valid interest is not destroyed just because the later condition is invalid.

If both fail together, Section 30 ensures the prior one is safe, while Section 16 ensures the next
interest is accelerated if possible.

Section 33 : Transfer Conditional On Performance Of An Act, Time For Whose

Performance Is Unspecified (Condition Subsequent)

When on transfer of property, an interest therein is created subject to a condition that the person
taking it shall perform a certain act, but no time is specified for the performance of the act, the
condition is broken when he renders impossible, permanently or for an indefinite period, the
performance of the act.

Relation with Section 136 Indian Succession Act, 1925

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Section 34 : Transfer Conditional On Performance Of An Act, Time For Whose

Performance Specified

If a person is granted an interest in property on the condition that they perform a certain act
within a specific time, failure to do so normally results in forfeiture of that interest.

Exception : Fraud

If someone fraudulently prevents the condition from being fulfilled within the time
limit—especially someone who benefits from the failure—then the law allows additional time
for performance.

Section 31 : Transfer Shall Cease To Have Effect In Case Where Certain Specified Event
Does or Does Not Happen

Subject to the provisions of Section 12, on a transfer of property an interest therein may be
created with the condition superadded that it shall cease to exist in case a specified uncertain
event shall happen, or in case a specified uncertain event shall not happen.

Relation with Section 134 Indian Succession Act, 1925

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Section 32 : Such Condition Must Not Be Invalid

In order that a condition that an interest shall cease to exist may be valid, it is necessary that the
event to which it relates be one which could legally constitute the condition of the creation of an
interest.

ELECTION

Section 35 : Election When Necessary

1.​ A person professes to transfer property which he has no right to transfer, and as part of
the same transaction confers any benefit (transfer for consideration) on the owner of the
property.

2.​ The owner must elect whether to :

a.​ Confirm the transfer (election) – In which case, the transaction is validated.
b.​ Dissent from the transfer (non - election) – In which case, they must give up the
benefit conferred on them. That benefit will then go back to the transferor (or
their legal representative).

General Principles :

●​ The doctrine of election applies whether or not the transferor knew that they were
transferring property they didn’t own. The transferor’s belief, mistake, or ignorance does
not matter.

●​ “Allegans Contraria Non Est Audiendus” A person cannot accept benefits from a
transaction while rejecting its burdens.

●​ ‘Owner’ includes a person with vested or contingent interest, or who has a reversionary
or remote interest.

●​ The doctrine of election only applies if the two transfers happen as part of the same
transaction. If the transfers are separate and independent, the transferee can accept one
and reject the other.

Remedies of the Transferee :

In case of non election, the disappointed transferee has 4 potential remedies :

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Exception :

●​ Specific Benefit : If a specific benefit is given expressly in exchange for the owner’s
property (i.e., instead of that property). The owner must relinquish only that specific
benefit if they claim their property back. But they are not required to relinquish any other
benefits conferred in the same transaction.

●​ Election By Acceptance : If the owner accepts the benefit with full knowledge of their
right to elect and the relevant circumstances, it is assumed that they have elected to
confirm the transfer.
If the owner waives their right to inquire into the circumstances, they are also deemed to
have elected to confirm the transfer.

●​ Presumption of Election : If the owner enjoys the benefit for 2 years without rejecting it,
it is presumed that they have elected to confirm the transfer unless they prove otherwise.

●​ Irrevocability of Election : If the owner does something that makes it impossible to

restore the original condition, election is presumed. Eg. the owner sells the benefit they
received, they cannot later reject the transfer and claim their property back.

Mohammed Afzal v. Gulam Kasim

Person A was the Nawab of T and executed a deed granting two villages to his son for his
maintenance. After A’s death, the government transferred a portion of the cash allowance to the
son.

Since these benefits come from different sources (one from his father, one from the government),
●​ The doctrine of election does not apply.
●​ The son can accept both benefits without having to choose between them.

If both benefits had come from the father, the son might have had to elect between them.
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APPORTIONMENT

Section 36 : Apportionment of Periodical Payments (Apportionment By Time)

When a person transfers their interest in a property that generates periodic income (like rent,
pension, dividends, annuities, etc.), the income is apportioned (divided) between the transferor
(seller) and the transferee (buyer) based on time.

The payments accrue daily, but they are payable on the scheduled due date (like at the end of the
month for rent).

Exception: If a contract or local custom says otherwise, the rule does not apply.

Eg. A owns a house and rents it out for ₹3000 per month (payable on the last day of the month).
On the 10th of the month, A sells the house to B.
On the 30th, when the tenant pays ₹3000, it is apportioned as follows:
• A gets ₹1000 (for 1st-10th, the days he owned the house).
• B gets ₹2000 (for 11th-30th, the days he owned the house).
Because rent is earned daily even though it is paid monthly.

Contract Can Override the Rule : If A & B agree in the contract that A will keep full January
rent, then B cannot claim a share even if the transfer happened in the middle of the month.

Local Custom Can Override the Rule : In agriculture, rents are often linked to crop harvests.
Courts have ruled that: Rent is not apportioned daily. Instead, rent belongs to whoever owns the
land when the crop is harvested.

Section 37 : Apportionment of Benefit of Obligation on Severance (Apportionment By

Estate)

When property is divided among multiple owners due to a transfer, any obligation (like rent
payment) attached to the property should also be divided proportionally among the new owners.

The duty (like rent payment) must be performed for each owner in proportion to their ownership
share, if it is possible.

Severance must not substantially increase the burden of obligation. If the duty cannot be divided
or if dividing it would make things too complicated, then the duty should be performed for one
owner chosen by all.

The person responsible for the duty (like a tenant) is not bound by this rule unless they have been
given reasonable notice of the severance.
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Eg. A sells his rented house to B, C, and D. The tenant, E, was paying ₹30 rent + one fat sheep
per year to A. B paid 50% of the purchase price, while C and D paid 25% each. The rent was
divided based on ownership share, but since the sheep cannot be split, B, C, and D must decide
together who gets it.​

Exception : The rule does not apply to court sales, succession, or forced transfers. It also does not
apply to agricultural leases unless the state government specifically allows it.
GP - Immovable Property
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General Principles : Transfer of Immovable Property

PART I : Section 38 - 43 and Section 48 - 53 : Conflict of Rights

​
PART II : Sections 44 - 47 : Joint Ownership ​

PART III : Section 53 A : Part Performance

PART I : CONFLICT OF RIGHTS

Section 38 : Transfer By Person Authorised Only Under Certain Circumstances To

Transfer

Person with limited authority (transferor) who can transfer immovable property, but only under
certain variable circumstances. The transferor is selling the property citing the existence of such
variable circumstances (such as legal necessity). The transferee, after using reasonable care to
ascertain the existence of such circumstances, has to act in good faith for the transfer to be held
valid.

Transferee’s Duty – Reasonable Care & Good Faith:

The buyer (transferee) must ensure the seller truly has the authority to sell.
They should investigate and confirm the necessity for the sale.
If they genuinely believe (bona fide) the seller has the right to sell, the transaction will be
protected.

Burden of Proof on Transferee:

If a sale is challenged, the buyer must prove they:

1.​ Conducted reasonable inquiries.
2.​ Acted in good faith.
3.​ Verified the necessity of the sale.
​
Eg. A Hindu widow (W) sells a piece of land, saying she needs money for her maintenance.
Buyer (B) inquires about her financial status and confirms she really needs money. B, acting in
good faith, buys the land. Later, the widow’s husband’s heirs challenged the sale, claiming she
had no right to sell it. Since B verified the need and acted honestly, the court will likely uphold
the sale.
Section 39 : Transfer Wherein A Third Person Is Entitled To Maintenance

Where a third person has a right to receive maintenance, or a provision for advancement or
marriage, from the profits of immovable property, and such property is transferred, the right may
be enforced against the transferee, if he has notice thereof or if the transfer is gratuitous; but not
against a transferee for consideration and without notice of the right, nor against such property in
his hands.

Third person (Beneficiary) :

Someone who has a legal right to receive maintenance or a financial provision (e.g., for
education or marriage) from the income of a property.
This could include:
• Wife (including widow)
• Children
• Mother
• Dependent male family members (e.g., minors, disabled coparceners in a Hindu joint family)

The property on which maintenance is dependent is sold or transferred to someone else. The
right to claim maintenance can be enforced against the new owner (transferee), but only under
certain conditions.

1.​ The transferee (buyer) had notice of the maintenance right. (for value + notice).
2.​ The transfer was gratuitous (gratuitous + without notice).

Maintenance cannot be claimed from the transferee when :

1.​ If the person entitled to maintenance knew about the transfer and did not object.
2.​ If the person is a transferee for value without notice.

Adiveppa v. Tengawwa, 1974 - Entire property itself is maintenance.

Maintenance was given by A in the form of a house to B (his wife). The house was then sold to
C for value and he was given notice. In this case, to claim the possession of the house, C must
wait for B to die - because the house itself is maintenance.

Ramankutty v. Aminikutty, 1997 - Transfer to defeat claim of maintenance.

The wife and daughter had a legal right to maintenance from the property. The husband
transferred the property to his brothers while a maintenance claim was pending. The court
invalidated the transfer because it was meant to defeat maintenance rights. - You cannot transfer
property that is lis pendens.

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Section 40 : Burden Of Obligation Imposing Restriction On Use Of Land, Or Of Obligation
Annexed To Ownership But Not Amounting To Interest Or Easement

When can a non owner impose obligations on the owner :

This section applies in 2 situations :

1. Restrictive Covenants : A third party (not the owner) has the right to restrict how the land is
used, even though they do not own the land or have an easement over it. This is for the beneficial
enjoyment of their own immovable property.

2. Obligations Attached to Ownership (Contractual Duties) : When a property owner has a

contractual duty related to land, but this duty is not an easement or ownership right.

Who Is Bound :

1.​ The transferee (buyer) had notice of the right. (for value + notice).
2.​ The transfer was gratuitous (gratuitous + without notice).

Who Is Not Bound :

1.​ The transferee (buyer) had no notice of the right. (for value + notice).

Difference Between Section 11 and 40 :

Section 11 → Applies when the original owner imposes conditions on the transferee.

Section 40 → Applies when a third person (not the seller) has a right to enforce a restriction.

Tulk v. Mohaxy, 1882

The Plaintiff, Tulk, originally sold Leicester Square with a covenant (restriction) that it must be
maintained as a public pleasure ground. The deed restriction applied to heirs and assigns,
meaning future owners were also expected to uphold it. The land was later sold multiple times,
and eventually, the Defendant, Moxhay, became the owner.

Moxhay knew about the restriction but wanted to build on the land. Tulk sued for an injunction
to stop Moxhay from violating the original agreement.

Issue : Can a restrictive covenant (a restriction on how land can be used) be enforced against a
future purchaser who was not part of the original contract?

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The Court held that Moxhay was bound by the restriction because he had notice of it. The buyer
cannot ignore obligations that were clearly part of the property transfer simply because they were
not privy to the original transfer.

Section 41 : Transfer By Ostensible Owner

What is an Ostensible Owner?

An ostensible owner appears to be the real owner but does not actually have ownership rights.
The real owner allows the ostensible owner to manage the property as if they were the owner.
The ostensible owner is different from a trespasser - their authority comes from the real owner’s
consent (express or implied).

When is a Transfer by an Ostensible Owner Valid?

1.​ The real owner knowingly allowed the ostensible owner to act as the owner.
2.​ The ostensible owner transferred the property for consideration (not as a gift).
3.​ The buyer (transferee) made reasonable inquiries and was satisfied that the seller had the
right to transfer.
4.​ The buyer acted in good faith (i.e., without fraud or collusion).

If all these conditions are met, the real owner cannot later dispute the sale, even if the ostensible
owner did not have actual ownership rights.

Burden of Proof

The buyer must prove that they:

●​ Took reasonable care to check the seller’s authority to transfer.

●​ Acted in good faith and without fraud.

Ramcoomar Koondoo v. Macqueen, 1872

Alexander had a mistress named Bunnu Biwi with whom he had a child - Macqueen. Alexander
bought the property for Bunnu Biwi and during his lifetime she transferred this property to
Ramdhan. Subsequently, Alexander died and Macqueen tried to reclaim this property from
Ramcoomar (Ramdhan’s Son).

It was ruled that Ramcoomar had acted in good faith and reasonably taken care to ascertain
whether Bunnu Biwi had the right to transfer such property - the property was bought in her
name and she managed all its affairs. Ramcoomar’s claim was held valid.

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Shafiquallah v. Samiullah, 1929

A property was in the possession of illegitimate sons, but they had no legal right to inherit it. The
real heir had already filed a suit for possession. The illegitimate sons sold the property to a third
party (C). This sale was held invalid because. The real owner never gave consent for the
illegitimate sons to act as owners and the buyer (C) knew about the ongoing lawsuit (lis pendens
applied).

Ostensible Owner v. Benami Transactions

A benami transaction is when a person holds property in someone else’s name while the actual
payment is made by another person.

The 2016 Amendment expanded the definition to include cases where:

●​ The property is in a fictitious name.

●​ The owner denies knowledge of ownership.
●​ The real owner (payer) is untraceable.

Property transactions within immediate family (parents, grandparents, children, grandchildren)

are not considered benami.

Law Commission of India ​57th Report, 1973 : Recommended strict legal measures to restrict
benami transactions and safeguard genuine buyers.

Law Commission of India 130th Report, 1988 : Proposal for Prohibition : Suggested outright
prohibition of benami transactions to prevent fraudulent asset transfers.

Law Prior to the Benami Transactions (Prohibition) Act, 1988 :

Benami transactions were legal and widely used to:

●​ Hide ownership to avoid creditors & tax liabilities.
●​ Transfer property within families without public disclosure.
●​ Escape legal disputes by holding property in another’s name.

Statutory Changes: The Benami Transactions (Prohibition) Act, 1988 :

Section 3 : Prohibition of Benami Transactions

Prohibited benami transactions – a person cannot buy property in someone else’s name unless it
is :
●​ Held for wife or child, or
●​ A joint Hindu family property.

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Section 4 : Prohibition of Recovery

●​ No claim by the real owner—if property is held benami, the real owner loses all rights.
●​ The real owner (who paid for the property) cannot claim it back from the benamidar.

Exceptions:
●​ If the property is held by a Hindu Undivided Family (HUF) for the benefit of
coparceners.
●​ If the property is held by a trustee or fiduciary for someone else’s benefit.

●​ Benami property can be confiscated by the government.

●​ Criminal penalties for engaging in benami transactions.

2016 Amendment :

1. Expanded definition of Benami Property

2. Stronger Penalties

3. Institutional Framework for Enforcement - The Act introduced 4 authorities : Initiating Officer
(to investigate benami cases), Approving Authority (to approve proceedings), Administrator (to
manage confiscated property), Adjudicating Authority (to decide legal disputes).

4. Retrospective Application : Applies to benami transactions since 1988, allowing past

transactions to be investigated.

Jaydayal Poddar v. Bibi Hazra, 1974

This case is important in determining whether a person is an ostensible owner or merely a

benamidar (a name lender in a benami transaction).

Section 41 of the Transfer of Property Act (TPA) protects buyers who purchase property from an
ostensible owner in good faith and for consideration. However, if the alleged “owner” was
actually a benamidar, and not an ostensible owner, then Section 41 will not apply because a
benamidar never had the owner’s consent to act as the real owner.

This case lays down tests to distinguish an ostensible owner from a benamidar.

1. Who Paid for the Property? (Most Important) : The person who actually provides the purchase
money is likely the real owner.

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2. Who Controls the Property? (Possession, Management, Rent Collection) : If the named owner
actively manages, rents out, and maintains the property, they may be the real owner. If the
supposed owner never exercises control, it suggests they are just a benamidar.

3. Was There a Motive to Hide Real Ownership? (Tax Evasion, Legal Disputes) : If a person
buys property in another’s name to evade taxes, protect assets from creditors, or bypass family
claims, it strengthens the case for benami ownership.

4. Relationship Between the Real Owner & Named Owner? (Family Links Suggest Benami) :
Close family ties (e.g., husband-wife, father-son) often indicate benami transactions, as family
members might hold property for each other.

5. Who Holds the Title Deeds? (Real Owner Usually Keeps Them) : If the person claiming real
ownership has custody of the sale deed, it suggests benami ownership.

6. How Did the Parties Act After Purchase? (Who Paid Taxes, Maintained the Land?) : If the
alleged benamidar paid property tax, made improvements, and acted like the owner, they are
likely the real owner.

Mithilesh Kumari v. Prem Behari Khare : The Supreme Court ruled that the 1988 Act applied
retrospectively, meaning benami owners lost their right to recover property even for transactions
before 1988.

R. Rajagopal Reddy v. P. Chandrasekharan : The Supreme Court ruled that while the 1988 Act
applied retrospectively to bar recovery of benami property, its penal provisions (punishments)
could not be applied to past transactions. This means benami transactions before 1988 could not
lead to prosecution, but real owners still lost their right to reclaim such property.

Section 42 : Transfer By Person Having Authority To Revoke Former Transfer

If a person transfers property but reserves the right to revoke the transfer, they can later transfer it
to another person, which will automatically revoke the first transfer (subject to any conditions
attached).

This applies only when the transferor has explicitly reserved a revocation right in the first
transfer. The second transfer acts as a revocation of the first transfer.

Essentials :

1.​ The first transfer must include an explicit right to revoke.

2.​ The revocation power must exist at the time of the second transfer.
3.​ The second transfer must be for consideration (not a gift).

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Eg. A gives a plot of land to B, reserving the right to cancel the transfer if B does not develop it
within 2 years. B fails to develop the land. A sells the land to C. The sale to C automatically
revokes B’s rights, provided the condition was fulfilled.

Section 43 : Transfer by Unauthorized Person Who Subsequently Acquires Interest

If a person fraudulently or erroneously misrepresents that they have the right to transfer a
property and professes to transfer it for consideration and later acquires ownership of that
property ,

If the property is sold to a bona fide purchaser without notice, the original transferee loses this
right.

The transfer then operates at the option of the transferee who may either :

1.​ Rescind it
2.​ Continue as it is
3.​ Seek compensation under the ICA

“Feeding the Estoppel” : If a person wrongly claims ownership and later acquires title, they
cannot deny the original transfer.

Essentials :

(i) The transferor makes a representation to the effect that he is competent to transfer a particular
piece of immovable property;

(ii) This representation may be erroneous or fraudulent or untrue

(iv) The transferee believes or is made to believe that the representation is correct and the
transferor is competent to transfer the property, i.e., he does not know the defect in title or lack of
capacity on part of the transferor;

(v) The transferor professes to transfer the property for a consideration;

(vi) The transferee acts on the representation and enters into the contract;

(vii) The transferor subsequently acquires competency to transfer the same property;

(viii) The contract is subsisting;

(ix) The property is still with the transferor, i.e., he has not transferred it to another bona fide
purchaser who takes it without actual or constructive notice of this earlier contract between the
transferor and the transferee;

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(x) The transferee exercises the option to signify his intention to go ahead with the contract;

Claim Against Property Is Personal In Character :

●​ The transferee cannot claim the property from anyone other than the transferor.
Eg. A fraudulently sells B his wife’s land. If A later inherits it from his wife, B can claim
it. However, if his heir inherits it instead, B cannot claim it.

●​ The transferee can only claim against that particular property - no other property, no
matter how similar may be claimed against.

However, when it comes to compensation, upon the death of the transferor, the transferee
may claim it from his representatives - Section 37 of the Indian Contract Act.

When Does This Section Not Apply :

●​ If The Transferee Had Knowledge That The Transferor Did Not Have The Authority To
Transfer.

●​ Transfer Must Not Be Otherwise Prohibited (Minor, Fraud, Unlawful Purpose, Illegal) :
If A, a minor, sells a house to B and later becomes an adult, B cannot claim ownership
because minors cannot legally transfer property.

●​ Gratuitous Transfer : If A gifts a property he doesn’t own to B, and later acquires

ownership, B cannot claim it under Section 43 because no consideration was involved.

●​ Sale To Bona Fide Another Transferee : If the transferor sells the property to a bona fide
third party, the original transferee loses their claim. Eg. A fraudulently sells B a house.
Later, A inherits it but before B can act, A sells it to C, who has no knowledge of B’s
claim → B loses the right to claim it but B can claim compensation from A, B just can't
claim that property.

Kartar Singh v. Harbans Kaur

A Hindu woman sold land belonging to her minor son in 1961. Before taking possession, the son
died, and the mother inherited the property as a Class I heir. In 1975, after attaining majority, the
son challenged the sale, and the court declared it void. The transferee (X) claimed protection
under Section 43, arguing that since the mother eventually became the rightful owner, the
transfer should now be valid.

The Supreme Court ruled that if the transferee should have known the transferor had no
authority, Section 43 will not apply. Since the original transfer was void, it did not remain
“subsisting.”

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Section 43 only applies if the contract was valid at the outset, but this contract was void ab initio
(from the beginning).

Jumma Masjid Mercara v. Kodimaniandra Deviah

A joint family had three brothers (B1, B2, B3). After their deaths, the property passed to W2, the
widow of B3.

The three grandsons (G1, G2, G3) of a predeceased sister sold the property to a buyer, Ganapathi
(T), even though they had no current ownership, only an expectation (spes successionis).

W1, the widow of B2, was still alive at the time of sale and successfully challenged the transfer.
However, after her death, the property legally passed to the grandsons.

The Jumma Masjid, Mercara, intervened, claiming ownership through a gift from W1 and a
release deed from one of the grandsons.

Issue : Whether a person who sells a property without title (Spes Successionis) can later validate
the sale under Section 43 when they actually acquire the title ?

Court’s Observations
Section 6(a) prohibits the transfer of a mere expectation of inheritance (spes successionis).
Section 43 applies when a transferor falsely represents having ownership and later acquires it.
Since the grandsons later became rightful owners, the sale to Ganapathi (T) became valid under
Section 43.
There is no conflict between Section 6(a) and Section 43 as they serve different purposes:
Section 6(a) is a substantive law restriction, while Section 43 is a rule of estoppel (a principle
preventing a person from denying a previous statement).

Judgment
The Supreme Court ruled in favor of Ganapathi (T) and rejected the claims of Jumma Masjid. It
held that:
If a transferee (buyer) purchases property based on a misrepresentation of ownership but later the
transferor actually acquires ownership, the transferee gains a valid title.

9
10
Section 48 : Priority Of Rights Created By Transfer

Qui prior est tempore, potior est jure

“He who is earlier in time is stronger in law.”

If the same property is transferred multiple times, the earlier transfer takes priority over the later
one.

The subsequent transferee takes the property subject to prior rights unless there is a contract to
the contrary.

Eg. A leases a house to B for 5 years. A later sells the same house to C. B’s leasehold rights
prevail, so C must wait until B’s lease expires.

Exceptions :

1. Registration : If the earlier transfer was unregistered but the later one is legally registered, the
registered transfer prevails.

2. No Notice : If the later transferee had no knowledge of the earlier transfer and acted in good
faith, their transfer may take precedence.

3. Court Order : If a property is transferred under court direction, and the court states it overrides
previous transfers, the court order prevails.

4. Statutory Exceptions :

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Lien for saving property: If money is borrowed to preserve or prevent destruction of property, the
lender may get priority over earlier claims.

Eg. A fails to pay property taxes, and the government is about to auction the property for tax
dues. To save the property, C lends money to A to pay off the tax dues. Later, A fails to repay
both B and C. C gets priority over B because C’s money was used to save the property from
being lost altogether.

Mortgage by court-appointed receiver: If a receiver mortgages a property to preserve it, this

mortgage may override prior claims.

Eg. The receiver takes a mortgage loan from X to pay for essential repairs and keep the business
running. There is an earlier mortgage in favor of Y. The business fails, and the property is sold. X
(the receiver’s mortgagee) gets paid first because their loan was used for the preservation of the
asset.

Section 49 : Transferee’s Right Under Policy

If an immovable property is insured by loss or damage caused by fire at the time of transfer, and
the transferor receives insurance money, the transferee can demand that the money be used for
reinstating the property, unless agreed otherwise.

If the transferor receives money from an insurance claim, the transferee can demand that it be
used to restore the property.

If there is a contract stating otherwise, the transferee cannot demand the insurance money for
repairs.

If the transferor does not restore the property, the transferee may:

●​ Mortgagee: Cancel the mortgage and demand loan repayment.

●​ Lessee (Tenant): Terminate the lease if the property becomes uninhabitable.

Section 50 : Rent Bona Fide Paid to Holder Under Defective Title

If a tenant pays rent to a person who seems to be the rightful owner but later turns out to have no
valid title, the tenant is protected as long as they acted in good faith.

This prevents tenants from being forced to pay rent twice for the same period due to conflicting
ownership claims

If they had knowledge of a legal dispute, this protection may not apply.

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Effect of Notice : If a tenant has no notice of a defect in the landlord’s title, they are not liable to
pay rent again if ownership changes. If a tenant receives legal notice that their landlord’s title is
defective, any rent paid after that is at their own risk. Once notified, the tenant should pay rent to
the rightful owner or deposit it in court.

Advance Payments Treated As A Loan : If rent is paid in advance, but the landlord later loses
title, this payment is treated as a loan, and the tenant may not get protection under this section.

Rent Paid When Lis Pendens : If a lawsuit about property ownership is already pending, tenants
should pay rent into court instead of giving it to the disputed landlord. If they continue paying to
the landlord despite knowing about the suit, they may be forced to pay again to the rightful
owner.

Section 51 : Improvements Made By Bona Fide Owners Under Defective Title

​Essentials :

●​ Property transferred is immovable property.

●​ The transferee in good faith believes himself to be absolutely entitled to the property -
mortgagee or tenant on permanent lease.

Exception : Court-ordered sales are treated differently, and compensation may still be
awarded even if the buyer knew their title was uncertain.

Partial transfers (such as mortgagees or lessees) cannot claim compensation for

improvements.

Exceptions where mortgagees may claim compensation:

●​ Mortgage by conditional sale – If the mortgagee believes the sale is absolute.
●​ Erroneous court orders – If the court misleads the transferee about their title.
●​ Forfeiture clauses – If the transfer deed specifies forfeiture after a certain period.

●​ The transferee makes improvements on the property, or has sown plants or crops on the
property.

●​ The transferee is evicted by a person who holds a better title.

Remedies of the Bona Fide Transferee :

If a person genuinely believes they own a property and makes improvements, but is later evicted
by the rightful owner, they have the right to ask for :

13
 1.​ Claim compensation for the improvements from the real owner, OR
2.​ Buy the property from the real owner at its current market value.

The individual with the better title is however the one that decides which remedy he wishes to
provide.

This prevents unjust enrichment of the rightful owner at the expense of the possessor who acted
in good faith. - He Who Seeks Equity Must Do Equity.

Growing Crops : If the transferee has planted crops, they are entitled to harvest them and must be
given access to do so.

Improvements :

Improvement means any work which adds to the market value of the property consistent with the
purpose for which it was let out, which enhances the value of the property as a marketable
subject. Improvement is not ascertained merely by the amount of money spent on the property,
but on the enhancement of the value of the property. Therefore, the amount of expenditure
incurred by the transferee alone is not the deciding factor.

Harilal Ranchhod v. Gordhan Keshav

A minor’s guardian sold the minor’s property without seeking court approval.

The buyer X paid the full consideration and constructed a new house after demolishing the old
one, believing he had absolute ownership.

When the minor attained majority, he challenged the sale and successfully evicted X.

The court upheld the minor’s right to reclaim the property, as the sale was invalid due to lack of
court permission.

However, since X acted in good faith, the court held that the minor was legally obligated to
compensate X for the improvements made to the property.

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Section 52 : Transfer of Property Pending Suit Relating Thereto

ut lite pendente nihil innovature

No new rights should be introduced during litigation

Lis = Suit or Action; Pendens = Pending.

Rajendra Singh v. Santa Singh : Confirmed the necessity of the doctrine.

Sanjay Verma v. Manik Roy : Emphasized that lis pendens is not based on notice but on equity.
The doctrine applies automatically, irrespective of whether the transferee had notice of the suit.

If a property is subject to litigation, it cannot be transferred by any party to the suit in a way that
affects the other party’s rights.

Exception: Transfer is allowed only with court permission and on conditions imposed by the
court.

1. Pending Litigation – There must be an ongoing case in a court of competent jurisdiction.

2. Specific Immovable Property – The dispute must relate to a specific immovable property.

3. Non-Collusive Suit – The suit must be genuine, not a collusive attempt to defraud others.

4. Right in Property – The dispute must involve rights (ownership, possession, etc.) in that
property.

5. Transfer by Party to Suit – The property must be transferred by one of the parties involved in
the litigation.

6. Affecting Rights of Other Party – The transfer should have the potential to impact the rights of
the other litigating party.

7. Before Final Disposal – The restriction remains until the case is finally adjudicated and
executed.

The doctrine applies only if the suit is filed in a court that has jurisdiction over the property.

Government auction sales may not be affected by lis pendens.

Any transfer made during the suit is subject to the court’s decision. The transferee (buyer) cannot
claim independent rights against the final decree. The decree is binding on all transferees, even if
they are not formally joined as parties.

15
Supreme General Films Exchange v. Brij Nath Singh Deo – Clarified that lis pendens applies
even to compromise suits and consent decrees.

Rights Affected by Lis Pendens

Specific Right in Immovable Property – The litigation must concern ownership, possession, or
another real right.

Transfers “or otherwise dealt with” – Includes:

• Partition
• Surrender
• Contract of sale
• Pre-emption rights
• Mortgage (If created after filing of the suit)
• Involuntary Transfers – Also covered under the doctrine.
Samrendra Nath Sinha v Krishna Kumar Nag – Confirmed that even involuntary transfers are
subject to lis pendens.

Section 53 : Fraudulent Transfer

Section 53 (1) - To Defraud Creditor

Based on the maxim: “Fraud vitiates everything”.

A transfer of immovable property is voidable if:

1. There is a transfer of immovable property.
2. The transfer is made with the intent to defeat or delay creditors.
3. The transfer is voidable at the option of the creditor(s) so defeated or delayed.

Broad Interpretation of Creditor : anyone to whom one has the obligation to pay. Includes
unsecured and secured creditors.

Eg. A (debtor) has taken loans from B (creditor). Knowing that B is about to sue him, A transfers
his property to C to prevent B from recovering his dues. This transfer, while legally valid, is
voidable at B’s option.

Exceptions :

1.​ Bona fide transferee in good faith for consideration.

2.​ Any existing insolvency laws override Section 53.
3.​ If property is divided among family members without intent to defraud, the doctrine does
not apply.

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Burden of Proof :

The creditor alleging fraud must prove the fraudulent intent of the transferor.

Courts may presume fraudulent intention if :

• The transfer is without consideration.

• The transferor retains possession or benefit of the property after the transfer.
• The transfer is suspiciously close to the creditor’s claim or legal action.

Musahar Sahu v. Hakim Lal, 1915

Debtor (K) had two creditors, H and M. K defaulted, and M sued him.

In 1901, M sought attachment of property, but K swore he wouldn’t transfer it.

Later, K transferred the property to H (another creditor). M challenged the transfer under Section
53.

A debtor can pay one creditor over another, as long as the debtor does not retain any benefit for
himself.

Abdul Shukoor v. Arji Papa Rao

Multiple creditors → Only one suit is filed on behalf of all creditors to prevent repetitive
litigation. A creditor who has obtained a court order to attach the debtor’s property can challenge
fraudulent transfers.

Section 53 (2) - General

If A transfers property to B without consideration, and later sells it to C for fair value, C can
challenge the first transfer as voidable if :

1. The first transfer was intended to defraud the second transferee (C).

2. C acts in good faith and for consideration.

There can be no presumption that the first transfer was with an intent to defraud just because :
●​ It is without consideration.
●​ There is a subsequent transfer for value.

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 PART II : JOINT OWNERSHIP​

Types of Co-ownership

1. Joint tenancy/co-tenancy :

A form of co-ownership where two or more people hold equal shares in a property with the right
of survivorship. When one owner dies, their share automatically passes to the surviving
co-owners, regardless of a will.

Unity of Time, Title, Interest, and Possession (All owners acquire the property at the same time,
under the same deed, with equal shares, and equal rights to possession).

Gurbax Singh v. Nikka Singh, 2011 – The Supreme Court of India held that joint tenancy is
uncommon in India, and unless explicitly stated, co-ownership is presumed to be
tenancy-in-common.

2. Tenancy-in-common :

A form of co-ownership where each co-owner holds a distinct and separate share in the property,
which can be equal or unequal.

No right of survivorship - each owner can pass their share to heirs or sell it independently.

Unity of Possession only.

3. Tenancy by entirety :

A special form of joint tenancy that only applies to married couples.

The property is owned as a single legal entity by the spouses. Indian law does not recognize
tenancy by the entirety; it is mainly an English concept.

4. Coparcenary - Hindu Joint Family Ownership :

A unique form of co-ownership under Hindu Law, where sons and daughters acquire a right in
ancestral property by birth.

Governed by the Mitakshara school of Hindu law (applies in most of India).

Unity of Possession (Each coparcener owns the whole property, but no one owns a specific part).

Partition Possible (Any coparcener can demand partition, dividing the property into separate
shares).

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Section 44 : Transfer By One Co - Owner

A co-owner of immovable property can transfer his share if he is legally competent.

The transferee steps into the shoes of the transferor, acquiring:

●​ Rights to joint possession or common enjoyment of the property.

●​ Right to enforce partition of the property.
●​ The transferee is subject to existing liabilities on the share transferred.

Exception: Dwelling House of an Undivided Family

If the transferred property is a dwelling house of an undivided family, and the transferee is an
outsider (not a family member) :

●​ The transferee cannot claim joint possession or residence.

●​ Their only remedy is to seek partition of the house.

Section 45 : Joint Transfer For Consideration

When two or more persons jointly purchase immovable property for consideration, their
ownership is determined by who paid what amount.

If the property is paid from a common fund, ownership is in proportion to their pre-existing
shares in that fund. If separate funds are used, ownership is in proportion to individual
contributions.

If contributions are unknown, they are presumed to be equal.

Does Not Apply If:

●​ There is a contract to the contrary (parties can agree on a different ownership structure).
●​ It is a gift or gratuitous transfer (since no consideration is involved).

Section 46 : Transfer For Consideration By Persons Having Distinct Interests

When multiple owners transfer a property or interest in property for consideration, they share the
proceeds :

●​ Equally, if their ownership shares were equal.

●​ Proportionally, if their ownership shares were unequal.

Applies only in the absence of a contract specifying a different arrangement.

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Transferors don’t have to be co-owners - can include tenants-in-common, life tenants,
reversioners, mortgagees, etc.

Difference from Section 45

While Section 45 deals with joint buyers, Section 46 governs joint sellers with distinct interests.

Section 47 : Transfer By Co Owners Of Share In Common Property

This section ensures clarity in cases where multiple co-owners transfer a share without
specifying from whose portion it is deducted.

It applies to tenants in common, where each co-owner holds a distinct but unspecified share.

The transferred share is divided proportionally based on their existing ownership rights.

If all transferors own equal shares, the transferred portion is equally deducted from each.

If shares are unequal, the deduction is proportionate to ownership.

Difference Between Section 46 and Section 47 of the Transfer of Property Act, 1882

Aspect Section 46: Transfer for Section 47: Transfer by Co-owners of

Consideration by Persons Having Share in Common Property
Distinct Interests

Scope Deals with transfer by persons who Deals with transfer by co-owners who
have distinct interests in the property. hold shares as tenants in common.

Key Rule The transferors receive consideration If no specification is made, the

in proportion to their ownership transferred share is deducted
interests. proportionally from each co-owner.

Nature of Transferors may or may not be Only applies to co-owners of a

Ownership co-owners. common property.

Example A owns ½, B and C own ¼ each. If A owns ½, B and C ¼ each. If they

they sell for ₹1,00,000, A gets sell ½ the property, A contributes ¼,
₹50,000, B and C get ₹25,000 each. B and C contribute ⅛ each.

20
 Objective Ensures fair distribution of sale Ensures proportional deduction of
proceeds among distinct interest property when multiple co-owners
holders. transfer a share without specifying
divisions.

PART III : PART PERFORMANCE

Section 53 A : Part Performance

Introduced via the Transfer of Property (Amendment) Act, 1929.

Partial importation of English law (Indian law only allows passive use of the doctrine, unlike
English law where it can be used actively). Readiness & willingness to perform the contract is
essential.
“Acts as a shield, not a sword”
It cannot be used to claim ownership, only as a defense against eviction.

Eg.

Under English Law : A transferee (B) can use it not only as a defense (passive use) but also to
enforce rights and seek specific performance of the contract (active use).
Eg. If A refuses to complete the transfer after B takes possession, B can sue A to enforce the
transfer of ownership.

Under Indian Law : A transferee (B) can use Section 53A only to protect their possession if the
transferor (A) or a third party (C) tries to evict them. B cannot sue A to enforce ownership rights
under Section 53A.

Difference between ‘defending possession’ and ‘claiming ownership rights.’

When someone defends possession, they are not claiming ownership but simply arguing that they
have the right to stay on the property and cannot be evicted.

The person does not become the legal owner but has a legal defense against being forcibly
removed.

If a bonafide transferee has taken possession and performed or is willing to perform their part of
the contract they cannot be dispossessed merely on the ground that the transfer was incomplete.

A transferee can claim protection under Part Performance if:

1. A written contract exists for the transfer of immovable property.

21
2. The transferee has taken possession (or continues to be in possession).

3. The transferee has performed (or is willing to perform) their part of the contract.

4. The transfer is not completed through a registered deed. After 2001, unregistered contracts
hold no value under Section 53A.

5. The transferor (or their successor) tries to evict the transferee.

How This Works In Practicality

Where B is in possession under a part performance and A sells the land to C.

B can defend possession :

Since B has possession under a contract for sale, even if the sale deed is not executed, B can
prevent eviction by A or C. C cannot forcibly remove B because C’s purchase is subject to B’s
existing rights under part performance.

However, C’s rights depend on C’s knowledge :

If C had knowledge (actual or constructive notice) of the prior contract between A and B, then
C’s purchase is subject to B’s possession.

If C was a bona fide purchaser for value without notice, then C’s ownership rights may be
protected, and B may have to vacate.

B Cannot Claim Ownership Under Section 53A :

B remains in possession but does not become the legal owner.

To get ownership, B must file a specific performance suit under the Specific Relief Act, 1963.

B can file a suit for specific performance and ask the court to direct A (or C if C had notice) to
execute the sale deed in B’s favor.

22
Pre - Amendment

Mohammad Musa v. Aghore Kumar Ganguli

A compromise deed divided property, but it was not registered. Legal heirs challenged it. The
Privy Council upheld the possession under doctrine of part performance.

Ariff v. Jadunath

An oral permanent lease was granted. After 10 years, the landlord tried to revoke the lease.
Calcutta HC followed Mohammad Musa and upheld the lessee's possession. Privy Council
overruled it, stating that it violated Section 107 of TPA & Registration Act. Oral contracts are not
protected under Section 53A.

Mian Pir Bux v. Sardar Mohammad Tahir

Privy Council again rejected Mohammad Musa’s judgment, reinforcing the need for a legal
provision. Led to the 1929 amendment introducing Section 53A.

Effect of Non Registration - Post 2001 Amendment

Section 17(1A) of Registration Act, 1908

●​ Contracts for transfer must be registered after the 2001 amendment.

●​ If not registered, they have no effect under Section 53A.

Section 49 of Registration Act, 1908

If a document required to be registered is not registered, then:

1. It does not affect any immovable property.
2. It cannot confer any power to adopt.
3. It cannot be used as evidence in court.

Case laws post 2001 Amendment :

Arun Kumar Tandon v. Akash Telecom Pvt. Ltd.

A contract must be unambiguous for courts to recognize part performance.

Doctrine acts as a defense, not a claim (shield, not sword).

Kukaji v. Basantilal

23
No action in furtherance = No part performance.

Babu Murlidhar v. Saudhager Mohammad Abdul

A mortgaged property to B. Later, A agreed to sell it to B (unregistered contract before 2001).

A sold it to C. B took possession, and A even applied for a name change.

It was held that A’s application for name change was an act in furtherance of the contract,
validating part performance.

Sardar Govindrao v. Devi Sahai

A paid B ₹1000 for purchasing stamps for sale deeds.

SC held that this act alone was not enough for part performance.

Prabodh Kumar Das v. Dantamara Tea Co. Ltd.

A tea estate owner (Glanders & Co.) contracted to sell to S.N. Roy.

Roy paid part of the price & took possession, but no deed was executed.

Later, Glanders sold it to Dantamara Tea Co., which obtained an export license.

Roy’s legal heir (Prabodh Kumar Das) challenged their export rights.

53A protects only possession, not additional rights. Prabodh could not claim the right to export
under 53A.

D.S. Parvathamma v. A. Srinivasan

A leased property to B. After 3 years, A & B agreed to a sale but never executed the contract. B
delayed legal action for 13 years. A later sold it to C, and C tried to evict B.

B failed to act in furtherance of contract. Delay defeated the claim under Section 53A.

24
25
Sale
SARA DHARWADKAR

Sale
Section 54 : “Sale” defined

Sale: is a transfer of ownership in exchange for a price paid or promised or part-paid and
part-promised.

As said earlier, an owner has 3 basic rights over his property :

●​ A right of title
●​ An exclusive right to possess and enjoy the property
●​ An exclusive right to alienate it.
​
Sale of Property - An Absolute Transfer

In a sale of property, all these rights are conveyed by the owner with his free consent in favour of
the transferee who is called a buyer. No rights remain with the seller, thus, the transfer of this
totality of rights is called an absolute transfer.

Whether a transaction amounts to sale or not would depend on the substance of the transfer.

The transaction may be described as a sale but if it does not convey all the rights in favour of the
buyer, it would not be a sale.

A power of attorney is not a sale.

Versus Lease and Mortgage

In contrast, a lease and a mortgage are transfers of a right in the property, but not absolute
transfers.

For instance, in a lease, there is a transfer of a right to possess and enjoy the property, but the
title and a right of alienation remain with the owner.

Similarly, in a mortgage, what is transferred is a right to cause the property to be sold in the
event of non-payment of loan by the mortgagor in favour of the mortgagee.
SARA DHARWADKAR

Versus Hire and Purchase Agreement

A sale immediately transfers ownership, whereas a hire-purchase agreement does not transfer
ownership until all payments are completed.

The transferor retains the right to rescind the agreement and take back possession under a
hire-purchase agreement.

Instalment payments are common in hire-purchase agreements, but in sales, payment terms are
as per the contract between the parties.

Versus Exchange

Sale is a transfer of ownership in exchange for money.

Exchange is a transfer of ownership in exchange for something other than money (e.g., land in
return for another property).

Right of pre-emption applies in a sale but not in an exchange.

Essentials of a Valid Sale

A valid sale requires:

1. Parties to a sale (Seller & Buyer) :

Transferor / Seller :

●​ Must be a person competent to contract, i.e., he must be a major and of sound mind, and
should not be legally disqualified to transfer the property.

Eg. A minor or a person of unsound mind is incompetent to transfer his own property
despite being its owner, but a transfer by a mentally challenged person during lucid
intervals is valid.

●​ Statutory incompetency refers to an incompetency imposed under law or a statute.

When a person is declared as an insolvent, his property vests in the official receiver, and
he is incompetent to transfer the same.

A judgment debtor is not capable of selling his property that is to be sold in execution
under the order of the court.

The property cannot be sold when it is under the management of the Court of Wards.
SARA DHARWADKAR

●​ The transferor should either be the owner of the property or should have an authority to
dispose it off.

Eg. a karta of a joint family property is authorised to transfer the property under certain
specified circumstances.

Similarly, the guardian of the property of a minor is empowered to sell it with the
permission of the court, and without such permission the sale would be invalid.

An agent having a power of attorney to sell the property can also sell it without being the
owner of the property.

Buyer :

●​ The transferee must be a person competent to receive a transfer in his favour. He should
not be subject to a legal disqualification.

Eg. an actionable claim under s. 136 cannot be purchased by a judge, legal practitioner or
an officer connected with the court.

an officer performing an official duty in connection with the sale of the property cannot
purchase the same.

●​ A minor is a competent transferee in a transaction of a sale.

A mortgage or a gift can be executed in favour of a minor, but a minor cannot take a lease
in his favour, as a lease has to be executed by both the parties. A lease in favour of a
minor is therefore void.

2. Subject matter (Immovable property) :

Only applies to immovable property (Section 54 of the Transfer of Property Act).

Property must be clearly identified in sale documents.
●​ Moveable
●​ In existence
●​ Sufficiently identifiable

3. Price (Consideration must be in money) :

Consideration must be in money (otherwise, it is exchange or barter).

If consideration is unascertained at the time of agreement but the transaction is complete, it is

still a sale.
SARA DHARWADKAR

Valid considerations:
• Decretal amount
• Family settlement
• Advance payments

Invalid considerations:
• Agreement to maintain the transferor
• Work done in lieu of property
• Transfer for future cohabitation

Sale can be completed even if price is paid later (if parties agree).
Exceptions:
●​ If the contract states ownership transfers only after full payment, then title does not pass
until price is fully paid.
●​ Dishonoured cheques do not complete a sale.

Price is essential for a valid sale.

●​ Price adequacy is irrelevant, but extreme inadequacy can indicate a gift or mortgage.
●​ No enforceable contract if price is not fixed.

4. Mode of execution (As per legal requirements) :

As per Section 54, Transfer of Property Act:

1. Sale deed must be in writing
●​ The date of execution of the sale deed is not the sole determining factor for ownership.
In cases of parallel sale claims, courts will examine the intention of parties and other
evidence.
2. Proper attestation
3. Registration or delivery of possession (only if property is valued below Rs 100)
●​ An oral sale that is not accompanied by delivery of possession of property therefore is not
permitted under the TP Act.
●​ Intangible property such as a reversionary interest must also be registered.
●​ If both movable and immovable property are transferred in a single document, and the
immovable property is worth Rs. 100 or more, the entire transaction requires a registered
sale deed.
●​ Pre-emption suit can only be filed after the completion of registration. If filed before
registration, it is premature.
SARA DHARWADKAR

Exception:
●​ If immovable property is valued below Rs 100, sale can be completed by delivery of
possession without registration.
●​ Court Auctions: No sale deed required; Sale Certificate by the court is sufficient proof of
ownership.

Agreement of Sale (Agreement to Sell) v. Sale

A contract of sale is a preliminary agreement that a sale will occur in the future based on settled
terms.
●​ Not a Sale: A contract of sale does not transfer ownership or create an interest in
property.
●​ Does Not Require Registration: Since it does not create a title or interest, it need not be
registered.

Contract of sale for existing property. ​

Contract for sale is for a future property.

Har Narain v. Mam Chand, 2010

“A contract for the sale of immovable property does not, of itself, create any interest in or charge
on such property.”

Ownership is deemed to be transferred when the parties intend to transfer ownership and all
essential elements of a valid transfer are fulfilled under the relevant law, such as the Transfer of
Property Act, 1882. The transfer of ownership depends not just on the execution of a document
(like a sale deed), but also on registration, delivery of possession, and the intention of the parties.

Mere agreement to sell does not transfer ownership of the property. An agreement to sell does
not create any right or title in favour of the buyer unless it is accompanied by a registered sale
deed.

Purpose of Agreement to Sell :

●​ Fraudulent Transfer : If the property is sold to a third party despite an existing agreement,
the subsequent buyer with knowledge of the prior contract holds the property in trust for
the original buyer.

●​ Specific Performance : A buyer can file a suit for specific performance to enforce the
sale. However, if the contract requires further negotiations, a specific performance suit
will not be entertained.
SARA DHARWADKAR

●​ Doctrine of Part Performance (Section 53A, TPA) : If possession is delivered under an

agreement of sale and other conditions of Section 53A are met, the buyer can protect
possession from trespassers, including the true owner.

An agreement of sale does not of itself create any interest or charge on such property even after a
decree for specific performance has been passed with respect to it.
All that a person gets is a right of litigation on this basis.

Execution of a Contract of Sale

Ramesh Chand Ardavatiya v. Anil Pangwani

Facts:
• A sold land to B under an agreement of sale and handed over possession.
• A failed to execute a sale deed, and trespassers encroached on the land with A’s help.
• B sued for protection of possession and an injunction against trespassers.

Held:
• B was entitled to protect his possession.
• A was restrained from taking possession unlawfully.
• If a buyer is in settled and peaceful possession under a contract of sale, he can protect his
possession against all except the true owner.

“A contract for sale of immovable property is a contract that a sale of such property shall take
place on terms settled between the parties; it does not of itself create any interest in or charge on
such immovable property. However, still if a person who entered into possession over immovable
property under a contract for sale and is in peaceful and settled possession of the property with
the consent of the person in whom the title vests, he is entitled to protect his possession against
the whole world, excepting a person having a title better than what he or his vendor possesses. If
he is in possession of the property in part performance of the contract for sale and the
requirements of Section 53A are satisfied, he may protect his possession even against the true
owner.”

Contract to Reconvey the Property

Once the sale is made absolute by a valid transfer the vendor is divested of the ownership of the
property and does not retain any control or right over the property. Such a transfer cannot be
annulled or cancelled unilaterally by the vendor by executing a deed of cancellation.

A typical SA/GPA/WILL transfer involves:

1. Seller signs an agreement to sell.

SARA DHARWADKAR

2. Gives power of attorney to the buyer to act on their behalf (e.g., to manage or sell the
property).
3. Executes a will in favour of the buyer to bequeath the property.

The buyer assumes possession and control without a registered conveyance deed.

Scope of these instruments

Who uses this method?

• Buyers/Sellers trying to avoid stamp duty and registration costs.

• Individuals with black money, wishing to avoid the tax trail.
• People trying to circumvent:
• Development Authority conditions
• Leasehold prohibitions
• Capital gains tax
• ‘Unearned increase’ clauses in lease deeds

Ill-Effects of SA/GPA/WILL Transactions

1. No legal transfer of ownership.

2. Encourages tax evasion and black money.
3. Leads to title disputes, frauds, and litigations.
4. Complicates mutation and registration in public records.
5. Affects urban development and public interest.
6. Risks of revocation of GPA or challenging of will.
SARA DHARWADKAR

Suraj Lamp & Industries Ltd. v. State of Haryana & Anr., 2012

In Delhi and some other parts of India, a common practice had emerged where people tried to
bypass stamp duty and registration charges by transferring property through General Power of
Attorney (GPA), agreement to sell, and will, instead of a registered sale deed.

This informal method was often used to facilitate illegal or benami transactions, leading to a rise
in property disputes.

The Supreme Court held:

1. GPA sales are not valid transfers of ownership.

2. Ownership can only be legally transferred by a registered deed of conveyance.

3. GPA, agreement to sell, or will do not convey title or ownership to the purchaser.

4. These documents can be part of a larger transaction and can be used to seek specific
performance, but they do not substitute a registered sale deed.

Asha M. Jain v. Canara Bank, 2001

The “concept of power of attorney sales have been recognized as a mode of transaction” when
dealing with transactions by way of SA/GPA/WILL are unwarranted and not justified,
unintendedly misleading the general public into thinking that SA/GPA/WILL transactions are
some kind of a recognised or accepted mode of transfer and that it can be a valid substitute for a
sale deed.

Such decisions to the extent they recognise or accept SA/GPA/WILL transactions as concluded
transfers, as contrasted from an agreement to transfer, are not good law.

In Conclusion

1. No Transfer of Ownership or Title:

Transactions involving only an Agreement to Sell, General Power of Attorney, and/or Will do
not amount to a legal transfer of property.
• They do not convey ownership.
• They do not create any legal interest or title in the immovable property.
• Courts will not recognize such transactions as valid or complete transfers.

2. No Recognition for Mutation or Title:

These transactions cannot be relied on for:
• Mutation in municipal or revenue records.
SARA DHARWADKAR

• Establishing legal title to the property.

• Even leasehold properties require a registered deed of assignment for valid transfer.

3. Limited Validity under Section 53A (TP Act):

These instruments may have limited protection under the doctrine of part performance (Section
53A), but:
• They do not substitute a registered sale deed.
• They do not grant ownership rights or titles.

4. Need to Curb the Practice:

The Court strongly condemned this “pernicious practice” of using SA/GPA/WILL to affect
property transfers, especially to:
• Evade taxes, registration fees, and development authority rules.
• Hide black money transactions.
• This practice must come to an end to protect the legal sanctity of property transfers.

5. Genuine Transactions Still Valid:

The Court clarified that this judgment does not affect:
• Legitimate sale agreements that are steps towards a future sale.
• Powers of attorney used for genuine purposes (e.g., managing property, representing in legal
matters).
• Wills that are executed and proved according to law upon the death of the testator.

Section 55 : Rights and Liabilities of Buyers and Sellers

In the absence of a contract to the contrary, the buyer and the seller of immovable property
respectively are subject to certain liabilities and have the rights or such of them as are applicable
to the property sold.

Duties of Seller

Section Before Sale Breach Section After Sale Breach

55 (1) (a) Disclosure of material Void. 55 (1) (f) To give such possession of the Rescind
defect in the property property as its nature admits. contract.
or in the seller’s title
thereto.

55 (1) (b) Production of all 55 (2) Covenant for title (implied Pay
documents of title contract/covenant for damages.
relating to the property title).
which are in the
SARA DHARWADKAR

seller’s possession or
power.

55 (1) (c) Answer all relevant Rescind 55 (3) Delivery of title deeds:
questions put to him contract. proviso to s 55 (3)
by the buyer in respect
to the property or the
title thereto.

55 (1) (d) To execute a proper

conveyance of the
property.

55 (1) (e) To take due care of the Claim

property and all compens
documents of title ation.
relating thereto which
are in his possession.

55 (1) (g) To pay all outgoings Buyer

(public charges and not
rent accrued due in liable to
respect of the property pay
up to the date of the public
sale, the interest charges
on all encumbrances if there
on such property due was no
on such date, and, notice.
except where the
property is sold subject
to encumbrances, to
discharge all
encumbrances on the
property then
existing).

Rights of Seller

Before Sale After Sale

55 (4) (a) Entitled to the rents and profits of 55 (4) (b) Right to charge
the property till the ownership • Interest on unpaid price
thereof passes to the buyer. • Transfer of seller’s charge
• Exclusion of the charge
SARA DHARWADKAR

Duties of Buyer

Before Sale After Sale

55 (5) (a) Duty to disclose to the seller any 55 (5) (c) Duty to bear any loss arising from
fact as to the nature or extent of the destruction, injury or decrease
the seller’s interest in the property in value of the property not
of which the buyer is aware, but caused by the seller.
of which he has reason to believe
that the seller is not aware, and
which materially increases the
value of such interest.

55 (5) (b) Duty to pay or tender the purchase 55 (5) (d) Duty to pay outgoings.
money to the seller.

Rights of Buyer

Before Sale After Sale

55 (6) (b) Buyer’s charge 55 (6) (a) Where the ownership of the
property has passed to him, to the
benefit of any improvement in, or
increase in value of the property,
and to the rents and profits
thereof.

Duties of Seller

Section Before Sale Breach Section After Sale

55 (1) (a) Disclosure of material defect in Void. 55 (1) (f) To give such possession of
the property or in the seller’s title the property as its nature
thereto. admits.

55 (1) (b) Production of all documents of 55 (2) Covenant for title (implied
title relating to the property contract/covenant for
which are in the seller’s title).
possession or power.

55 (1) (c) Answer all relevant questions put Rescind 55 (3) Delivery of title deeds:
to him by the buyer in respect to contract. proviso to s 55 (3)
the property or the title thereto.

55 (1) (d) To execute a proper conveyance

SARA DHARWADKAR

of the property.

55 (1) (e) To take due care of the property Claim

and all documents of title relating compensati
thereto which are in his on.
possession.

55 (1) (g) To pay all outgoings (public Buyer not

charges and rent accrued due in liable to pay
respect of the property up to the public
date of the sale, the interest charges if
on all encumbrances on such there was
property due on such date, and, no notice.
except where the property is sold
subject to encumbrances, to
discharge all encumbrances on
the property then existing).

BEFORE SALE

Section 55 (1) (a) : Duty to disclose material defects in property and / or seller’s title

The seller is legally bound to disclose to the buyer:

• Any material defect in the property or in the seller’s title,
• Which the seller is aware of, and
• Which the buyer is not aware of, and
• Which the buyer could not discover with ordinary care.

Material Defect :

A material defect is one that:

• Fundamentally affects the buyer’s decision to purchase.
• Hampers the enjoyment or use of the property.
• Is not discoverable by mere inspection.

1. Defect in Property
• Weak foundations, street alignment issues, access problems.

2. Defect in Title
• Property held in trust, legal notices for demolition, encroachments, acquisition under Land
Acquisition Act.

Consequence of Non - Disclosure :

SARA DHARWADKAR

If the seller fails to disclose: - May make the contract void.

• It amounts to fraud or deliberate concealment.
• The buyer has the right to rescind the contract or refuse completion of the sale.

Section 55 (1) (b) : Duty to produce all documents of title relating to the property which are
in the seller’s possession or power

The seller has a legal duty to:

• Produce all relevant documents of title for inspection on the buyer’s request.
• Ensure documents in his possession or power are available within a reasonable time.

“Possession or Power” means:

• Documents actually held by the seller, or
• Documents he can obtain and produce without unreasonable effort or legal obstacles.

What is required:
• Inspection, not delivery of documents.
• The seller need not hand over documents until the entire purchase price is paid.

Production of documents not in possession of the seller can be insisted upon only by an express
term of the contract.

Where, on the sale and purchase of the land the description in the contract affords a sufficient
and satisfactory identification of the property sold without a plan, the buyer cannot, require at the
expense of the seller, require a plan to supplement the description.

Section 55 (1) (c) : Duty to answer all relevant questions

Section 55 (1) (d) : Duty to execute conveyance

The seller must execute the sale deed (conveyance) after receiving or being tendered the full
purchase price by the buyer.

●​ Execution of Conveyance “ The seller must sign and properly attest the sale deed.
●​ Registration : Must be done at seller’s behest; essential for transfer of ownership.
●​ Timing : Must be executed when the buyer tenders payment at a proper time and place.
●​ Contemporaneity : Execution and payment are presumed to occur simultaneously.
●​ Auction Sales : Auction purchasers can have a sale certificate issued in the name of the
nominee. Seller must comply.
SARA DHARWADKAR

●​ Delay in Execution : If unreasonable delay occurs, buyer may give notice making time of
essence.

Section 55 (1) (e) : Duty to take care of property conveyance

Duty applies from the date of the contract of sale to the delivery of possession or execution of the
conveyance.

Seller must take as much care as a reasonably prudent owner would.

●​ Position of Seller : Treated like a trustee of the property during this interim period.
●​ Maintenance : Must keep the property in reasonable repair.
●​ Protection: Must protect property from trespassers or any damage.
●​ Title Documents : Must also take care of documents of title in their possession.

Consequence of Breach : If the seller neglects this duty, the buyer is entitled to claim
compensation for any loss or damage caused.

Section 55 (1) (g) : Duty to pay all outgoings

The seller must pay all dues up to the date of sale, or up to the date of possession, if the contract
so specifies.

●​ Public Charges : Includes government revenue, municipal taxes, and other statutory dues.
●​ Rent : Any rent due on the property up to the date of sale/possession.
●​ Interest on Encumbrances : Must be paid unless property is sold subject to the
encumbrance.
●​ Encumbrances : Seller must discharge all encumbrances on the property unless agreed
otherwise.

The public authority is not bound by the agreement between buyer and seller. It levies dues on
the property and its current owner. Buyer is not liable if they purchased the property without
notice of existing statutory charges.

AFTER SALE

Section 55 (1) (f) : Duty to give such possession of the property as its nature admits

When Must Possession Be Given?

At the time property passes to the buyer (generally at the time of execution of the sale deed). It
may vary depending on contractual terms or the nature of the property.
SARA DHARWADKAR

●​ Must deliver possession : On buyer’s request and after buyer complies with contract
conditions (e.g., payment).
●​ Cannot avoid this duty : Even if the sale deed says the buyer must obtain possession
himself.
●​ Sale through court : Court must ensure delivery of possession, even if not specifically
prayed for.
●​ Failure to deliver : Buyer may rescind the contract.

Payment v. Possession
●​ Price unpaid : Seller not entitled to retain possession just because payment is pending.
●​ Dual enforcement : Both rights (to price & possession) may be enforced in one suit.
●​ Buyer sues without readiness : If buyer is not ready with the balance amount, court may
dismiss suit.

Nature of Possession
●​ Seller in possession : Must vacate & give vacant possession.
●​ Third-party in possession : Seller should try to get it vacated, especially for agricultural
land or trespassers.
●​ Tenant or usufructuary mortgagee : Buyer gets only symbolic possession, not actual
occupation

Section 55 (1) (2) : Duty to give covenant for title (implied contract/covenant for title).

Seller is deemed to contract that:

• The interest he professes to transfer actually subsists.
• He has the power to transfer it.

Buyer is entitled to:

• Good and marketable title free from reasonable doubt.
• Refuse performance if title is doubtful or unmarketable.
• Seller cannot seek specific performance unless he provides a satisfactory title.

Seller liable for damages:

• If he turns out to have no saleable interest, even without fraud.
• Cannot confer higher title than he holds.

Damages arise if:

• Selling non-transferable cantonment land as transferable.
• Selling encumbered land as unencumbered.
• Selling invalid mortgage debt.

Extent of buyer’s duty:

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• No legal duty on the buyer to investigate the seller's title.

• Mere suspicion doesn’t affect buyer’s remedies.
• Doctrine of Caveat Emptor (buyer beware) is not strictly applied.
• Buyer may sue for damages or refund if dispossessed due to defective title.

Covenant for Quiet Enjoyment

• Usual covenant for title includes one for quiet enjoyment.
• Covenant to refund does not apply if dispossessed by pre-emptor.
• Breach occurs only on actual delivery and disturbance.
• Limitation begins from the date of disturbance.

Covenant Runs with the Land

• Benefit of the covenant goes with the land:
• Can be enforced by every person in whom the interest vests.
• Includes pre-emptor.

Breach of Covenant
• Non-disclosure = Fraud.
• To set aside sale after conveyance, buyer must prove fraud.
• Damages = Market value at time of eviction.

Section 55 (1) (3) : Duty to give title deeds

Once full purchase money is paid:

• Seller must deliver all title deeds in his possession or power.
• Includes kabuliyats, counterpart leases, etc.

If buyer fails to ask for them and there’s a prior unregistered mortgage:
• Buyer is guilty of gross negligence.
• He is deemed to have constructive notice of the prior encumbrance.

Title Deeds in Case of Multiple Buyers

●​ Seller retains part of property : He may retain all title deeds.

●​ Whole property is sold to multiple buyers : Buyer of the lot of greatest value gets the
documents.
●​ Sales at different times : Last buyer gets the documents.
●​ Any buyer needs copies : Must be provided on request and at their cost.
●​ Safekeeping Holder : must keep documents safe, uncancelled, and undefaced, unless due
to accident (e.g., fire).
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Rights of Seller

Before Sale After Sale

55 (4) (a) Entitled to the rents and profits of 55 (4) (b) Right to charge
the property till the ownership • Interest on unpaid price
thereof passes to the buyer. • Transfer of seller’s charge
• Exclusion of the charge

BEFORE SALE

Section 55 (4) (a) : Right to Rents and Profits Until Transfer of Ownership

General Rule: Seller retains the right to rents and profits until ownership is transferred.

Agreement to Sell: Does not pass ownership, so the seller retains this right.
• Possession to Buyer: Upon transfer of ownership, seller must deliver possession.

If buyer takes possession before completion, they must:

• Enjoy profits, but
• Pay interest on unpaid purchase money.

Post-Ownership Transfer:
• If seller retains possession, he:
• Must account to the buyer for rents and profits.
• Cannot claim interest on unpaid purchase money.

Rule: Possession and interest are mutually exclusive.

• Applies even in compulsory acquisition: owner gets interest from date of dispossession.

AFTER SALE

Section 55 (4) (b) : Right to :

1. Interest on Unpaid Price

When ownership passes to the buyer but the purchase price is not fully paid, the seller is entitled
to interest on the unpaid amount.

The interest is calculated from the date possession is delivered, not from the date of the contract.
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However, if the seller retains possession after ownership has passed, they are not entitled to
interest — instead, they must account to the buyer for rents and profits. This rule ensures that the
same person cannot enjoy both interest on unpaid money and possession benefits.

2. Transfer of Seller’s Charge

The seller’s lien (right to charge the property for unpaid purchase money) is non-possessory —
the seller cannot keep the property just because payment is pending.

This charge is transferable to another person (assignee) through a registered deed.

The assignee steps into the shoes of the seller and can enforce the same charge.

In case there are multiple purchasers, the charge exists over the whole property, and the seller
can recover from any part — not just specific portions.

Exclusion of the Charge

The seller’s right to charge can be lost or excluded in specific circumstances:

• If the sale deed acknowledges full payment (even if not actually paid), this creates estoppel
against the seller. They cannot later claim a charge unless they prove non-payment.

• If the buyer makes a promissory note to a third party at the seller’s direction, the charge is lost
— the buyer then owes the third party, not the seller.

• If the seller directs the buyer to pay the purchase money to someone else (like a creditor or
illegitimate son), the lien is lost — this is considered a waiver of the seller’s charge.

• Mere taking of a promissory note or other personal security does not cancel the charge unless
it’s meant to be in substitution for the sale price itself.
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Section 56 : Marshalling

1. The owner owns two or more properties.

2. He mortgages all of them to one mortgagee.

3. He later sells one or more properties to another person (subsequent purchaser).

4. The purchaser can require the mortgagee to recover the debt from the unsold property first.

5. This right exists only in the absence of a contract to the contrary.

6. Marshalling must not harm:

●​ The mortgagee’s rights

●​ Rights of persons under the mortgagee
●​ Bona fide purchasers or others with a consideration based interest.

Aim : to protect the interest of a subsequent purchaser by ensuring that the mortgage debt is
satisfied, as far as possible, from the property that remains with the original owner (mortgagor)
and not from the one already sold to the purchaser.

Limitation :

1. No prejudice to the mortgagee:

• Mortgagee cannot be forced to forego his right of sale over specific property.

2. Debt must be recoverable:

• Marshalling fails if unsold properties cannot cover the full mortgage debt.

3. No right without common debtor:

• All properties must belong to the same mortgagor.

4. No marshalling between two purchasers generally:

• They must contribute ratably unless otherwise agreed.

Marshalling will not apply if there’s an express or implied contract that excludes this right.

Such a contract can exist:

• Between mortgagor and mortgagee, or
• Between mortgagor and purchaser.
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Section 57 : Discharge of Encumbrances on Sale

The purpose is to simplify and promote saleability of immovable properties. Buyers are reluctant
to buy encumbered properties.

Hence, Section 57 ensures:

●​ Encumbrances are secured via deposit, and
●​ The buyer gets a clean title.

This section applies when immovable property subject to encumbrances is sold:

1. By the court,
2. In execution of a decree, or
3. Out of court, if the court is approached for directions.

Application
●​ Any party to the sale (e.g., purchaser, seller, decree-holder).
●​ Application is made to the Court, which then exercises its discretion.

(a) Payment into Court

Court may allow or direct payment into court as follows:
1. In case of annual or monthly recurring charges (like maintenance or annuities):
●​ A lump sum is to be deposited into court.
●​ This amount must be sufficient, when invested in Central Government securities, to
generate interest income to pay the recurring charge.

2. In case of a capital sum charged on the property:

●​ Deposit of the exact sum charged, along with interest due, into the court.

3. Additional Contingency Amount:

Court may require an additional amount to cover:
●​ Costs,
●​ Expenses,
●​ Future interest,
●​ Other contingencies.
●​ This amount must not exceed 10% of the principal, unless special reasons (to be
recorded) justify more.

(b) Declaration that Property is Freed from Encumbrance

After the required sums are deposited, and notice is served to the encumbrancer:
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●​ The court may declare the property free from the encumbrance.
●​ May dispense with notice if it records reasons in writing.

(c) Payment/Distribution of Money

After giving notice to the people interested in the deposited money:
●​ The court may order payment or transfer to persons entitled.
●​ May also issue directions regarding the application or distribution of the money (either
principal or income).

(d) Right of Appeal

●​ Any declaration, order, or direction under this section is appealable as if it were a decree.
Mortgage
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Mortgage

Section 58 : “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money” and

“mortgage-deed” defined

A mortgage is the transfer of an interest in specific immovable property for the purpose of
securing the payment of
●​ money advanced or to be advanced by way of loan,
●​ an existing or future debt,
●​ or the performance of an engagement which may give rise to a pecuniary liability.
Eg. A borrows seeds from B, and mortgages his field to secure its return. This
undertaking to repay or return the seeds is an engagement giving rise to a pecuniary
liability.

Essentials :

(i) Parties to a mortgage;

●​ A minor cannot affect a mortgage but a guardian of a minor can affect a valid mortgage
with the sanction of the court.
●​ A partner of a commercial firm, a pardanashin woman, one of the several co-owners, can
affect a valid mortgage. In case of joint tenants, mortgage by one servers the tenancy and
in case of more than one mortgage their share each is liable jointly and severally.

(ii) Transfer of an interest;

●​ In a mortgage there is, necessarily, a transfer of an interest in the property for a specific
purpose.
●​ Personal liability v. Mortgage : If A borrows money from B and promises to sell his
property if he cannot repay the loan, this is not a mortgage. Why? Because no interest in
the property is transferred to B (the lender). It’s just a personal obligation, a backup plan
not a legal transfer of rights in the property.
●​ A covenant by the owner not to sell his property till the loan is repaid does not make this
a transaction of mortgage.

(iii) In a specific immovable property;

●​ Property should be sufficiently identified.
Eg. A borrows money from B and undertakes to repay it within a period of two years.
The contract also provides that if A fails to repay the loan within a period of two years, B
can sell any of his properties. A owns three properties, X, Y and Z. This is not a
transaction of a mortgage.
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(iv) the purpose is to secure the repayment of money advanced or to be advanced/or is for
performance of an engagement that may give rise to a pecuniary liability.
●​ The date of execution of the mortgage is effective even if the mortgage money is
undertaken to be advanced in future.
●​ If there is no consideration, the mortgage is void.

The transferor is called a mortgagor, the transferee a mortgagee.

The principal money and interest of which payment is secured for the time being are called the
mortgage-money.
The instrument (if any) by which the transfer is effected is called a mortgage-deed.

Raghunath v. Amir Baksh

Facts:
On 3rd May, A mortgaged his property to B through a mortgage deed.
The money was to be advanced by B on 10th May.
On 7th May, before the money was advanced, A sold the same property to C.
C claimed he was not bound by the mortgage since the money had not been paid at the time of
his purchase.

Issue:
Whether C, the purchaser, was bound by the mortgage even though the mortgage money was not
advanced until after his purchase.

Judgment:
The court held that the mortgage became effective on 3rd May, the date of its execution, not the
date the money was advanced.
A mortgage can be made to secure a future debt, and it is valid from the date of execution.
Therefore, C would be bound by the mortgage if he had actual or constructive notice of it.

Mortgage v. Charge

Every mortgage is a charge, because it also secures a debt. But not every charge is a mortgage,
because a charge does not transfer interest in the property.

Mortgage
Defined under: Section 58 of the Transfer of Property Act.
Essence: Involves a transfer of an interest in specific immovable property to secure a debt.
Creates a right in rem: The mortgagee gets a real, legal interest in the property.
Binding on all subsequent transferees, regardless of whether they had notice.
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Eg. A house is mortgaged to a bank. Even if the owner sells the house later, the mortgage still
binds the new buyer.

Charge
Defined under: Section 100 of the Transfer of Property Act.
Essence: No transfer of interest in the property—just a right to receive payment from a specific
property or fund.
Weaker than a mortgage: It is “a little more than a personal obligation.”
Not binding on bona fide transferees for value without notice, but is binding on:
Transferees with notice.
Transferees without consideration.
Eg. An agreement that certain property will be used to pay maintenance allowance or settle a
debt.

Right of Redemption v. Right of Foreclosure

Right of Redemption (Section 60, Transfer of Property Act)

This is the statutory right of the mortgagor (borrower) to reclaim their property by repaying the
full loan.
Redemption = Release – Once the debt is paid, the property is liberated from the mortgage.

The mortgagee must return:

• All documents,
• Possession of the property (if any),
• And release the mortgagor from the debt.

This is not a favor but a legal right of the mortgagor, enforceable even in court.

Right of Foreclosure (Section 67, Transfer of Property Act)

This is the right of the mortgagee (lender) to ask the court to either:
• Bar the mortgagor’s right to redeem, or
• Order a sale of the property to recover dues.

Foreclosure happens when the mortgagor fails to repay the loan in time.

A mortgagee cannot just take over or sell the property himself. He must approach the court for
foreclosure or sale. The old rule that allowed forfeiture of the property on non-payment is no
longer valid.
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Limitation Period : The right to foreclosure must be exercised within 12 years from the date it
arises, or it becomes time-barred.

This time starts:

• From the date fixed for repayment, or
• From the date of mortgage, if repayment was due immediately.

Section 58 (b) : Simple Mortgage

A Simple Mortgage is a transaction where:

●​ The mortgagor (borrower) does not deliver possession of the mortgaged property.​

●​ The mortgagor personally binds himself to repay the mortgage money.​

●​ There is an express or implied agreement that, upon default, the mortgagee (lender) can
have the property sold and use the sale proceeds to recover the mortgage money.

●​ Mortgagor retains possession and enjoyment of the property.​

●​ The right to sell (not to foreclose) the mortgaged property is granted to the mortgagee in
case of default.​

●​ No foreclosure is allowed.​

●​ Registration is mandatory even if the mortgage amount is less than ₹100.

Mortgagee’s Remedies:
1.​ Suit for recovery of money (simple money decree).
2.​ Suit for sale of mortgaged property (decree for sale).

Section 58 (c) : Mortgage By Conditional Sale

A mortgage by conditional sale is a transaction where:

The mortgagor ostensibly sells the property to the mortgagee with a condition that:

(i) the mortgagor ostensibly sells the mortgaged property,

(ii) this ostensible sale is subject to a condition, that
(iii) on default of payment by a certain date, the sale shall become absolute;
(iv) if payment is made, the sale shall become void; and
(v) if payment is made the buyer would return the property to the seller.
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“Ostensible sale” = apparent sale, but not an actual sale.

The mortgagor (borrower) is not personally obligated to repay the mortgage loan.

If the mortgagor defaults, the creditor (mortgagee) cannot sue the mortgagor for money or obtain
a money decree against him.

If the amount secured is ₹100 or more, registration of the deed is mandatory.

Mortgagee’s Remedies:
1.​ Suit for foreclosure, not sale : That means they ask the court to bar the mortgagor’s right
to redeem the property permanently if repayment doesn’t happen.

It is mandatory that in a mortgage by conditional sale, the condition must be embodied in the
document which effects or purports to effect the sale.

Mortgage v. Sale with Condition of Re-purchase ​

If the sale and repurchase condition are in a single document, courts presume it to be a mortgage
by conditional sale.

Burden of proof lies on the person alleging the transaction to be a mortgage.

The true intention of the parties is the test, not the form of the document:
●​ If the intention was to create a security for a debt → it’s a mortgage.
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●​ If the intention was a sale, with a mere option to buy back, → it’s a sale with a repurchase
clause.

Right of Redemption (Mortgage) v. Right to Re Purchase (Sale)

Right of Redemption (Mortgage)

●​ What it is: A legal (statutory) right that always belongs to the mortgagor (borrower).
●​ What it means: Even if the mortgagor fails to repay the loan within the time mentioned in
the contract, he still has the right to get his property back by repaying the loan.
●​ Until when : This right continues until the mortgagee (lender) goes to court and gets a
decree of foreclosure (which legally ends the mortgagor’s right).
●​ Can’t be taken away by any contract or agreement.

Eg. A borrows ₹5 lakhs from B and mortgages his land. The contract says A must repay in 5
years. Even if A is late, he can still repay and take back his land—unless B files a foreclosure
suit and the court ends that right.

Right to Re Purchase (Sale)

●​ What it is: A contractual right it’s not protected by law unless it's clearly mentioned in the
agreement.
●​ What it means: The original seller can only buy back the property within the specific time
mentioned in the agreement.
●​ Until when : After time expires? The right is lost permanently. There’s no right to redeem
like in a mortgage. If the seller fails to re-purchase in time, he can’t get the property back.

Eg. A sells land to B for ₹5 lakhs, with a written condition that A can buy it back within 3 years.
If A fails to do so in 3 years, the land belongs to B completely and permanently.

Chennammal v. Munimalaiyan

1.​ A took a loan from B and created a simple mortgage on 3 properties.

2.​ He couldn’t repay the loan on time.
3.​ So, A and B made another agreement: A sold one of the properties to B for ₹3,000, with a
right to repurchase within 3 years.
4.​ Possession of the property was given to B.
5.​ After 3 years passed, A went to court and filed a suit to redeem the mortgage.
6.​ B said: “Too late! This was a sale with a right to repurchase, and that time has expired.”

Issue : Right of Redemption (Mortgage) or Right to Re Purchase (Sale) ?

Court’s Reasoning :
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The Court looked at 5 criteria

●​ Only one document was used → suggests mortgage, not sale.

●​ Price paid was only 1/4th of the property’s value → also suggests a mortgage (not a fair
sale).
●​ Therefore, the court presumed it was a mortgage by conditional sale.
●​ So, A still had a right to redeem the property, even after 3 years.

Section 58 (d) : Usufructuary Mortgage

A mortgage where:
Possession of property is delivered to the mortgagee, or the mortgagor binds himself to deliver
possession.
Mortgagee is entitled to retain possession until the mortgage money is repaid.

Mortgagee may receive rents and profits:

• In lieu of interest, or
• Towards repayment of mortgage money, or
• Partly towards both.

Delivery of possession of the property is mandatory, and unless there is a clause in the deed
providing for possession going to the mortgagee there cannot be a usufructuary mortgage.

No personal liability of the mortgagor.

Remedies :
o Mortgagee cannot foreclose or sue for sale of mortgage-property.
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o Mortgagee’s right to retain possession is for an indefinite period till the loan is repaid.

However, if it is a personal covenant to pay and a right of sale in default it is not a usufructuary
mortgage, but an anomalous mortgage. It would be a combination of a simple and a usufructuary
mortgage and if after the expiry of the time limit it becomes a mortgage by conditional sale, it is
a mortgage usufructuary by conditional sale.

Ordinarily, a usufructuary mortgagee is not entitled to institute a suit for sale but if it is a
combination of a simple and a usufructuary mortgage, the two rights are independent and the
mortgagee may sue for sale although he may have given up possession and the right accrues
immediately after due date is passed.

Any lease by the mortgagee (to tenants) = underlease. It automatically ends when the mortgage is
redeemed.

Registration is mandatory where the sum of money secured is Rs. 100 or more.

Usufructuary Mortgage v. Zuripeshgi Lease

Point of Usufructuary Mortgage Zuripeshgi Lease

Difference

1. Legal Between debtor and creditor May not involve a debtor-creditor

Relationship (mortgagor and mortgagee). relationship.

2. Right of Yes, inherent right of mortgagor to No right of redemption; lessee vacates

Redemption redeem property. at end of lease term.

3. Primary Acts as security for loan repayment Meant to secure the tenant's advance
Purpose money, not a loan repayment.

4. Possession Mortgagee may have actual or Lessee always has actual possession of
constructive possession; mortgagor property.
can stay as lessee.

5. Nature of Based on a loan secured by property. Lump-sum payment in exchange for

Transaction fixed-term use of property.

6. End of Ends with redemption by mortgagor. Ends with expiry of lease term;
Transaction property returned to lessor
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While both involve possession and advance money, a usufructuary mortgage is a loan-secured
transaction with redemption rights, whereas a zuripeshgi lease is a leasehold arrangement with
no redemption rights and often no creditor-debtor dynamic.

Nidha Sah v. Murli Dhar

The intention of the parties, presence of debt, security, repayment clause, and right of redemption
are critical to determining whether a transaction is a mortgage or a lease.

Just naming a document a “mortgage deed” doesn’t make it one — courts will examine
substance over form.

Section 58 (e) : English Mortgage

A mortgage where:

●​ The mortgagor binds himself personally to repay the mortgage money on a certain date;
●​ The property is absolutely transferred to the mortgagee;
●​ But subject to a proviso for re-transfer to the mortgagor on repayment as agreed.

Right of Mortgagee:
The mortgagor retains a legal right of redemption, which is treated as an estate in land.

Essentials of an English Mortgage:

1. Existence of a debt – loan taken by mortgagor.
2. Absolute transfer of mortgaged property to the mortgagee.
3. Binding covenant to repay on a specific date.
4. Proviso for re-transfer to mortgagor upon repayment.

Remedy of Mortgagee: Suit for sale, not foreclosure.

Ownership: Passes to mortgagee immediately, but is revested on payment.

Possession: Mortgagee can take possession from the time of execution.

Registration: Mandatory where money is secured ≥ ₹100.

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Section 58 (f) : Mortgage By Deposition of Title Deeds

A transaction where a person delivers title deeds of immovable property to a creditor or his
agent.

With intent to create a security thereon for present or future debt.

No written document or registration required.

Essentials :
●​ Existence of Debt – Present or future.
●​ Delivery of Title Deeds – Actual or constructive delivery to creditor/agent.
●​ Intention to Create Security – Clear intention that property is security for repayment.
●​ Constructive delivery is valid when loan is increased on the same security.

Territorial Restrictions :
●​ Can only be created in notified towns: e.g., Calcutta, Madras, Bombay, Simla.
●​ If outside notified areas → not a valid mortgage.

Documents Considered as Title Deeds :

●​ Original documents showing ownership/title
●​ Certified copies may suffice if originals are lost
●​ Patta, hundi + agreement + tax receipt can also suffice
●​ Mere tax receipt/plan/copy → Not enough
●​ If land has structures → Mortgage covers both land and structures

Remedy of Mortgagee :
●​ Mortgagee can file a suit for sale of mortgaged property (like simple mortgage).
●​ No right of foreclosure.

State of Haryana v. Narvir Singh

●​ The State of Haryana (appellant) had sanctioned a loan to Narvir Singh (respondent).
●​ As security for repayment, the respondent deposited title deeds of certain immovable
property with the appellant.
●​ A memorandum was also drafted relating to this transaction.
●​ The State contended that this transaction was not valid as a registered instrument of
mortgage had not been executed.
●​ The issue was whether such a mortgage required registration under Section 59 of the
Transfer of Property Act, 1882 and Section 17(1)(c) of the Indian Registration Act, 1908.

The Supreme Court upheld the validity of the mortgage by deposit of title deeds and made the
following key rulings:
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1. Essence of Mortgage under Section 58(f):

A mortgage by deposit of title deeds is complete when:
• The debtor deposits the title deeds with the creditor, and
• There is intent to create security over immovable property.

2. No need for registration under Section 59:

Unlike other types of mortgage (simple, English, usufructuary, etc.), mortgage by deposit of title
deeds does not require a registered instrument under Section 59.

3. Memorandum recording the deposit:

• If the memorandum does not include any terms or conditions, it is merely evidential and does
not require registration.
• However, if it incorporates terms and conditions (such as repayment schedule, rights,
obligations), it becomes the instrument of mortgage and is compulsorily registrable under
Section 17(1)(c) of the Registration Act, 1908.

Rachpal v. Bhagwandas

If the parties intend to reduce the bargain to writing, then such a document is not merely
evidentiary and must be registered, as it forms an integral part of the mortgage transaction.

Section 58 (g) : Anomalous Mortgage

A mortgage that is not:

• a Simple Mortgage
• a Mortgage by Conditional Sale
• a Usufructuary Mortgage
• an English Mortgage
• a Mortgage by Deposit of Title Deeds

It can be a combination of two or more types of mortgages.

Execution : Must be in writing and must be attested.

Ramkinker v. Satya Charan

Section 58(e) only deals with the form and not the substance. Substantial rights are dealt with in
sections 58(a) and 60. Whatever form is used, nothing more than an interest is transferred, and
that interest is subjected to the right of redemption.
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MODE OF EXECUTION

Section 59 : Mortgage When To Be By Assurance

1. Where the principal money secured is ₹100 or more:

• A mortgage (other than by deposit of title deeds) can be affected only by a registered
instrument,
• Signed by the mortgagor, and
• Attested by at least two witnesses.

2. Where the principal money secured is less than ₹100:

Mortgage may be created either:
• By a registered instrument signed and attested as above, or
• (Except in the case of a simple mortgage) by delivery of possession of property.

3. Simple Mortgage:
• Must always be executed through a registered deed, regardless of the loan amount.

●​ Must Be In Writing :
Applicable to all mortgages except those by deposit of title deeds.
Must be in writing if the loan amount is ≥ ₹100.
Oral agreements or possession are insufficient to create a mortgage.
Applicable to all kinds except equitable mortgage (Section 58(f)) - title deeds.

●​ Signature by Mortgagor :
The deed must be signed by the mortgagor or their authorised agent.
Illiterate mortgagor can put a thumb impression or mark.
Signature can be handwritten, typed, or facsimile.
Signature implies intention to transfer interest in the property.

●​ Attestation :
Requires at least two witnesses to attest the execution.
Invalid attestation = No mortgage/charge, but:
• Deed may be admissible to prove personal covenant to repay.
If execution is denied, one attesting witness must testify.
• Execution admitted → attestation still needs proof.
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RIGHTS OF MORTGAGOR

Section 60 : Right of Redemption

Statutory Right: Under Section 60 of the Transfer of Property Act, 1882, the right of redemption
is a legal and statutory right available to the mortgagor.

Equitable Principle: Rooted in the English doctrine of equity of redemption - “Once a mortgage,
always a mortgage and nothing but a mortgage.”

This ensures that no clause in the mortgage deed can prevent the mortgagor from redeeming the
property once the debt is repaid.

A mortgage cannot be converted into a sale or any irrevocable transfer merely by contract.

Even if the mortgagee enters possession or inserts penal conditions, the right to redeem remains
intact until:

●​ It is lawfully extinguished.
●​ Mortgagor renounces it himself.
●​ Property is sold under a valid foreclosure decree or sale.

A right of redemption being a statutory right can only be extinguished by

(i) the act of the parties; or
(ii) by a decree of the court.

Pomal Kanji Govindji v. Vrajlal Karsandas Purohit

The mortgagor’s right to redemption cannot be fettered by any stipulation in the mortgage deed.
The transaction remains a security for repayment, not an absolute transfer of ownership.

Exercise of Right of Redemption

The mortgagor can redeem the property in 3 ways:

(a) By paying/tendering mortgage money

●​ Must be done after the principal money has become due.
●​ Payment must be made at a proper time and place, unless waived by the mortgagee.

(b) By depositing the mortgage money in court

●​ The mortgagor may deposit money in court under Section 83 TPA, even if the mortgagee
refuses to accept it.

(c) By filing a suit for redemption

●​ A redemption suit can be filed if the mortgagee refuses to reconvey property.
●​ Must be filed before the right is extinguished by foreclosure or sale.
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After this, the mortgagee must :

(a) Deliver the mortgage deed and all related documents in his possession;
(b) Restore possession of the property (if he had taken it);
(c) At the mortgagor’s cost, either:
●​ Re-transfer the property to the mortgagor or a third party, or
●​ Acknowledge in writing (and register, if required) that the mortgagee’s interest has
ended.

Mortgagee can require reasonable notice before the mortgagor tenders repayment, especially
when no time was fixed for repayment.

If a property is mortgaged as a whole, then no co-owner or part-owner can redeem only their
share of the property by paying just their portion of the loan. - Because the mortgage is on the
entire property, not divided shares.

Exception : If the mortgagee has already acquired either party’s share in the mortgaged property.

Then, the person whose share was not acquired can redeem the rest by paying the proportionate
mortgage money.

Because now the mortgagee is also a co-owner, and the mortgage on that part is effectively gone
so it’s fair to allow the remaining mortgagor to redeem their portion.

Clog on Redemption

A “clog” is any obstruction or restriction imposed by the mortgagee to prevent the mortgagor
from exercising their right to redeem.

A clog is void in equity courts that do not allow mortgagees to exploit borrowers.

Prevents oppressive or unconscionable terms that effectively strip the mortgagor of redemption
rights.

SB Narain Dass v. Surta

A executed a mortgage of his land in favour of B, with delivery of possession.

B had stipulated a very high rate of interest.
The rate of interest was, in fact, higher than what is permissible under the Punjab Relief of
Indebtedness Act, 1934.
B enjoyed the benefits of the land and appropriated its income for a period of 60 years.

Thereafter, without rendering of accounts and without even filing a suit for foreclosure of the
mortgage, B filed a suit in a court of law for a declaration of title to the property.
The court dismissed his suit and noted that B had remained in possession of the property for a
period of over 60 years and had appropriated the fruits of the land.
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Since he had not followed the procedure for foreclosure of the mortgage and had not even settled
any accounts, the terms of the mortgage operate as a clog on A's right of redemption. The
mortgage, according to the court, was deemed to have been redeemed during this period, with the
mortgage debt fully discharged.

Section 60 A : Obligation to Transfer to Third Party Instead of Transference to Mortgagor

When a mortgagor is entitled to redeem the mortgage (i.e., repay the loan and get the property
back), he can choose to have the mortgagee assign (transfer) the mortgage rights to a third party
(instead of just re-transferring the property to him).

Any encumbrancer (like a second mortgagee, or a person who has some charge or lien on the
property) can also demand that the mortgage be assigned to them, not just the mortgagor.

If multiple people ask for this:

●​ The request of an encumbrancer beats the mortgagor’s.
●​ Between two encumbrancers, the earlier one gets priority.
​
Eg. A mortgages to B. Then A creates a second mortgage to C.
Now when redemption time comes:
A wants B to assign to X.
But C wants B to assign to him.
C wins, because he’s an encumbrancer.
If D is a third mortgagee, and also makes a request, C’s (earlier) request will prevail over D’s.

Exception: Not Applicable Where Mortgagee is in Possession : If the mortgagee is or has been in
possession of the property (e.g., under a usufructuary mortgage), this section does not apply.
Because in such cases, the mortgagee’s interest is not just a money debt they may have been
enjoying the property, collecting rents, etc., and a mere assignment doesn’t make sense in the
same way.

Section 60 B : Right to Inspection and Production of Documents

As long as the right of redemption exists, the mortgagor has the:

●​ Right to inspect, copy, or extract from the documents of title

●​ That are in the possession or control of the mortgagee
●​ At reasonable times, upon request and at the mortgagor’s own cost
●​ Plus, any reasonable expenses the mortgagee incurs for facilitating this
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Section 61 : Right to Redeem Separately or Simultaneously

Where a mortgagor has created two or more mortgages in favour of the same mortgagee, and the
principal amounts have become due, the mortgagor can:

• Redeem any one mortgage individually (separately),

• Redeem multiple mortgages together,

Unless there’s a clear contractual provision saying otherwise.

Section 62 : Right of Usufructuary Mortgagor to Recover Possession

In a usufructuary mortgage, the mortgagor has a right to recover:

• Possession of the mortgaged property,
• The mortgage deed, and
• All related documents in the mortgagee’s custody,
→ After the mortgage debt is satisfied (either fully or partially, depending on the terms).

In usufructuary mortgages, a suit for redemption is essentially a suit for possession.

When can redemption occur when mortgage debt is not satisfied ?

• There is misconduct on the part of the mortgagee (e.g., misappropriation of profits),
• Then, equity may allow earlier redemption.

Section 63 : Accession to Mortgaged Property

If mortgaged property in the possession of the mortgagee receives any accession (i.e., addition or
improvement) during the period of mortgage:

The mortgagor is entitled to such accession upon redemption, unless there is a contract to the
contrary.

A. Natural Accession
• Arises naturally (e.g., expansion of village land, river alluvion).
• Automatically reverts to the mortgagor upon redemption.
• Example: Increased area of a mortgaged village or land erroneously included with the
mortgage.

B. Acquired Accession
• Result of effort or expense, generally by the mortgagee.
• Two categories:
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1. Separable Accession
• Can be enjoyed or possessed independently without harming the principal property.
• Acquired at the expense of the mortgagee.
• The mortgagor may recover the accession only if he pays the cost of acquisition at redemption.
• If not paid, it is deemed abandoned.
• Even if the acquisition was made benami (in the name of a relative), the mortgagor’s right
remains unaffected.

2. Inseparable Accession
Cannot be separately enjoyed or removed without damaging the principal property.
Must be delivered to the mortgagor along with the property at redemption.
•Mortgagor is liable to reimburse the cost as part of the principal if:
-​ The accession was necessary to preserve the property from destruction/forfeiture/sale, or
-​ Was made with the mortgagor’s consent.
In such cases, the mortgagee is entitled to interest at the contractual rate, or 9% per annum if no
rate is specified.
The profits arising from the accession shall be credited to the mortgagor.

Accessions Made Without Consent of Mortgagor

If inseparable improvements are made without the mortgagor’s consent, the mortgagee:
●​ Cannot claim compensation or cost.
●​ The accession becomes part of the mortgaged property and goes back to the mortgagor at
redemption free of cost.

Where the mortgage is usufructuary, and the accession is made at the expense of the mortgagee:
The profits from such accession, unless otherwise agreed, are to be set off against the interest
payable on the amount spent for acquiring the accession

Section 63 A : Improvements to Mortgaged Property

If mortgaged property in possession of the mortgagee is improved during the continuance of the
mortgage:
• The mortgagor is entitled to the improvement at redemption.
• Mortgagor is not liable to pay the cost of such improvements except as stated in sub-section
(2).
• The rule applies in the absence of a contract to the contrary.

Exception – When Mortgagor is Liable

• Where the improvement was made at the cost of the mortgagee and falls under any of the
following three categories:
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1. Necessary to preserve the property from destruction or deterioration, or

2. Necessary to prevent the security from becoming insufficient, or
3. Made in compliance with a lawful order of any public servant or authority,

Then, the mortgagor must pay:

• The proper cost of such improvements,

Treated as an addition to the principal money, with interest at:

• Contractual rate, or
• 9% per annum if no rate is fixed.
• Any profits arising from such improvements must be credited to the mortgagor.

Essentials of Valid Improvement under Section 63A

1. Possession: The mortgaged property must be in the possession of the mortgagee.

2. Timing: Improvement must be made during the subsistence of the mortgage.

3. Entitlement: Upon redemption, the mortgagor is entitled to the improvements (unless

contracted otherwise).

4. Cost-bearing by mortgagor (only if):

• Improvement was:
a. To preserve property from destruction or deterioration, or
b. To prevent insufficiency of security, or
c. In compliance with a lawful public order.
• And was made at the mortgagee’s cost.

5. Cost recovery:
• Proper cost is added to the principal money.
• Interest is payable either at the contractual rate or at 9% p.a.

6. Profits arising from the improvements must be credited to the mortgagor.

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Section 64 : Renewal of Mortgaged Lease

Where the mortgaged property is a lease, and the mortgagee obtains a renewal of the lease, the
mortgagor, upon redemption, shall, in the absence of a contract by him to the contrary, have the
benefit of the new lease.

DUTIES OF THE MORTGAGOR

Section 65 : Implied Contracts of Mortgagor

In the absence of a contract to the contrary, the mortgagor is deemed to enter into certain implied
covenants with the mortgagee. These covenants are presumed by law to ensure that the
mortgagee’s interest and security in the mortgaged property is not prejudiced.

These obligations are automatically annexed to the mortgage contract, unless explicitly excluded
by agreement.

He cannot:
• Derogate from the grant
• Deny the title of the mortgagee
• Set up the title of a third party
• Deny ownership or transferability of the mortgaged property
​
Which are implied :
(a) Covenant of Title
(b) Covenant to Defend Title
(c) Covenant to Pay Public Charges
(d) Leasehold Property Covenants
(e) Covenant Regarding Prior Mortgages

Section 65 A : Mortgagor’s Power to Lease

A mortgagor in lawful possession of the mortgaged property retains the statutory power to lease
the property.

Such leases are binding on the mortgagee, subject to certain statutory conditions and terms of the
mortgage deed.

The mortgagor, while lawfully in possession, may lease the mortgaged property, and such leases
will be binding on the mortgagee.

To ensure the lease is binding on the mortgagee, the lease must comply with the following
conditions:
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(a) Ordinary Course of Management

• Lease must be made:
• In the ordinary course of prudent management of the property.
• In accordance with local law, custom, or usage.

(b) Best Rent, No Premium or Advance Rent

• Lease must:
• Reserve the best rent that can be reasonably obtained.
• Not involve any premium paid or promised.
• Not allow advance rent to be paid.

(c) No Covenant for Renewal

• Lease must not contain a covenant for renewal.
• If it does, such a covenant is not binding on the mortgagee.

(d) Timely Effect

• The lease must take effect from a date not later than six months from the date it is made.

(e) Leases of Buildings – Additional Rules

• Duration must not exceed three years.
• The lease must include:
• A covenant for payment of rent.
• A condition of re-entry if rent is not paid within a specified time.

Role of the Mortgage Deed

• Sub-section (1) applies only if there is no contrary intention in the mortgage deed.
• The conditions in sub-section (2) may be varied or extended by the mortgage deed.
• When varied, they will operate as if statutorily included in Section 65A.

Section 66 : Waste By Mortgagor In Possession

A mortgagor in possession is:

• Not liable for mere deterioration of the mortgaged property through natural wear and tear.

Liable if he commits any voluntary act that is destructive or permanently injurious to the
property and:
• The security is already insufficient, or
• The act would render the security insufficient.
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Standard of Care : Mortgagor is deemed to take care of the mortgaged property as any prudent
owner would.

Section 67 : Right To Foreclosure or Sale

In the absence of a contract to the contrary, a mortgagee has a statutory right, after the mortgage
money becomes due and before the mortgagor redeems the mortgage, to approach the court for:
• A decree of foreclosure, or
• A decree of sale.

Pre-requisites for Invoking Section 67

1. No contract to the contrary must exist.
2. Mortgage money must have become due.
3. Action must be taken before:
●​ A decree for redemption has been passed.
●​ The mortgage-money has been paid or deposited in court.

Only then can the mortgagee seek a decree from court.

When Does A Right To Foreclose Arise ?

1. No time fixed for repayment:

• Right arises from the execution of the mortgage deed, or
• From the date of demand and refusal by mortgagor.

2. Time fixed for repayment:

• Right arises after expiry of the stipulated time.

3. Default in payment of interest:

• Does not trigger foreclosure unless specifically contracted.
• Mortgagee may, however, issue a notice of demand or file suit.

4. Instalment repayment:
• Right arises each time an instalment is defaulted.

Limitation Period for Filing a Foreclosure Suit

• 30 years from the date mortgage money becomes due.

• Applies also to personal claims if the sale proceeds are insufficient.
• If no date is fixed, time runs from execution of the mortgage deed.
• Suit filed after 30 years is barred by limitation.
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Section 67A : Right To Foreclosure or Sale

The mortgagee must sue on all mortgages together when:

1. Multiple Mortgages:
• The mortgagee holds two or more mortgages.

2. Same Mortgagor:
• All mortgages are executed by the same mortgagor.

3. Same Kind of Decree:

• The mortgagee is entitled to obtain the same kind of decree (either foreclosure or sale) under
Section 67 for each mortgage.

4. Suit Filed on One Mortgage:

• If the mortgagee sues on one of the mortgages.

5. All Debts Due:

• The mortgage-money has become due under all the mortgages.

6. No Contract to the Contrary:

• There is no express contract allowing separate suits.

Waiver : The mortgagor may waive the benefit of this rule. Waiver can be implied if the
mortgagor fails to object in time during the litigation.

A husband and wife are not one entity. If they own and mortgage property separately and jointly,
a suit to enforce a joint mortgage does not bar a separate suit by either for their individual
mortgages.

The mortgagee has a right to sue for the mortgage-money only

(i) Where the mortgagor binds himself to repay the same; or
(ii) Where, by any cause other than the wrongful act or default of the mortgagor or mortgagee,
the mortgaged property is wholly or partially destroyed; or
(iii)The security is rendered insufficient, and
(iv)The mortgagee has given the mortgagor a reasonable opportunity of providing further
security enough to render the whole security sufficient, and the mortgagor has failed to do so; or
(v) Where the mortgagee is deprived of the whole or part of his security by or in consequence of
the wrongful act or default of the mortgagor; or
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(vi)Where, the mortgagee being entitled to possession of the mortgaged property the mortgagor
fails to deliver the same to him; or
(vii) To secure the possession thereof to him without disturbance by the mortgagor or any person
claiming under a title superior to that of the mortgagor.

RIGHTS OF MORTGAGEE

Section 69 : Right To Exercise Power of Sale, If Given (Without Court’s Intervention)

1. When the Power of Sale is Validly Exercised [Section 69(1)]

A mortgagee can sell the mortgaged property without court’s intervention only in the following
situations:

1. English Mortgage
• The mortgage must be an English mortgage, and
• Neither the mortgagor nor the mortgagee is a Hindu, Muhammadan, Buddhist, or a member of
any specified class or tribe as notified by the State Government in the Official Gazette.

2. Express Power in Mortgage Deed + Government Mortgagee

• The mortgage deed expressly grants power of sale without court, and
• The mortgagee is the Government.

3. Express Power in Mortgage Deed + Notified Area

• The mortgage deed expressly grants power of sale without court, and
• The property is located in Calcutta, Madras, Bombay, or any town/area specified by the State
Government by notification.

2. Conditions for Exercising the Power [Section 69(2)]

Even in the above situations, the power of sale cannot be exercised unless:

• Written notice requiring repayment of principal amount has been served, and
• There has been a default for 3 months after the service of such notice; or
• Interest of at least Rs. 500 is in arrears and unpaid for 3 months after becoming due.

Note:
• This 3-month notice period is statutory and cannot be reduced by contract.
• The notice is necessary to prevent oppression and protect the right of redemption.

Protection of Purchaser [Section 69(3)]

Once a sale is made in professed exercise of this power:

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The title of the purchaser cannot be challenged on the ground that:

• No case had actually arisen to justify the sale,
• No due notice was given, or
• The power was exercised improperly or irregularly.
• However, if the power was improperly or irregularly exercised, damages can be claimed by the
injured party against the mortgagee.

The purchaser:
• Is not required to make enquiries into regularity of sale.
• Will not be affected by irregularity unless he had notice or was complicit in the irregularity
(e.g., if he knew notice wasn’t given).

Application of Sale Proceeds [Section 69(4)]

The sale proceeds received by the mortgagee must be applied as follows:

1. First, to pay off all costs and expenses incurred in conducting the sale.
2. Second, to discharge the mortgage money and other dues under the mortgage.
3. Remaining balance, if any, must be paid to the person entitled to the mortgaged property or
someone authorized to receive it.

Duty of Care by Mortgagee :

The mortgagee must exercise this power:
• Reasonably and equitably
• So as to realise the debt without causing undue loss to the mortgagor.

Limitation on Applicability [Section 69(5)]

Section 69 does not apply to powers of sale that were conferred before 1st July, 1882.

This provision is an exception to the general rule under Sections 67 and 68, where the mortgagee
must approach the court for sale.

Section 69A : Appointment of Receiver

To ensure fair realisation of mortgage debt without causing unjust harm to the mortgagor.

The receiver acts as a neutral third party:

• Represents the mortgagor.
• Is accountable to the mortgagee.
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Although the mortgagee may have possession and power of sale under Section 69, the property
still legally belongs to the mortgagor.

A receiver safeguards the interests of both parties, ensuring:

• Fair treatment of mortgagor’s property.
• Proper collection and application of income from the property.

1. By the Mortgagee under Section 69A(1)

• If the mortgagee has power of sale under Section 69, he is also entitled to appoint a receiver.
• The receiver’s role is to collect and manage income from the mortgaged property or any part of
it.
• The appointment must be made in writing (signed instrument).
• This power is subject to the conditions under subsection (2).

2. Person Named in Mortgage Deed

• If the mortgagor has named a person in the mortgage deed to act as receiver, the mortgagee
must appoint that person (unless disqualified).

3. By the Court (not mentioned in this section directly but recognized generally)
• In cases of dispute or where no agreement exists, the court may appoint a receiver to protect the
interests of both parties.

Section 70 : Accession To Mortgaged Property

What is an Accession?
• Any addition or improvement made after the mortgage.
Can be:
• Natural (e.g., land gained by alluvion or the growth of trees),
• Artificial/Man-made (e.g., construction of a building).

If any accession is made to the mortgaged property after the date of the mortgage, then:
• The mortgagee is entitled to such accession for the purposes of the security,
• Unless there is a contract to the contrary.

The accession becomes part of the mortgaged property, and thus - security for the mortgage debt
automatically extends to this accession.

Relationship with Section 63

Section 70 – From the mortgagee’s perspective:

• Right to include accessions in the security.
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Section 63 – From the mortgagor’s perspective:

• Right to redeem not just the original property but also the accessions added during the
mortgage period.

Thus, Section 70 complements Section 63, but applies from the mortgagee’s end.

Instances of accessions to which the mortgagee is entitled:

1. Land formed by alluvion or diluvion

– Natural changes in land due to river action (accretion or erosion).

2. Machinery fixed by bolts and nuts to the concrete floor

– Fixtures permanently attached to the mortgaged building.

3. Electric installation in a mortgaged factory

– Enhancements made to industrial property by the mortgagor.

4. Replacing a shed with a small house

– Construction of a more permanent structure on mortgaged land.

5. Purchase of government-owned trees on mortgaged land

– Adding valuable assets to the land post-mortgage.

6. Increase of interest or enlargement of the estate

– Expansion of legal rights or interest in the property.

7. Puisne mortgagee acquiring occupancy right from the mortgagor

– Lower-ranked mortgagees gains new rights enhancing the property’s value.

8. Increase in estate value due to discharge of a prior encumbrance by the mortgagor

– Mortgagee benefits from the reduced burden on the property.

9. Sub-mortgagee acquiring equity of redemption

– Acquiring the right to redeem the property from another mortgagee.

10. Increase in mortgagor’s share by death of co-heirs

– In Muslim or Hindu undivided families, coparcenary rights expand.

11. Acquisition of freehold rights when mortgagor had only leasehold rights initially
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– Enhancing the nature of ownership in the property after mortgage.

Notes :
• Applies only after the mortgage is created.
• Can be excluded by an express contract.
• Protects mortgagee’s interest by enhancing the value of the security.

Section 71 : Renewal of Mortgage When The Right Is A Leasehold

If mortgaged property is leasehold and the mortgagor renews the lease, then:
The mortgagee is entitled to the renewed lease, unless there’s a contract to the contrary.

This is to protect the mortgagee’s security - otherwise, the mortgagor could undermine the
mortgage by letting the lease expire and then secretly renewing it in their own name.

1. Collusive decree for rent and purchase by landlord:

If a tenant-mortgagor lets their landlord get a collusive rent decree and then buy the property, the
landlord’s title is still subject to the mortgage.

2. Renewal and deposit of expired lease deed:

If the lease has expired, but the deed is deposited again after renewal, it acts as a mortgage by
deposit of title deeds with the renewed term.
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DUTY OF MORTGAGEE IN POSSESSION

Section 72 : Right To Spend Money in Preserving the Mortgaged Property, if it is in

Possession of the Mortgagee

(1) Preservation from destruction, forfeiture, or sale

(2) Supporting mortgagor’s title

(3) Making the mortgagee’s own title good against mortgagor

-​ Insurance against fire
If the mortgage deed mentions a maximum limit, then the insurance taken can’t exceed
that limit. If it doesn’t mention a limit, then the mortgagee can insure up to only
two-thirds (⅔rd) of the amount that would be needed to completely rebuild or reinstate
the property in case of total destruction.

(4) Renewal of a lease (when property is leasehold)

If money is spent under valid grounds:

• It can be added to the principal of the mortgage.
• Same interest rate as the principal will apply to the additional sum.
• If no agreed interest rate on the principal: then 9% p.a. applies.
• This becomes part of the secured debt recoverable from the mortgagor.

But after the 1929 amendment, it now applies to all mortgagees, even those not in possession.

• The underlying rationale is:

The mortgagee has a vested interest in maintaining the value of the property because their ability
to recover the debt depends on it. Hence, it is as if the mortgagor implicitly requests the
mortgagee to take such protective actions when needed.

Section 73 : Right to Proceeds of Revenue Sale or Compensation on Acquisition

Revenue Sale :

When mortgaged property (or part/interest) is sold due to failure to pay:

• Arrears of revenue;
• Public charges; or
• Rent in respect of the property;

And the failure was not due to mortgagee’s default ; Then mortgagee is entitled to claim:
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• Full or partial mortgage-money;

• Out of surplus sale proceeds (after paying dues and statutory charges).

Compulsory Acquisition :

If mortgaged property (or part/interest) is acquired under:

• Land Acquisition Act, 1894; or
• Any other law for compulsory acquisition;
The mortgagee can claim payment of the mortgage money (in whole or part) from compensation
paid to the mortgagor.

Priority of Claims
These claims of mortgagee:
• Prevail over all others, except prior encumbrancers
• Can be enforced even if principal money is not yet due

LIABILITIES OF MORTGAGEE IN POSSESSION

Section 76 : Liabilities of Mortgagee In Possession

When a mortgagee takes possession of the mortgaged property (e.g., under a usufructuary or
anomalous mortgage), they don’t get to behave like an owner. They hold the property in trust for
the mortgagor and have legal duties.

1. Ordinary Prudence

●​ Must manage the property as a person of ordinary prudence would manage their own
property.
●​ This means careful, reasonable, and non-negligent management.

2. Collection of Rents and Profits

●​ Has to collect rents and profits from the property in a regular and diligent manner.

3. Payment of Government Revenue and Charges

●​ Must pay property taxes, municipal charges, land revenue, and other public dues.
●​ If they fail, and the property is sold — they can’t claim the surplus (as per Section 73).

4. Necessary Repairs

●​ Should make essential repairs (not extravagant ones) as far as possible from the rental
income.
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5. No Waste / Destruction

●​ Must not commit acts that are destructive or permanently injurious to the property.
●​ For example: Cutting down valuable trees, demolishing structures, etc.

6. Application of Insurance Money

●​ If the property is insured and suffers damage, the mortgagee must use the insurance
payout to restore the property, not for personal use.

7. Maintenance of Accounts

●​ Must maintain clear, accurate, and complete accounts of:

Income (rents/profits)
Expenses (repairs, taxes, etc.)

8. Application of Income

Must apply income as follows:

• First: Pay public charges, repairs, insurance, etc.
• Then: Pay interest on the mortgage-money
• Surplus: Can be adjusted toward the principal

9. Gross Receipts

Must account for gross receipts, not just net profit after deductions.
You can’t hide income by inflating expenses.

If the mortgagee fails to perform any of the duties imposed upon him by this section, he may,
when accounts are taken in pursuance of a decree made under this chapter, be debited with the
loss, if any, occasioned by such failure.
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PRIORITY

Section 78 : Postponement of Prior Mortgage

General Rule (Doctrine of Priority):

“First in time, stronger in right” — the prior mortgagee has priority.
So, if the property is sold, the first (prior) mortgagee is paid first, then the subsequent ones.

Exception under Section 78: If the prior mortgagee commits fraud, misrepresentation, or gross
neglect that leads a person to become a subsequent mortgagee, the prior mortgagee loses priority.

Lloyds Bank v. P.F Guzdar

Section 79 : Mortgage to Secure Uncertain Amount When Maximum Is Expressed

This section deals with mortgages that secure future or fluctuating amounts (like credit limits or
running accounts), where the maximum amount is stated in the mortgage deed.

Often, a borrower and lender agree to a mortgage not for a fixed sum, but to secure:
• Future advances,
• A line of credit,
• The balance of a running account, etc.

Since the amount fluctuates, the lender sets a maximum limit for safety and clarity.

Even if the first mortgagee advances more money after the second mortgage, they still get
priority — as long as it is within the maximum limit specified.

The timing of the advance doesn’t matter.

What matters is:
• The first mortgage had a maximum limit, and
• The second mortgagee knew about it.

Eg.

A mortgages his house to B for up to ₹10 lakhs, to secure future loans.

B gives ₹4 lakhs at the time of the mortgage.
Later, A mortgages the same house to C, and C knows about the first mortgage to B.
After that, B gives A another ₹6 lakhs.
Now A defaults, and the house is sold.
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Even though B gave the ₹6 lakhs after C’s mortgage, B’s claim is still first in line for the full ₹10
lakhs, because:
• The mortgage was for future advances,
• A maximum amount was specified, and
• C had notice of B’s prior mortgage.

MARSHALLING & CONTRIBUTION

Section 81 : Marshalling Securities

It basically means rearranging or managing liabilities in a fair way, so that a subsequent

mortgagee (or transferee)doesn’t get unfairly prejudiced just because someone else took their
security earlier.

Eg. A owns Property X and Y. A mortgage for both X and Y to Bank 1. Later, A mortgages only
Y to Bank 2. Now A defaults. Normally, Bank 1 can sell both X and Y. But under Section 81,
Bank 2 can ask: “Please satisfy your claim from X first, and leave Y for me — if possible.”

Conditions/Limitations:

1. No prejudice to prior mortgagee — If X is not enough, M1 can still go after Y.

2. No harm to buyers for value — If someone else bought the property in good faith, they
shouldn’t suffer.
3. Doesn’t apply to hypothecation — Only immovable property, not movables.
4. Equitable discretion — Court can adjust how marshalling works.

Section 82 : Contribution to Mortgage Debt

Rule 1 : When mortgaged property belongs to two or more persons

If a mortgaged property is co-owned, and there’s no contrary agreement, then:

●​ Each co-owner’s distinct share in the mortgaged property is liable proportionately
(rateably) to the mortgage debt.
●​ The rate of contribution :
value of each share at the time of the mortgage - any pre-existing mortgage or charge on
that share.

Rule 2 : When one property is first mortgaged, then both are mortgaged together

If a person owns Property X and Y:

• He first mortgages X alone to secure Debt 1
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• Later mortgages X and Y together to secure Debt 2

Then:
• Debt 1 must be paid out of X (as agreed)
• For Debt 2, the remaining value (after Debt 1 is paid off) of both X and Y will be used to
contribute rateably
Contribution is based on net values after clearing previous debt.

Rule 3 : Marshalling Supersedes Contribution

This means:

Marshalling is a prior right of the subsequent transferee.

If both marshalling and contribution can apply, marshalling prevails — it protects the subsequent
mortgagee’s property first.

So:
• First, see if marshalling is possible (under S.81)
• Then, if necessary, apply contribution rules to split remaining liability.

Eg.

Mohan owns two properties:

• Property A (worth ₹10 lakhs)
• Property B (worth ₹10 lakhs)
Mohan mortgages both A and B to X (a lender) for a loan of ₹15 lakhs.
So, X has a mortgage over both A and B — he’s the prior mortgagee.

Mohan mortgages only Property B to Y for a second loan of ₹8 lakhs.

So, Y is a subsequent mortgagee who only has rights over B.

Now Mohan defaults on both loans.

So, X (the first mortgagee) can proceed to recover ₹15 lakhs from either A or B or both, because
he has a mortgage over both.

Without Marshalling : X can choose to sell B entirely to recover his ₹15 lakhs, which leaves Y
(the second mortgagee) with nothing, even though he had a valid mortgage over B.

With Marshalling : Y can invoke marshalling, and say: X, you have mortgages over both A and
B. I only have a mortgage over B. So, please recover as much as you can from A first. Protect
my interest in B.
SARA DHARWADKAR

Property A (₹10 lakhs) is sold → X recovers ₹10 lakhs

X still needs ₹5 lakhs → He now proceeds against B

So total encumbrance on B = ₹5 lakhs (to X) + ₹8 lakhs (to Y) = ₹13 lakhs

If B is sold for ₹10 lakhs:

• ₹5 lakhs → goes to X (remaining claim)
• ₹5 lakhs → goes to Y (partial payment)

What Contribution Says : A and B should both share X’s ₹15 lakh burden equally ₹7.5 lakh each.

Marshalling helped Y: Instead of B being fully consumed by X’s claim, it was protected partially,
and Y got ₹5 lakhs, not ₹0.

Contribution was not applied to override marshalling because marshalling protects the weaker
interest (the subsequent mortgagee).
Charges
SARA DHARWADKAR

Charges
Section 94 : Rights of Mesne Mortgagee

​Where a property is mortgaged for successive debts to successive mortgagees, a mesne

mortgagee has the same rights against mortgagees posterior to himself as he has against the
mortgagor.

When a property is mortgaged successively for successive debts, each subsequent mortgagee
(puisne) has :

●​ A right to redeem all prior mortgages.

●​ The same rights against mortgagees subsequent to themselves as against the mortgagor.

“Doctrine of Redeem Up And Foreclose Down” : A subsequent (puisne) mortgagee can redeem
any prior mortgage (i.e., “redeem up”), but if they wish to foreclose, they can only do so against
mortgagees below them or the mortgagor (i.e., “foreclose down”).

The law favors redemption over foreclosure — foreclosure is a drastic remedy that extinguishes
someone else’s interest, so it’s applied narrowly. Hence, one can always redeem those above in
priority, but cannot foreclose against those who rank higher.

Redemption :

A junior mortgagee (puisne) can redeem a senior mortgagee (mesne).

●​ By paying or tendering the dues of the senior mortgage

●​ By filing a suit for redemption (Section 60, Transfer of Property Act).

The junior mortgagee must redeem the entire amount due under the senior mortgage.
Once redeemed, the junior steps into the senior’s shoes under subrogation, and gets priority.

Priority of redemption - The junior’s right to redeem comes first.

Eg. The junior mortgage (say, C’s) is subordinate to the senior (B’s).
So C must have the first opportunity to redeem B. Only after C fails to redeem can B (the senior)
step in and redeem or foreclose down on C.

Foreclosure :

A senior mortgagee can foreclose a junior mortgagee (puisne).

●​ Senior mortgagee files a suit for foreclosure or sale (depending on the mortgage type).
●​ Must implead the junior mortgagee in the suit.
SARA DHARWADKAR

●​ Court passes a preliminary decree allowing juniors to redeem within a time.

●​ If they fail to redeem, the final decree forecloses their interest too.

Eg.

A mortgages property to B (1st mortgagee)

A then mortgages the same property to C (2nd mortgagee)
A again mortgages it to D (3rd mortgagee)

C can redeem B (pay off B’s dues).

D can redeem C and B (pay off B and C’s dues).
B can foreclose against A, C, and D.

D can foreclose against A.

D cannot foreclose against B or C, he can only redeem them.
This is because B and C are senior mortgagees. Their rights are prior in time and superior in law
— D must redeem them by paying off their debts if he wants to take full title.

Auction Purchaser :

B (senior) sells the property at auction:

●​ The auction purchaser gets all rights of B and A as they stood at the time of mortgage.
●​ But junior mortgagees (like C or D) can still redeem from the auction purchaser.

The auction purchaser cannot throw out:

●​ A puisne mortgagee who wasn’t joined in the suit.
●​ A tenant/lessee not made a party.
●​ An assignee of part of the equity of redemption (someone who got partial ownership from
A).

Possession After Sale :

Whoever has a stronger right is based on the :

i. type of mortgage

ii. the order (priority)

Eg. Usufructuary + Senior In Possession + Junior Purchases

SARA DHARWADKAR

If (senior mortgagee) B’s mortgage is usufructuary, then he has possession (and earns rent/profit
from it). Even if C later gets the property through auction or enforcement, B stays in possession
until fully paid back (redeemed). So, usufructuary = right to possess till money is paid.

Eg. Not Usufructuary + Junior In Possession

C (junior mortgagee) is already in possession of the property. Then B (senior mortgagee) sells
the property in court. D (the auction buyer) tries to take possession.

D can’t kick C out unless:

●​ C was made a party in the sale case, and
●​ C didn’t redeem B.
If C wasn’t even made a party — his rights survive, and he keeps possession.

Section 95 : Right of Redeeming Co Mortgagor to Expenses

Where one of several mortgagors redeems the mortgaged property, he shall, in enforcing his right
of subrogation under Section 92 against his co-mortgagors, be entitled to add to the
mortgage-money recoverable from them such proportion of the expenses properly incurred in
such redemption as is attributable to their share in the property.

There are multiple co-mortgagors (A, B, and C) who jointly mortgaged a property. One of them
— let’s say A — pays off (redeems) the mortgage entirely by himself.

●​ A now has a right of subrogation under Section 92 — meaning he steps into the shoes of
the mortgagee and can recover the other co-mortgagors’ shares.

●​ When A (one co-mortgagor) redeems the whole mortgage, he can also recover a fair
share of the expenses he properly spent for the redemption from B and C.

Eg. A, B, and C are co-owners (each 1/3rd). The total mortgage is ₹3,00,000.
• A pays ₹3,00,000 to redeem.
• A also spends ₹15,000 in legal, registration, or travel costs for redemption.
Now:
• A can recover ₹1,00,000 from B
• ₹1,00,000 from C
• And also ₹5,000 from B and ₹5,000 from C as redemption expenses.
SARA DHARWADKAR

Section 100 : Charges

When immovable property is made a security for the payment of money, but no interest is
transferred, it creates a charge, not a mortgage.

Requisites of a Valid Charge

1. Property is immovable.
2. It is made security for payment of money.
3. Created by parties or operation of law.
4. Does not amount to a mortgage (i.e., no transfer of interest).
5. Can’t be enforced against a bona fide transferee for consideration without notice.

Eg. Father gives property to son with a condition to pay ₹5,000/month to daughter = daughter
has a charge.

Creation of Charge

1. No Mandatory Requirement of Writing:

●​ A charge need not be in writing.
●​ However, if reduced to writing, and it’s a non-testamentary instrument involving ₹100 or
more, registration is compulsory under the Registration Act, 1908.

2. No Specific Language Required:

●​ There is no prescribed form or phraseology.
●​ What is crucial is the clear intention that a particular immovable property is made
security for repayment of money.
●​ Ambiguity or generality in language (e.g., “all properties of X”) can render the charge
invalid.

Exception :

●​ Arrears of electricity dues from a previous owner do not create a charge on the property.
●​ The property serving as security must be definite and identifiable.

How does a charge arise ?

A charge may arise either by:

• Act of Parties, or
• Operation of Law.
SARA DHARWADKAR

Charge By Act of Parties

1. Intent is Crucial:
• There must be a clear intention to create a security interest in specific property, not merely a
personal obligation to repay.
• If an agreement reflects an intention to create a charge in praesenti (at the present moment), it
can amount to a charge.

2. Not a Mere Promise:

• A simple undertaking to pay is not enough.
• The agreement must show that a specific fund/property is made liable for the obligation.

●​ Continuity: Once created, a charge continues until expressly extinguished or abandoned.

(e.g., mere passage of time does not extinguish a charge).

●​ Consent is Essential: No charge can be created on a third party’s property without their
consent. A decree attempting to do so would be invalid and unenforceable against the
third party.

●​ Charge on Future Property: A charge can be created over future property. Once that
property comes into existence, the charge automatically attaches.

If property is distributed under insolvency law, and it is subject to a charge, the creditor holding
that charge gets priority in distribution.

This overrides Section 61 of the Provincial Insolvency Act, which deals with general distribution
priority.

Charge By Operation Of Law

While a charge by act of parties arises from mutual agreement, a charge by operation of law is
imposed by statute or a court decree, regardless of the parties’ consent.

●​ No need for express agreement.

●​ Arises automatically under certain legal circumstances (e.g. decree, statutory dues).
●​ Does not amount to a transfer of interest in property.
●​ The property is made liable, but ownership rights remain unaffected.
SARA DHARWADKAR

Extinction of Charge

1.​ By Act of Parties

Payment of the secured amount: Once the debt or obligation secured by the charge is
fully paid or discharged.

Release or waiver: The charge-holder (creditor) may release the charge through a written
document.

Mutual agreement: Parties may agree to extinguish the charge, e.g., through a deed of
release or cancellation.

Sale of the property free from charge, if so agreed between parties.

2.​ Novation : Novation is a concept from contract law where a new contract replaces the old
one.

A charge may be extinguished if the underlying debt is replaced by a new debt or

obligation under a new agreement.

The original contract is discharged, and the new one substitutes it entirely.

This also implies that security created under the old obligation (the charge) is no longer
valid, unless expressly recreated.

3.​ Merger : Merger occurs when the interests of the charge-holder and the owner of the
property merge into a single person.

If the creditor (charge-holder) acquires ownership of the property.

The debtor and the charge-holder become the same person.

The charge is absorbed into ownership, and ceases to exist independently.

SARA DHARWADKAR

Lien v. Charge

Aspect Charge Lien

Definition A charge is a right created over A lien is the right to retain

property to secure the payment possession of property until a debt
of a debt or performance of an is paid.
obligation.

Possession of No possession is required. The Possession is essential. The

Property charge-holder does not need to lien-holder must have lawful
possess the property. possession.

Creation Can be created by act of parties Usually arises by operation of law

or operation of law. or by implication; rarely
contractual.

Interest in Creates a proprietary interest in Does not create any proprietary

Property the property. interest — only a right of
retention.

Transfer of There is no transfer of No interest or charge is created —

Interest ownership, but an interest is only the right to retain possession.
created.

Right to Sell In some cases (like mortgage), a Generally, a lien-holder cannot sell
charge-holder may have the right the property, unless expressly
to enforce sale. provided.

Registration Registration may be mandatory, No registration is required.

depending on the value and
nature.

Examples Charge for maintenance created Bailee’s lien, banker’s lien, unpaid
in partition deed; charge by court seller’s lien under Sale of Goods
decree. Act.

Statutory Covered under Section 100, Recognised under Indian Contract

Reference Transfer of Property Act, 1882. Act, 1872 and specific commercial
statutes.
SARA DHARWADKAR

Enforceability Can be enforced through civil Enforced by retaining possession,

court. not typically through court action.

Mortgage v. Charge

Point of Mortgage Charge

Distinction

Basic Every mortgage involves a charge. Every charge is not a mortgage.

Relationship

Creation Created only by act of parties Created either by act of parties or

(contract). operation of law.

Transfer of Involves transfer of interest in the No transfer of interest; only liability is

Interest property to the mortgagee. created.

Application of Governed fully under S. 58 and Not a mortgage, but provisions of

Law other TPA provisions. simple mortgage apply analogously.

Requirement Based on existing or future debt, or There may or may not be a debt.
of Debt liability.

Term & Has a fixed term and is redeemable. May be perpetual; not necessarily
Redemption redeemable.

Attestation Requires attestation under TPA. No attestation required.

Requirement

Priority in Has priority if registered or known No priority if the subsequent

Rights to subsequent parties. transferee/mortgagee has no notice.

Nature of Creates a right in rem (real right Does not create a right in rem.
Right enforceable against the world).
SARA DHARWADKAR

Limitation Most mortgages can be enforced in Charge and simple mortgage can be
Period 30 years. enforced in 12 years.

MERGER

Section 101 : No Merger In Case Of Subsequent Encumbrance

A mortgagee or charge-holder who acquires ownership (equity of redemption) does not cause the
mortgage or charge to merge merely due to such acquisition.

Protection of Prior Mortgage/Charge: A subsequent mortgagee or charge-holder cannot foreclose

or sell the property without redeeming the prior one.

Eg. A mortgage property to B. B later purchases the property from A. Now, B holds both the
mortgage and ownership — typically leading to merger and extinction of the mortgage.

Merger = Union of lesser and greater interests in the same person → Extinguishment of the
lesser interest.

When Merger Occurs :

1. No subsisting prior encumbrance at the relevant time.

2. No clear intention to keep both interests alive.
3. The rights merged are co-extensive (i.e., they fully overlap in remedy and scope).
4. No reservation of mortgage rights in deed or conduct.

When Merger Does Not Occur :

1. Intention to Keep Mortgage Alive:

• Explicit or implied (e.g., retention of mortgage deed, creation of sub-mortgage).
• Statutory protection under S. 101 for subsequent encumbrancers.

2. Circumstances Excluding Merger:

• Remedies are not co-extensive.
• Later security is inoperative.
• There’s an express stipulation against merger (e.g., clause of additional security).
• Only one physical person holds rights, not enough without unity of interest.

Effect of Merger

1. Mortgage becomes extinguished.

2. Purchaser of equity of redemption by mortgagee has ownership without mortgage rights,

unless intention to keep mortgage alive is shown.
SARA DHARWADKAR

3. If a merger occurs, the suit on the mortgage is not maintainable.

4. But: Collateral securities (e.g., promissory notes) don’t merge in the mortgage.

Rule of Intention

Did the mortgagee intend to keep the mortgage alive?

• Express clauses in deed.

• Creation of sub-mortgage.
• Retention of mortgage document.
• Relationship with subsequent mortgagees (i.e., keeping priority).
• No mention in the sale proclamation ≠ merger if intent exists.

NOTICE AND TENDER

Section 102 : Service or Tender on or to Agent

Section 102 deals with the manner of serving notice or making a tender under Mortgage
especially when:

The mortgagee/mortgagor does not reside in the district where the mortgaged property is located.

●​ An agent holding a general power-of-attorney

●​ An agent otherwise duly authorized to accept

This is considered valid and sufficient service/tender.

There is no known agent or person on whom service/tender can be made.

(a) For Service of Notice:

The party required to serve may:

●​ Apply to any competent court where a redemption suit could be filed.
●​ The court will prescribe a manner of service.
●​ Compliance with the court’s direction = deemed valid service.

Proviso:
• In case of a notice under Section 83 (deposit by mortgagor to redeem), the application must be
made to the same court where deposit is made.

(b) For Making Tender:

SARA DHARWADKAR

If no known agent/person to receive the tender:

●​ The person can deposit the tender amount in court.
●​ The deposit must be made in a court where a redemption suit can be brought.
●​ The deposit in court is treated as a valid tender.

Protects the mortgagor’s right to redeem or the mortgagee’s right to foreclose, by allowing
communication through authorized agents.

●​ Non-resident mortgagee/mortgagor : Service/tender on authorized agent is sufficient

●​ No known person/agent : Apply to court for directions on service
●​ Tender not possible : Court deposit = valid tender
●​ Section 83 proviso : Application for notice must be to court where deposit is made

Section 103 : Notice, etc., to or by Person Incompetent to Contract

This section addresses how notices, tenders, or deposits are to be served or made when a party is
legally incompetent to contract, such as:
• Minors
• Persons of unsound mind
• Other legally incapacitated individuals

Who Can Act on Behalf of Such Person:

A Legal Curator:

A legal curator (i.e., a guardian, manager, or executor already legally in place) of the
incompetent person’s property:

• Can serve or receive notice

• Can make, accept, or withdraw a deposit
• Can tender or accept tender

Legal curator = any lawful representative entrusted with the person’s property.

Where There is No Legal Curator:

If no such person exists, and a transaction or notice under the Mortgage Chapter (e.g.,
redemption, foreclosure, etc.) is:

• Requisite (necessary), or
• Desirable (in the interest of the person),

Then:
• An application may be made to a competent civil court (where redemption suit could be filed)
• To appoint a guardian ad litem solely for that specific legal act.
SARA DHARWADKAR

Guardian ad litem = a temporary guardian appointed by the court to represent a person incapable
of protecting their own interests in legal proceedings.

Scope:

• Limited to the purpose for which appointed (e.g., service or receipt of notice, tender, deposit,
etc.).
• Can perform all acts that would have been done by the person if they were competent.
Leases
SARA DHARWADKAR

Leases
Chapter V, Sections 105 - 117

Section 105 : “Lease” defined

A lease of immovable property is:

●​ A transfer of a right to enjoy the property, express or implied
●​ For a certain time or in perpetuity,
In consideration of:
●​ A price paid or promised, or
●​ Money, share of crops, service, or
●​ Any other thing of value
-​ rendered periodically
-​ or on specified occasions.

Lessor – Transferor
Lessee – Transferee
Premium – The price paid or promised
Rent – The periodic return (money, share, service, etc.)

Essentials of Lease:

1.​ The parties must be competent to contract and require consensus ad idem (meeting of
minds).

2.​ Property should be immovable and should be clearly identifiable.

3.​ Transfer of interest.

●​ A lease creates a legal interest in immovable property.
●​ The lessee gains the right to possess and enjoy the property.
●​ This is not a mere license or permission that can be revoked at will.
●​ The right is in rem, enforceable against the world.

4.​ The demise is the subject-matter (limited interest, i.e. right to enjoyment)

5.​ The term (duration): Permanent lease/ Lease in perpetuity is possible.

6.​ The consideration (premium or rent) may be in the form of :

• Money (rent),
SARA DHARWADKAR

• Services,
• Share of crops, or
• Other valuable consideration.

Aspect Premium Rent

Meaning Lump sum paid for acquiring lease Periodic payment for using and
rights enjoying the property

Nature of One-time / non-recurring Recurring (monthly, quarterly, yearly,

Payment etc.)

Purpose Acts like a price for granting the Acts as compensation for ongoing use
lease

Timing Paid at the beginning of the lease Paid throughout the lease period

Legal Nature Capital payment Revenue payment

Example ₹1,00,000 paid once for a 10-year ₹10,000 per month during the lease
lease period

Effect of Does not usually affect possession Can lead to eviction or termination of
Non-payment rights lease

Mentioned in Yes, under Section 105, Transfer Yes, also under Section 105, Transfer
TPA of Property Act of Property Act

Characteristics:

Lease is Both Heritable and Transferable

Lessee’s interest is:

●​ Heritable – passes to legal heirs.
●​ Transferable – can be sub-leased or assigned.

Exceptions & Clarifications:

●​ Monthly tenancy is heritable.
●​ Life lease ends on the lessee's death.
●​ Lease can be bequeathed by will, but landlord’s consent is necessary – no stranger can be
imposed on unwilling lessor.
SARA DHARWADKAR

When It’s Not a Lease:

●​ No transfer of interest = no lease.
●​ License is a mere permission, not a lease.
●​ Personal covenants (e.g., right of resumption by lessor) do not create leasehold interests.

Difference Between Absolute Lease and Derivative Lease

Basis Absolute Lease Derivative Lease / Sub-lease /

Under-lease

Meaning A lease granted by a person having A lease granted by a person who has a
absolute ownership rights in the limited leasehold interest.
property.

Who Owner / Lessor with full rights over Lessee / Tenant under a primary lease.
grants it? the property.

Duration Can be for any number of years or in Cannot exceed the duration of the
perpetuity. original (absolute) lease.

Legal Based on ownership/title. Based on derivative rights obtained

Authority through an original lease.

Example A leases his house to B for 10 years - B leases it further to C - this is a

this is an absolute lease. sub-lease / derivative lease.

Right to Absolute owner can create any kind of Sub-lessee can create lease only
Create lease. within the limits of their own lease.
Lease

Limitations No inherent limitation other than by Limited by the terms and duration of
contract/law. the head lease.

Statutory May be permitted by law to continue in Cannot sublease — no transferable

Tenant possession. interest.

Interest Primary interest in the leasehold Secondary/derivative interest,

Created property. dependent on the primary lease.
SARA DHARWADKAR

Difference Between Lease and Mortgage

Basis of Lease Mortgage

Distinction

Definition Transfer of a right to enjoy Transfer of an interest in immovable

immovable property for a property as security for a debt.
specified period.

Governing Section 105, Transfer of Property Section 58, Transfer of Property Act,
Law Act, 1882 1882

Purpose Enjoyment or use of property by Security for repayment of a loan or

lessee in return for rent. performance of an obligation.

Interest Only the right to possess and An actual interest in the property is
Transferred enjoy the property is transferred. transferred to the mortgagee.

Ownership Remains with the lessor. Temporarily transferred to the mortgagee

to the extent of the mortgage.

Consideration Rent or premium paid Loan or debt given by mortgagee to

periodically or as agreed. mortgagor.

Right to Lessee can sublet unless Mortgagee can transfer interest only
Transfer restricted by contract. under specific types (e.g. usufructuary
mortgage).

Right of Not applicable. Mortgagor has the right to redeem the

Redemption property on repayment of the loan.

Right to Not available. Mortgagee can foreclose if debt isn’t

Foreclosure repaid (except in simple mortgage).

Duration For a fixed term, periodic, or Until the debt is repaid or foreclosed
perpetual (as agreed). upon.

Registration Mandatory if lease is for more Mandatory for most mortgages except
than 12 months. those under Rs. 100.

Effect of Lessor may terminate the lease. Mortgagee can initiate sale or foreclosure
Non-payment proceedings.
SARA DHARWADKAR

Lease By Operation of Law

It’s when lease rights are given automatically by law, not by a normal contract or transfer under
the Transfer of Property Act (TPA).

The government owns a piece of land.

●​ The government passes a law saying that this land will be given to a nearby government
school as a playground.
●​ The school gets lease rights directly because of the law, not through a signed lease
contract.
●​ This is called a lease by operation of law.

The original landowner was a private person who had earlier leased this land to the government.
Later, the government becomes the full owner (leasehold vests in the government). The original
owner or their family cannot come back and say: “We want the land back.” They can’t sue for
possession because the land is now governed by law, not private lease rules under the TPA.

Subject Matter of Lease

Valid Subject Matters (Immovable Property) :

• Land, buildings (houses, shops, factories), minerals
• Benefits arising from land:
• Fisheries, ferries, market dues, sandmines
• Right to tap toddy palms
• Right to fell trees and enjoy regrowth benefits
• Cinema hall with equipment, fixtures, fittings

Composite Leases :
A lease of a building includes:
• The land beneath (unless excluded)
• Fixtures and things appertaining to it
• Example: Cinema hall with seats and projector

Invalid/Not Leases (Mere Licences or Contracts) :

• Grazing contracts
• Right to pluck fruits
• Royalties
• Sale of trees for cutting/removal
• Collecting offerings
• Advertising rights on municipal poles
SARA DHARWADKAR

Lease of business with equipment, not premises (e.g., barber’s tools) – treated as lease of
business, not lease of shop

Lease v. Licence

Associated Hotels v. R.N Kapoor

A person was running a barber shop inside the Imperial Hotel, owned by Associated Hotels of
India.
He was occupying certain rooms in the hotel for this purpose.
He filed an application for fixation of standard rent under a Rent Control Act.

Was the occupancy a lease or a licence?

If lease → Rent could be fixed under the Rent Act.
If licence → Rent Act would not apply.

Terms of the Occupancy Agreement

●​ Document titled as a “Licence Deed”.

●​ Grantee (barber) was referred to as a licensee, hotel as licensor.
●​ Gave permission to use the premises for one year, with quarterly payments.
●​ Option to renew the occupancy on mutual terms.
●​ Barber was to pay for electricity and water separately.
●​ No alterations allowed without grantor’s consent.
●​ Grantor could terminate without notice on default.
●​ Right of transfer of occupancy, but with prior approval of the grantor.

Lease, Not Licence

●​ The Supreme Court held that the arrangement created a lease and not a mere licence.
●​ Despite being labelled a “licence”, the substance of the document pointed to a lease.
●​ The grantee had exclusive possession of the premises and could even transfer his rights
(with consent).
●​ These factors negate the idea of a mere personal privilege, which is the essence of a
licence.

1. Substance over Form

Don’t just go by the label (e.g., “licence”); look at the actual nature and terms of the agreement.

2. Intention of the Parties

SARA DHARWADKAR

The real intention - whether they meant to create interest in the property (lease) or just use
without possession (licence) is crucial.

3. Creation of Interest

If the document creates an interest in the property, it is a lease. If it merely allows use without
transferring possession, it’s a licence.

4. Exclusive Possession

If a person is granted exclusive possession, he is prima facie a tenant. But this may be rebutted if
circumstances show that there was no intention to create tenancy.

Important Clarifications :

A lease of house + shop includes the site, unless excluded by contract.

Air space or terrace not included unless specified.

Destruction of property (fire, flood, etc.):

-​ Lease continues, unless the lessee opts out.
-​ If lease is only for the house (not land), destruction ends lease.

Is Mining A Sale or Lease ?

Tarkeshwar Sio Thakur v. Bar Dass Dey

Whether a contract allowing someone to extract minerals (coal) from land amounts to a “lease”
or a “sale of goods” ?

1. Transfer of an Interest in Immovable Property:

●​ The right to enter land and extract minerals involves granting a limited interest in the
immovable property itself (i.e., the land).
●​ This is not just a transaction for buying coal; it includes the right to access and work the
land.

2. Nature of the Transaction:

●​ If the right to extract minerals is recurring or continuous over a period of time, it suggests
a lease, not a one-time sale.
●​ The minerals are part of the land until extracted therefore, mining rights pertain to
immovable property.

3. Sale vs Lease Distinction:

SARA DHARWADKAR

●​ A sale refers to transfer of ownership of existing goods.

●​ But here, the coal does not exist separately until it is extracted - so what’s being
transferred is the right to extract, not the goods themselves.

Commencement of Lease

When does a lease begin?

●​ Must start from a certain date or one capable of being made certain.
●​ If date is not mentioned → lease begins from the date of execution.
●​ If possession is taken under agreement → lease term starts from date of possession.
●​ Future leases valid (e.g. post expiry of earlier lease or contingent on some event).

A lease is void for uncertainty if :

●​ No commencement date is stated
●​ There is no way to ascertain it

Notes :
●​ A lease with renewal clause every 3 years is not “permanent.”
●​ Permanent lease valid even if determinable only under special circumstances.
●​ Lease “as long as lessee wishes” ends on death of lessee, not necessarily heritable.

Section 106 : Duration of Certain Leases in Absence of Written Contract or Local Usage

(1) Presumption of Duration of Leases

In the absence of written contract, local law or usage, the following rules apply:
1. Agricultural or Manufacturing Purpose Leases:
●​ Deemed to be year-to-year leases.
●​ Terminated by either party (lessor or lessee) by giving 6 months’ notice.
●​ Lease is renewed every year unless terminated properly.
2. Other Purposes (e.g., residential, commercial, etc.):
●​ Deemed to be month-to-month leases.
●​ Terminated by either party with 15 days’ notice.

This legal fiction applies only in absence of an express agreement, or contrary local law/custom.

(2) Commencement of Notice Period

• The period of notice starts from the date of receipt of notice, not the date of sending.
• This overrides any conflicting provision in other laws.

(3) Validity of notice even if duration mentioned in it is shorter than the legal requirement.
“Vacate the property in 10 days” instead of 15.
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Even if the notice says 10 days, it won’t be considered invalid as long as the person waits for the
full 15 days before filing a case or taking legal action.

(4) Mode and Form of Notice

1. Notice must be in writing.
2. Must be signed by or on behalf of the person giving it.
3. Modes of service:
• Sent by post to the intended party.
• Delivered personally to the party or to a family member or servant at residence.
• If delivery is not possible, affix on a conspicuous part of the leased property.

Section 107 : Lease how made

1. Mandatory Registration

A lease from year to year, or

For a term exceeding one year, or
Reserving yearly rent,

●​ Must be made by a registered instrument only.

2. Leases for Lesser Periods

Leases for 1 year or less or without yearly rent:

May be made either by:

●​ Registered instrument, or
●​ Oral agreement + delivery of possession

3. Execution Requirement

If lease is through registered instrument:

●​ Both lessor and lessee must execute the instrument

●​ If multiple instruments exist, at least one must be signed by both
SARA DHARWADKAR

Kinds of Tenancies

Basis Fixed Term Lease Periodic Lease Permanent Lease

Duration Specified (e.g., 5/10 Repeats by period Indefinite or perpetual

years) (year/month/quarter/week
)

Renewal May or may not be Automatic unless Not intended to end,

renewed terminated by notice unless lawfully
terminated

Termination Ends at term expiry Requires notice by either Can end only through
unless extended party lawful eviction

Presumption Not relevant Mode of rent payment Uniform rent for long =
from Rent implies duration presumption of
permanence

Burden of Not disputed; clear on May arise from conduct Tenant must prove lease
Proof face (e.g., holding over) is permanent

Legal Directly under Section Supported by judicial Recognized in

Recognition 105 TPA interpretation agricultural leases,
estoppel cases

Tenancy At Sufferance

A non-consensual tenancy.

Arises by operation of law when a person, who originally entered possession lawfully (e.g., as a
tenant), continues to remain in possession after the lease has expired, without the landlord’s
consent.

●​ Lawful Entry – Possession initially must be under a valid lease.

●​ Expiry of Lease – The original term of lease has ended.
●​ No Consent for Overstay – The landlord does not consent to continued possession.
●​ No Fresh Tenancy – No new lease or tenancy is created by mere holding over.
SARA DHARWADKAR

Tenancy By Holding Over

When a tenant continues in possession after the expiry of the lease, with the landlord’s consent, a
new tenancy is created by implication of law.

●​ Expiry of original lease : Lease term must have ended.

●​ Continued possession : Tenant stays on the premises.
●​ Landlord’s assent : Express or implied consent (e.g., accepting rent).
●​ Rent paid & accepted : Strong indication of assent to a new tenancy.

Feature Tenancy by Holding Over Tenancy at Sufferance

Possession post-expiry Yes Yes

Landlord’s consent Yes (express/implied) No

Legal relationship Tenancy exists No tenancy

Entitlement to notice Yes No (unless required by statute)

Right to sub-let Yes No

Tenancy At Will

A non-permanent tenancy where a person occupies property with the consent of the landlord, but
without a fixed term.

It continues as long as both parties wish. It can be terminated at any time.

-​ By simple demand for possession (landlord).

-​ If seeking ejectment through court, notice to quit is required.
-​ Even a 15-day notice clause implies tenancy at will.

Section 106 & 116, TPA: A tenancy at will terminable at either party’s will is considered a
‘contract to the contrary’, meaning it alters the default notice requirements under the Act.

Registration is not required.

Compensation is paid daily or periodically.

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Lease That Is Not Permissible - Concurrent Lease

Two leases between the same landlord & tenant for the same property at the same time → not
permissible.

If the second lease is executed without cancellation of the first → first lease automatically ends
on execution of the second - the second lease implies novation.

Eg. Landlord A executes a registered lease deed with Tenant B on 1st January 2020 for a term of
5 years. Without terminating or cancelling this lease, Landlord A enters into another lease deed
with the same Tenant B for the same premises on 1st January 2022, again for a term of 5 years.
Neither lease refers to the other.

The second lease deed, dated 1st January 2022, will be presumed to supersede the first lease. The
first lease automatically ends from the date of the second lease, as two concurrent leases for the
same property between the same parties cannot co-exist.

Section 108 : Rights and Liabilities of Lessor and Lessee

In the absence of a contract or local usage to the contrary, the lessor and the lessee of immovable
property, as against one another, respectively, possess the rights and are subject to the liabilities
mentioned in the rules next following, or such of them as are applicable to the property leased -

(A) Liabilities / Duties of Lessor

Section 108 Duty Description Legal Consequence of

Breach

(a) Disclosure Must disclose known material Lessee may claim damages
of material defects with reference to its or rescind lease.
defects intended use which the lessee
cannot discover with their
ordinary care.

(b) Give Must deliver possession on Lessee can sue for

possession request. possession or damages.

(c) Duty for Lessee won’t be disturbed if they Interference allows the
Covenant comply with the lease. lessee to seek relief.
for a Quiet
enjoyment

(B) Rights and Liabilities of Lessee

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Clause Provision Category Summary

Lessee is entitled to any accession to the leased

(d) Accession to Right property unless otherwise provided i.e subject to
property law relating to alluvion.

(e) Destruction Right If the property is materially and permanently

of property destroyed due to force majeure (e.g., fire, flood,
mob), lessee can choose to void the lease - unless
destruction was caused by lessee’s own act/default.

If lessor fails to make necessary repairs after

(f) Repairs by Right notice, the lessee may do them and deduct costs
lessee (with interest) from rent.

(g) Payments by Right If the lessor fails to make certain payments (e.g.,
lessee taxes) that may be recovered from the
lessee/property, lessee may pay and deduct with
interest.

(h) Removal of Right Lessee may remove fixtures even after lease ends,
fixtures as long as he is in possession and restores the
property to original condition.

(i) Right to Right If lease ends without lessee’s fault, lessee or legal
crops representative can collect and take crops
planted/sown before termination.

(j) Right to Right & Lessee can assign, sub-lease, or mortgage

transfer Liability interest— but remains liable under the lease.
interest
Restrictions apply to tenants with non-transferable
occupancy rights, defaulting revenue farmers, or
estates under Court of Wards.

Disclosure by Liability Lessee must disclose any fact that materially

(k) lessee increases the value of the interest, which the lessor
doesn’t know but lessee does.
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Payment of Liability Lessee must pay or tender rent/premium at proper

(l) rent time and place.

Must maintain property in original condition

(m) Maintain Liability (reasonable wear and tear allowed). Must allow
condition of inspection and repair any damage caused by lessee
property or agents.

(n) Notice of Liability Must inform lessor if aware of legal

legal claims/encroachments/interference concerning the
proceedings property.

(o) Use of Liability Must use property as a prudent owner would.

property Cannot misuse, sell timber, demolish buildings,
work unopened mines/quarries, or cause damage.

(p) Erection of Liability Cannot build permanent structures without lessor’s

permanent consent (except for agricultural use).
structures

(q) Delivery of Liability Must return possession of the property to the lessor
possession when the lease ends.

Section 109 : Rights of Lessor’s Transferee

Subrogation :

If the lessor transfers the leased property (wholly or partly), or transfers any part of his interest,
then:
●​ The transferee steps into the shoes of the lessor and acquires all rights under the lease.
●​ If the lessee chooses, the transferee also becomes subject to the liabilities of the lessor (as
long as he owns that part).

Liabilities on Election :

Mere transfer does not absolve the original lessor of his duties under the lease.
The transferee is bound by the lessor’s liabilities only if the lessee elects (chooses) to hold him
liable.
If no such election is made, the original lessor remains liable for lease obligations (e.g., repairs,
quiet enjoyment, etc.).
SARA DHARWADKAR

Rent :

If the lessee is unaware of the transfer and continues to pay rent to the original lessor. Lessee is
protected; they are not liable to pay the same rent again to the transferee.

The lessor, transferee, and lessee can mutually agree on:

●​ What portion of rent/premium is payable for the transferred part.
●​ If they disagree, a Court with jurisdiction over the property can decide.
●​ Exception : The transferee cannot claim rent arrears that were due before the transfer. The
transferee’s rights begin only post-transfer.

Section 110 : Exclusion of the day on which the term commences

Exclusion of Commencement Day : If the lease states a specific date from which the term begins
(e.g., “from 1st January”). That starting day is excluded when calculating the lease period.
Eg. A lease “from 1st January for 1 year” will end on 31st December, not 1st January next year.

Duration of Lease for One or More Years : When lease duration is expressed as a year or
multiple years, and there is no agreement to the contrary:
The lease continues for the full anniversary year(s) starting from the commencement date.
Eg. If a lease is for 3 years from 5th May, it ends on 4th May after 3 full years.

No Day Specified – Lease Starts From Execution : If no specific commencement day is

mentioned, the lease is deemed to commence from the date of its execution (i.e., the date it is
made).

Option to Determine Lease Early : If the lease mentions that it can be terminated before the full
term, but does not specify who has the [Link] is assumed to be the lessee’s option. Key
Rationale: This interpretation protects the lessee from arbitrary or unfair termination by the
lessor.

Section 111 : Determination of Leases

A lease of immovable property can be determined (i.e., legally brought to an end) in the
following 8 broad ways:

(a) By Efflux of Time

Lease ends automatically when the time period specified in the lease expires.
No need for notice or action from either party.

(b) Conditional Limitation

SARA DHARWADKAR

If the lease duration is dependent on the happening of a particular event, it ends upon the event’s
occurrence.

(c) Lessor’s Interest/Powers End

Lease ends if:

●​ Lessor’s interest in the property ends, or
●​ Lessor’s power to lease ends due to the happening of an event.

(d) Merger of Interests

Lease ends when both lessee and lessor interests in the property become vested in the same
person, in the same legal right. This is known as the Doctrine of Merger.

(e) Express Surrender

Voluntary and mutual agreement between lessor and lessee.

Lessee yields up interest in the lease in writing or by clear expression.

(f) Implied Surrender

No express words, but the surrender is implied through conduct.

(g) Forfeiture

Lease can be terminated for wrongdoing or breach by lessee in 3 situations:

1. Breach of Express Condition:

2. Disclaimer of Lessor’s Title:

Lessee denies the lessor’s ownership by:
• Claiming title in himself, or
• Setting up a title in a third party.

3. Insolvency:
• Lessee is adjudged insolvent,
• Lease provides that lessor may re-enter in such case.

In any of these 3 cases, the lessor (or transferee) must give written notice of his intention to
terminate the lease.

(h) Notice to Quit/Terminate

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Lease ends on the expiration of a duly given notice:

• To determine the lease.
• Or to quit.
• Or expressing an intention to quit.

Either party may issue such notice as per lease terms or law.

Section 112 : Waiver of Forfeiture ( Read with Section 111 (g) )

Under Section 111(g), a lease can be terminated by forfeiture for:

1. Breach of express condition
2. Renunciation of lessor’s title
3. Lessee’s insolvency (where lease allows re-entry)

A forfeiture is waived if the lessor does any of the following, after the forfeiture is incurred:
1. Accepts rent which became due after the forfeiture; or
2. Distrains (i.e., legally seizes property for rent) for such rent; or
3. Performs any act that shows an intention to treat the lease as ongoing/subsisting.

Conditions : The lessor must be aware that forfeiture has been incurred.

Exception : If the lessor accepts rent after filing a suit for ejectment based on forfeiture, it is not a
waiver.

Section 113 : Waiver of Notice to Quit ( Read with Section 111 (h) )

Under Section 111(h), a lease can be determined:

1.​ By expiration of a notice to quit, or
2.​ By notice expressing intention to quit, duly given by one party to the other.

Even after serving a valid notice to quit, the lessor/lessee can waive it by subsequent conduct
showing intention to treat the lease as continuing.

Conditions :

1.​ Consent of the party to whom notice was given (may be express or implied).
2.​ Conduct of the person giving notice must indicate intention to treat the lease as
continuing.

Once waived, the original notice is nullified, and fresh notice is required if termination is still
intended.
SARA DHARWADKAR

Section 114 : Relief Against Forfeiture for Non Payment of Rent

1. There is a lease of immovable property.

2. The lease has been determined by forfeiture (Section 111(g)) due to non-payment of rent.

3. The lessor has filed a suit to eject the lessee.

Relief is not automatic—it’s at the discretion of the Court. The Court may refuse relief if the
conduct of the lessee is dishonest or grossly negligent.

At the hearing of the suit, if the lessee:

●​ Pays or tenders the entire rent in arrears,
●​ Pays interest on the rent, and
●​ Pays full court costs,

OR

●​ Provides sufficient security for making such payment within 15 days,

The Court may refuse to pass an ejectment decree and instead:

●​ Relieve the lessee from forfeiture, and
●​ Allow the lessee to retain possession as if forfeiture never occurred.

Section 114 A : Relief Against Forfeiture In Certain Other Cases

Deals with other breaches (besides non-payment of rent) where the lease has forfeited due to
violation of an express condition allowing re-entry.

No suit for ejectment shall lie unless and until the lessor has:

1. Served a written notice on the lessee:

(a) Specifying the breach complained of,
(b) If capable of remedy, requiring the lessee to remedy it.

2. The lessee fails to remedy the breach within a reasonable time from service of notice.

Exceptions – Relief Not Available :

This section does not apply to breaches of express conditions relating to:
• Assignment of lease,
• Under-letting,
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• Parting with possession,

• Disposal of property leased, or
• Non-payment of rent (covered under Section 114).

Section 115 : Effect of Surrender and Forfeiture of Underleases

This section deals with the status of under-leases (i.e., sub-leases) when the main lease is
surrendered or forfeited.

Surrender

Surrender means the lessee voluntarily gives up the lease either expressly or impliedly.

If a lessee surrenders the lease, any previously granted under-lease is not affected, provided:
●​ The under-lease was granted before the surrender
●​ It is substantially on the same terms as the head lease (except for rent amount).

The under-lessee’s rights continue, and

●​ The lessor now steps into the shoes of the lessee:
●​ Receives rent from under-lessee,
●​ Enforces contracts binding on the under-lessee.

Exception : If A surrendered the lease only to get a new lease from the landlord, then the
under-lease to B does not automatically continue. Because the law wants to stop tricks or fraud.
A has a lease that’s about to expire.
A gives an under-lease to B.
Then A tells the landlord: “Hey, I surrender my old lease…”
And immediately takes a new lease from the landlord — now pretending as if the under-lease to
B never happened.
This could be used to cut out B unfairly.

Forfeiture

Forfeiture happens when the lessee breaches a condition of the lease (e.g., non-payment of rent),
and the lessor terminates the lease.

All under-leases automatically stand annulled (i.e., become void).

Exceptions to Such Annulment:

1. Fraud by Lessor:
• If the lessor procures forfeiture fraudulently to defeat the under-lessee’s interest, the forfeiture
is invalid against the under-lessee.
SARA DHARWADKAR

2. Relief under Section 114:

• If the lessee is granted relief against forfeiture (e.g., pays rent and is allowed to continue), then
the under-lease also survives.

Section 116 : Effect of Holding Over

1. Continuation after lease ends:

The lessee or under-lessee remains in possession after the original lease ends.

2. Lessor’s assent is essential:

• Lessor accepts rent, or
• Otherwise consents to the continued possession (e.g., doesn’t object, gives permission).

3. Effect:
In the absence of an agreement to the contrary, the lease is:
• From year to year, or
• From month to month
— depending on the purpose of the original lease (as per Section 106).

This is called “holding over” - essentially a fresh tenancy by conduct, not an extension of the old
lease.

Type of Renewal:
• It is not a continuation of the old lease.
• It is a new tenancy (a tenancy-at-will becomes a periodic tenancy).

Not Applicable If:

• There is an agreement to the contrary.
• The lessor refuses to accept rent and objects to possession.
• The lessee is a trespasser (i.e., stayed back without consent).
​
Arbitrability of tenancy disputes

In the landmark judgment of Vidya Drolia v. Durga Trading Corporation, 2020, the Supreme
Court of India addressed the arbitrability of tenancy disputes, particularly those arising under
lease agreements.

It overruled Himangni Enterprises v. Kamaljeet Singh Ahluwalia, 2017, which had held that even
tenancy disputes under the TPA were non-arbitrable
SARA DHARWADKAR

The Court laid down a comprehensive four-fold test to determine when a dispute is
non-arbitrable:

1. Action in Rem: If the dispute pertains to rights in rem (rights against the world at large) and
does not involve subordinate rights in personam (rights between specific parties), it is
non-arbitrable.

2. Third-Party Rights: Disputes that affect third party rights, have erga omnes effect, require
centralized adjudication, and where mutual adjudication would not be appropriate and
enforceable, are non-arbitrable.

3. Sovereign Functions: Disputes involving inalienable sovereign and public interest functions of
the State are non-arbitrable.

4. Statutory Bar: If the subject matter of the dispute is expressly or by necessary implication
non-arbitrable under mandatory statutes, it cannot be referred to arbitration.

Applying this test, the Court held that landlord-tenant disputes governed by the Transfer of
Property Act, 1882 (TPA) are arbitrable.
Licence
 Licence
Section 52 of the Indian Easements Act, 1882 : Licence

A licence is a right granted by one person to another (or a definite group) to do or continue doing
something on the grantor’s immovable property which, without such permission, would be
unlawful.

●​ Does not amount to an easement or interest in the property.

●​ Is a personal right and not transferable or heritable.
●​ Legal possession remains with the grantor, only use is permitted.

Exclusive Possession was once considered a conclusive test of a lease.

But not always reliable – even if exclusive possession is given, intention of parties and terms of
agreement matter more.
The true test is: “Whether the rights granted amount to a transfer of interest in property or
merely a permission to use it?”

Aspect Lease Licence

Statute Transfer of Property Act, 1882 Easements Act, 1882

Nature of Right Proprietary right (interest in land) Personal right (no interest in
land)

Transferability Usually transferable and heritable Not transferable, personal to

licensee

Possession Lessee gets exclusive possession Licensor retains legal possession

Estate or Interest Creates estate in favour of lessee Creates no estate or interest

Revocability Generally not revocable during Revocable at will (unless coupled

term with consideration)

Effect of Death Lease survives death of parties Licence terminates on death (if
personal)

Effect of Sale Buyer is bound by lease Licence is terminated unless

protected by contract
 Remedy Against Lessee can sue as a possessor Licensee cannot sue, only
Trespasser licensor can

Section 53 of the Indian Easements Act, 1882 : Who May Grant Licence

A person in possession (lawful owner or occupier) of the property can grant a license.

This includes:

●​ The owner,
●​ A tenant (for their period of tenancy),
●​ A person with any lawful interest in the land.

Possession must be lawful not by trespass or adverse possession unless recognized by law.

Section 54 of the Indian Easements Act, 1882 : Grant May Be Express or Implied

A license may be granted:

●​ Expressly: By words, writing or spoken,

●​ Impliedly: Through conduct, custom, or circumstances.

Section 55 of the Indian Easements Act, 1882 : Accessory Licence

A license may be accessory to a grant or contract.

This means that when a right is granted, it may include ancillary licenses necessary for its
enjoyment.

Eg. If a person is granted the right to use a warehouse, an accessory license may allow them to
access the loading dock.

Section 56 of the Indian Easements Act, 1882 : Licence When Transferable

A license is personal and not transferable or assignable.

Exception: If the license is part of a benefit attached to land, it may transfer with the land to
which it is attached.

Section 57 of the Indian Easements Act, 1882 : Grantor Must Not Frustrate Licence

Once a license is granted the grantor must not do anything that renders its exercise impossible or
defeats its object.
Section 58 of the Indian Easements Act, 1882 : Grantor May Revoke Licence

A license can be revoked at the will of the grantor, unless:

1. It is coupled with a transfer of property, and such right is necessary for enjoyment.
2. It is made irrevocable by an express contract.

A standalone license is revocable. But if a contract exists or reliance is proven, revocation may
be disallowed.

Section 59 of the Indian Easements Act, 1882 : When Licence is Irrevocable

A license becomes irrevocable if:

●​ The licensee has acted on the license,

●​ By executing a work of permanent character,
●​ And has incurred expenses in good faith,
●​ Relying on the license.

If B constructs a factory on A’s land with A’s permission and at great expense, the license
becomes irrevocable.

Section 60 of the Indian Easements Act, 1882 : License revocable at will unless…

General rule: Licenses are revocable at will.

Exceptions:
(a) License coupled with a transfer of property and necessary for its enjoyment.
(b) Licensee has executed a permanent work relying on it in good faith.

Judicial interpretation: Courts often look at conduct, investments made, and expectation created
by the grantor to determine irrevocability.

Section 61 of the Indian Easements Act, 1882 : Revocation – how made

A license may be revoked:

1. By notice to the licensee.
2. By the overt act of the grantor making enjoyment of license impossible.
3. By physical obstruction, provided it is not illegal, forceful, or fraudulent.

Mere revocation notice must allow a reasonable period for the licensee to vacate.

Section 62 of the Indian Easements Act, 1882 : Termination of Licence

A license is terminated in the following cases:

1. Death of grantor or licensee.

2. Cessation of grantor’s interest in the property.

3. Merger: Where licensee becomes the owner.

4. Expiry of time for which license was granted.

5. Fulfillment of the purpose of the license.

6. Destruction of the subject matter (e.g., building).

7. Release of license by licensee.

8. Revocation by grantor as permitted.

9. Licensee becomes entitled to possession of the property.

Section 63 of the Indian Easements Act, 1882 : Licensee’s Right on Revocation

When a license is revoked or ends the licensee is entitled to reasonable time to:
●​ Leave the premises,
●​ Remove any movable goods.
Provided the licensee entered lawfully and did not cause damage.
Exchanges
SARA DHARWADKAR

Exchanges
Chapter VI, Sections 118 - 121

Section 118 : “Exchange” defined

When two persons mutually transfer the ownership of one thing for the ownership of another,
neither thing or both things being money only, the transaction is called an “exchange”

A transfer of property in completion of an exchange can be made only in manner provided for
the transfer of such property by sale.

Essentials of an Exchange

(i) There must be a minimum of two parties and two properties, one each belonging to each of
them;

(ii) There have to be a mutual transfer of these properties i.e., A transferring his property to B,
and B in turn transferring his property to A;

(iii) Property can be exchanged with either movable or immovable property;

(iv) No other consideration should be involved besides these properties.

(v) For a valid exchange, there must be a physical delivery of the property to the parties and each
party to the exchange has the rights and is subject to the liability of the seller as to that which he
gives, and also has the rights and liabilities of a buyer as to that which he takes.

An exchange involves a mutual transfer between two parties of their respective properties. The
main factor that distinguishes an exchange from a sale is that in an exchange, no monetary
consideration is involved.

Sale and Exchange

The TP Act has kept both sale and exchange on the same footing as far as the liabilities of both
the parties are concerned. The methods and formalities for executing a sale and an exchange are
also similar. Yet at the same time, the two are different in two fundamental aspects. These two
primary differences between an exchange and a sale are as follows:

(i) In a sale, generally only one property is exchanged for money but in an exchange, one
property is exchanged for another property;
SARA DHARWADKAR

(ii) In a sale, the consideration is money. However, in an exchange the consideration cannot be
money.

Mohammadin v. Asibun Nissa

A and B were neighbours having adjacent lands. In survey records, with respect to their plots,
entries were wrongly made, showing X property belonging to A and Y property as that of B. A
and B, therefore, in order to correct the mistake in the survey records, executed a document
wherein they acknowledged that a mistake had sccurred in the survey records and they clearly
stated in the document that the respective ownership of X was with B and of property Y, with
[Link] document is not an exchange, but simply a document embodying an acknowledgment of
possession. As this was not an exchange document, it would be admissible in evidence even if it
were unregistered.

John Thomas v. Joseph Thomas

The issue before the court was whether the written agreement for mutual exchange of properties
amounted to a sale or an exchange. The parties had known each other for a long time. One of the
parties, A, owned property X, and the other, B owned property Y. Since X was more valuable
than Y, when A exchanged X for Y, B paid an additional sum of one lakh rupees towards
equalisation money. The court held that since money had been paid by one party to another, it
amounted to a sale and not an exchange.

Chief Characteristic Features:

●​ Mutual transfer of ownership in properties

●​ No consideration besides the properties
●​ Properties need not be immovable
●​ Exchange includes barter
●​ Mode of transfer
●​ Deed of exchange must be a valid contract

Shrihari Jena v. Khetramohun Jaina - Object of the exchange should be lawful

A deed of exchange was executed to compromise criminal proceedings between the parties. The
agreement between them stated that till the proceedings are compromised, the deed of exchange
could not be taken from the Registrar’s office. The court held that in view of s 23 of the Indian
Contract Act, 1872, the exchange was invalid.
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Section 119 : Right of party deprived of thing received in exchange

Applies only in cases of exchange (not sale or gift).

Deals with situations where one party suffers deprivation of the thing received due to defective
title of the other.

Cause of deprivation : Must be due to a defect in the title of the other party. E.g., the property
was not lawfully owned or was encumbered, mortgaged, or subject to litigation.

Who can claim : The party to the exchange or any person claiming through or under them (e.g.,
heirs, assignees).

Remedy : The party deprived has 2 options:

(a) Compensation for Loss:

• Monetary damages for the value or loss caused due to the deprivation.

(b) Return of Property:

• Ask for return of their original property, if:
• It is still in possession of:
• The other party, or
• Their legal representative, or
• A transferee without consideration (i.e., gratuitous transferee).

Exception – Contrary Intention: If the terms of the exchange explicitly exclude such liability (via
contract), then this remedy will not apply.

Section 120 : Right and liabilities of parties

Unless otherwise provided in this Chapter (i.e., Chapter VI on Exchange), each party to an
exchange:
●​ Has the rights and liabilities of a seller in respect of what he gives.
●​ Has the rights and liabilities of a buyer in respect of what he takes.

Section 121 : Exchange of money

On an exchange of money, each party thereby warrants the genuineness of the money given by
him.
Gifts
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Gifts
Chapter VII, Sections 122 - 129

Section 122 : “Gift” defined

“Gift” is the transfer of certain existing movable or immovable property, made voluntarily and
without consideration, by one person (the donor) to another (the donee), and accepted by or on
behalf of the donee.

1. Transfer of ownership

Donor may create absolute or limited interest.

Absolute: Full ownership transferred (e.g., enjoy property exclusively).
Limited: Life interest or conditional interest (e.g., reversion to donor/heirs).

2. Parties to the gift

Donor: Must be competent (sound mind and of majority age).

Donee: Any person capable of holding property (can be minor, but acceptance must be through
guardian).
Gifts to unregistered societies or vague entities like “dharam” are void.
Gift to two donees with the right of survivorship is valid.

Sainath Mandir Trust v. Vijaya - Gift to idols or for religious purposes:

●​ Gifts to existing idols (as juristic persons) are valid but not under s 122 TPA, as idols are
not “living persons”.
●​ Gift to a yet-to-be-installed idol is invalid unless given in trust to Pujaris for installation.

3. Property must be certain and existing

Property must be definite and in existence at the time of the gift.

Future property cannot be gifted. (Section 124)

4. Without consideration

A gift must be gratuitous ; no monetary or other compensation involved.

5. Voluntarily made
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Must be made with free consent, without coercion, undue influence (voidable), fraud (void), or
misrepresentation.
1. Relationship of domination: Donee is in a position to dominate the donor’s will.
2. Unfair advantage: Donee used that position to gain a benefit.
3. Burden of proof: Shifts to the donee if transaction is unconscionable.

6. Acceptance by the donee (Section 125)

Acceptance must be made:

●​ During the lifetime of the donor, and
●​ While the donor is still capable of giving.
●​ If the donee dies before acceptance, the gift is void.

Gift v. Will

Basis Gift Will

When it takes effect Immediately upon acceptance After the death of the testator

Consideration Without consideration Without consideration

Revocability Generally irrevocable Revocable during lifetime

Acceptance Mandatory Not required during lifetime

Section 123 : Transfer How Effected

Immovable Property:

●​ Gift must be effected by a registered instrument

●​ Signed by/on behalf of the donor
●​ Attested by at least two witnesses

●​ Mere possession by donee does not validate an unregistered gift (oral gift by father to son
not proved = invalid).
●​ Possession for 12 years under an oral gift may result in title by prescription.

Movable Property:

●​ Gift must be effected by a registered instrument

●​ By delivery akin to delivery of goods sold.
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Registration :

If validly attested and registered, a gift deed does not require formal proof under the Indian
Evidence Act, 1872.

Registration creates a presumption of validity, but doesn’t cure a gift that lacks essential elements
(like acceptance).
​
Exception : Property gifted to daughter at marriage (e.g., pasupu kumkuma) by written deed
need not be registered.

Irrevocability Post Registration

Once gift deed is:
●​ Duly attested
●​ Registered
●​ Accepted and acted upon by donee
●​ Gift becomes irrevocable despite the donor's contrary intention.

Delivery of Possession:

A gift followed by delivery of possession is irrevocable.

Physical possession is essential if the property is capable of it. Without possession, the gift is
invalid.

Exception : Minor donee living with donor under care - delivery not required.

Collusive Gifts

A collusive gift is one that is not genuine and has been executed in order to defeat the rights of a
third party. Such collusive deeds are void.

Surendra Kumar v. Nathulal:

●​ A man (A) owned some property.

●​ He mortgaged that property to someone (B).
●​ Then B mortgaged it again to C, who sub-mortgaged it to D.
●​ While D was trying to demolish parts of the property, A filed a case in court to protect his
rights.
●​ During the case, A gifted the property to another person (X).
●​ B, C, and D (the mortgagees) said the gift was fake, claiming it was only made to cheat
them and take back the property.
●​ But the court said the gift was valid because:
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-​ A (the original owner) admitted he really made the gift.

-​ Therefore, X (the donee) now had full rights, including the right to redeem the
mortgage.

Venkati Rama v. Pillati Rama

The gift is considered valid, and registration can occur posthumously. This principle was upheld
in the case of Venkati Rama Reddi And Ors. v. Pillati Rama Reddi And Ors., where the Madras
High Court affirmed that a gift deed registered by the donee after the donor’s death is valid,
provided the donor had executed it during their lifetime.

If the donee dies before accepting the gift, the gift deed becomes void. According to Section 122
of the Transfer of Property Act, acceptance must occur during the donor’s lifetime. If the donee
passes away before accepting the gift, there’s no valid transfer, and registration cannot rectify
this.

Section 124 : Gift of Existing and Future Property

A gift comprising both existing and future property is void as to the latter.

If someone tries to gift both present and future property, the gift will only be valid for the
existing part. The future part is void.

●​ You can’t gift something you don’t own yet (like future income or property you hope to
get later).
●​ A gift of the right to manage something or future revenue (like from a village) is invalid.
●​ A gift of money that doesn’t exist yet (for example, funds a business doesn’t have or
can’t borrow) is also invalid.

Section 125 : Gift to Several of Whom One Does Not Accept

A gift of a thing to two or more donees, of whom one does not accept it, is void as to the interest
which he would have taken had he accepted.

If some accept and others don’t, the gift is:

●​ Valid for those who accept.
●​ Void only for those who do not accept.

Eg. A owns 3 lands - X, Y, and Z.

He gifts:
●​ Land X to B,
●​ Land Y to C,
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●​ Land Z to D - all in the same gift deed.

If only D accepts, then:

●​ Gift of Z to D is valid.
●​ Gifts of X and Y to B and C are void because they didn’t accept.

Section 126 : When Gift May Be Suspended or Revoked

A gift is generally irrevocable once made and accepted. But there are 2 exceptions where
revocation is allowed :

1.​ Conditional Gifts (Agreed Suspension / Revocation)

If both donor and donee agree beforehand that the gift will be cancelled or suspended
when a specific event happens, then it can be revoked if that event occurs.

But the condition must not depend on the donor’s will alone.

Eg. “If B gets married within 2 years, the gift to him will be revoked.”
This is valid if both parties agreed.

●​ Condition Precedent - Something must happen before the gift is complete.

If that thing is impossible/illegal, the gift fails.

●​ Condition Subsequent - Something happens after the gift is given.

If the condition fails, the gift reverts to the donor.

2.​ Gift Treated Like A Contract

A gift can also be revoked like a contract can be cancelled (for example, due to fraud,
misrepresentation, undue influence, etc.), except for lack of consideration (because gifts
are by nature without consideration).

Nothing in this section should affect the rights of a third party who is a bonafide transferee for
consideration.

Eg. A (donor) gives a house to B (donee) as a gift. They both agree in writing: “If B ever moves
out of the city, the gift is cancelled.” Later, B sells that house to C (a third person).
C buys it honestly, pays money for it, and doesn’t know anything about this condition. Then even
if B moves out and the gift should be cancelled between A and B, C’s ownership is safe.
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Thakur Raghunathjee Maharaj v. Ramesh Chandra

Even if the gift deed is unconditional, if there’s another agreement signed the same day that sets
a condition, the gift is treated as conditional.

The donor can’t revoke the gift unless the condition is clearly stated at the time of the gift and it’s
part of the same transaction.

Where an unconditional gift deed and an agreement between the donor and the donee were
executed on the same day, the conditions prescribed in the agreement would attach to the deed as
gift deed and the agreement would form part of one transaction.

Where via a gift deed the land was gifted unconditionally to the donee, but by another agreement
executed on the same day it was stipulated that the donee was to construct a college building on
the land within 6 months failing which the donor would have a right to take back the possession,
it is a conditional gift.

Sridhar v. N. Revanna

N. Revanna was gifted property through 2 gift deeds that prohibited Revanna and his brothers
from selling the property. (Condition restraining alienation - Section 10)

Revanna later sold parts of the property to third parties, despite the restriction. His sons argued
the sales were void due to the non-alienation clause and sought to reclaim ownership.

The court held that absolute restrictions on the alienation of property in gift deeds are void under
Section 10 of the Transfer of Property Act.

Such void conditions do not invalidate the gift itself ; the donee retains full rights over the
property, including the right to transfer it.

Section 127 : Onerous Gifts

An onerous gift is a gift with a burden or obligation attached to it.

“Qui sentit commodum sentire debet et onus” : He who receives the benefit must also bear the
burden. A donee cannot cherry-pick only the advantageous part of an onerous gift if it’s via a
single instrument.

Where several things are transferred by a single instrument, and some are burdened with
obligations while others are not:

●​ The donee must accept or reject the gift as a whole.

●​ Partial acceptance is not permitted.
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Where the gift comprises multiple, distinct and independent transfers:

●​ The donee is free to accept one and reject the others.

●​ Acceptance is not interdependent.

Exception : Onerous gift to disqualified person - A person not competent to contract (like a
minor) who is gifted a property with obligations is not bound by the obligations, even if the gift
is accepted.

But if after attaining majority, the donee:

●​ Retains the gift and

●​ Is aware of the obligations,

then they become bound by those obligations.

Minors are protected from onerous obligations unless they voluntarily retain the burden
post-majority.

Section 128 : Universal Donee

A universal donee is a person who receives the donor’s entire property (both movable and
immovable) under a gift.
If a donor gifts all his assets, the donee becomes personally liable for all the donor’s debts and
liabilities that existed at the time of the gift.

If any part of the donor’s property is excluded from the gift, the donee is not a universal donee.

However, this liability is limited to the value of the gifted property.

It does not exceed the value of the property received.

If the donor gifts entire property but subject to a liability (e.g., a promissory note payable to a
third party):
●​ The donee must honour the debt.
●​ He cannot accept the estate and reject the burden attached to it.

Eg.

Full Liability Case

●​ A owes B ₹20 lakh and owns property worth ₹40 lakh.
●​ A gifts the entire property to C, retaining nothing.
●​ C is a universal donee and must pay ₹20 lakh to B.
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Limited Liability Case

●​ Same facts, but the gifted property is worth only ₹15 lakh.
●​ C’s liability limited to ₹15 lakh, even though A owed ₹20 lakh.

If A retains part of the property or gift is partial, C is not a universal donee, and the creditor
cannot claim under S.128.

The mortgagee is allowed to tack (i.e., add) the simple contract debt of the donor onto the
mortgage debt. The universal donee must pay both the mortgage debt and the simple contract
debt if he wants to redeem the property.

Eg.

●​ Mr. A (Donor) owns a house worth ₹20 lakh.

●​ An unsecured debt of ₹3 lakh owed to Mr. C.
●​ The house is mortgaged to Mr. C for ₹5 lakh.
●​ Mr. A executes a gift deed transferring all his properties (house + remaining assets) to
Mr. B (Universal Donee).

●​ Mr. B now owns the house (subject to mortgage) and becomes a universal donee under
Section 128 of the Transfer of Property Act, 1882.
●​ Mr. B wants to redeem the house.

●​ Under equity principles and Section 128, Mr. B must bear the burden of all debts of Mr.
A to the extent of the property he received. He can’t keep the property but refuse to pay
some of the debts, especially to the same creditor. Mr. B can redeem the house only after
paying ₹8 lakh (₹5L + ₹3L) to Mr. C.

Section 129 : Saving of Donations Mortis Causa and Muhammadan Law

“Nothing in this Chapter relates to gifts of movable property made in contemplation of death, or
shall be deemed to affect any rule of Muhammadan law.”

Excludes 2 categories of gifts from the applicability of general rules under Chapter VII (Sections
122–128) of the Transfer of Property Act:

1. Donation mortis causa (gifts in contemplation of death) Section 191, Indian Succession Act,
1925 / marz ul maut (muslim law)

1. Movable property only.

2. Made in contemplation of death.
3. Immediate apprehension of death due to illness or condition.
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4. Delivery of possession to donee.

5. Automatic revocation if:
• Donor recovers, or
• Donee predeceases the donor.

2. Gifts governed by Muslim/Muhammadan Law

Challenge:

Argued that the section discriminates on the basis of religion, violating:

●​ Article 14 - Equality before the law

●​ Article 15 - Non-discrimination

Court’s View:

Held constitutional.
Based on reasonable classification:
Distinction is valid considering the distinct religious and customary practices of Muslims.
Muslim personal law forms a separate and coherent legal system, justifying exclusion.
Actionable Claims
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Actionable Claims
Chapter VIII, Sections 130 - 137

Section 3 : Interpretation Clause

An “actionable claim” refers to:

A claim to any debt,

Excluding debts secured by:
●​ Mortgage of immovable property, or
●​ Hypothecation or pledge of movable property;

OR

A claim to any beneficial interest in movable property that is not in the possession (actual or
constructive) of the claimant.

The claim must be one that civil courts recognize as affording grounds for relief, whether the
debt or interest is:
●​ Existent (presently due),
●​ Accruing (will become due in the future),
●​ Conditional (dependent on the fulfillment of a condition), or
●​ Contingent (dependent on a future uncertain event).

Actionable:

●​ Unsecured loan recoverable from a friend.

●​ Arrears of rent. Madhabilata v. Bhutto Kristo
●​ Claim to insurance money.
●​ Right to get money under a contract (e.g., winning from a lottery or raffle, if legal).
H Anraj v. Government of Tamil Nadu
●​ Claim for return of earnest money.
●​ Claim in respect of salary. Poothekka v. Annamalai

Not Actionable:

●​ A loan secured by a mortgage.

●​ A claim to goods that are pledged.
●​ A claim to movable property in your possession.
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●​ Judgment Debt or Decree : Once a court passes a decree, the original debt merges into it
and becomes a judgment debt. It is no longer a mere “claim” but a conclusive
determination of rights.

●​ Claim to Compensation for Government Construction (e.g., canal on mining site) : Such a
claim arises post-transfer and is in the nature of a compensation for governmental acts. It
is not a debt or beneficial interest recognized as actionable under TPA.

●​ Claim to Mesne Profits : Mesne profits refer to unlawful gains made by someone in
wrongful possession of property. They are unliquidated damages, i.e., not a fixed or
ascertained sum. Actionable claims must be for definite, enforceable debts or interests not
speculative or to-be-assessed damages.

Section 130 : Transfer of Actionable Claim

Mode of Transfer (Assignment)

A valid transfer of an actionable claim requires the following:

1. Written instrument: The transfer must be executed in writing.

2. Signature: Signed by the transferor or their agent.
3. Completion upon execution: The transfer is effective once the instrument is executed.
4. Rights vest in transferee: The transferee gains all rights and remedies of the transferor.

The section combines features from both English common law and equity principles in handling
actionable claims.

Effect of Transfer (Assignment)

The transferee has the right to sue or initiate proceedings in their own name without needing the
transferor’s consent or making the transferor a party to the proceedings.

Once an actionable claim is transferred, the transferee has the exclusive right to sue for the debt
in their name without the transferor’s involvement.

Notice of Transfer (Assignment)

After the transfer of a debt, the debtor cannot make a valid payment to the transferor unless they
are notified of the transfer. If they pay the transferor after receiving notice of the assignment,
they risk having to pay the transferee again.

The provision benefits the debtor but does not affect the priority of claims between transferees. If
a debtor is informed of multiple assignments, the first notice giving assignee takes precedence.
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Exception : Section 130 does not apply to the transfer of a marine or fire insurance policy. This
exception is governed separately by Section 38 of the Insurance Act, 1938.

Valid Transfers:

1. Transfer of future debts (e.g., book debts).

2. Transfer of the right to a sum of money.
3. Assignment of the right to participate in a lottery draw.
4. Transfer of dividends from shares in a company.
5. Transfer of the right to demand a reconveyance of property.
6. Assignment of the interest of a buyer of goods in a forward delivery contract.
7. Transfer of the benefit of a contract to purchase land.

Invalid Transfers:

1. Decrees: A decree is not an actionable claim, and thus cannot be transferred.

2. Promissory Notes: A promissory note itself cannot be transferred; however, the debt can be
assigned.
3. Mortgage Debts: A mortgage debt is not an actionable claim.
4. Collateral Security: The transfer of collateral security does not transfer the underlying debt.
5. Power of Submission to Arbitration: This is personal and cannot be assigned.

Section 131 : Notice to be in Writing and Signed

Notice of Transfer (Assignment)

The notice of the transfer of an actionable claim must be in writing, signed by either the
transferor or their authorized agent.

If the transferor refuses to sign, the notice may be signed by the transferee or their agent.

The notice must clearly state the name and address of the transferee.

An assignment of an actionable claim is not valid against the debtor until they receive notice of
the transfer in the proper form.

Until the debtor is notified of the assignment, their dealings with the original creditor remain
protected. The debtor can waive the requirement for notice.

If the assignment is through a registered document, notice is not required.

A notice given within one year of the transfer is considered valid.

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Conditional notices are allowed but can only be validated by subsequent notices.

After the transfer of a debt, the debtor cannot make a valid payment to the transferor unless they
are notified of the transfer. If they pay the transferor after receiving notice of the assignment,
they risk having to pay the transferee again.

The provision benefits the debtor but does not affect the priority of claims between transferees. If
a debtor is informed of multiple assignments, the first notice giving assignee takes precedence.

Section 132 : Liability of Transferee of Actionable Claim

The transferee of an actionable claim assumes all the liabilities and equities that the transferor
was subject to at the time of the transfer.

This means the transferee cannot escape the legal situation that existed between the transferor
and the debtor at the time of the assignment.

Debt Transfer with Set-Off:

●​ A owes money to B and also has a debt that B owes him.

●​ A gives his debt to C, and now C can ask B to pay.
●​ But B can say : "A owes me money too,” and reduce the amount he has to pay to C.
●​ Even though C didn’t know A owed B money, B can still reduce the amount because the
debt transfer included A’s debts.

Transfer of Bond with Conditions:

●​ A gave a bond to B with certain conditions that let A cancel the bond.
●​ B then sells the bond to C without telling him about these conditions.
●​ C can’t force A to follow through with the bond because A still has the right to cancel it
due to the original conditions.

Section 133 : Warranty of Debtor’s Solvency

If the person transferring a debt (the transferor) guarantees that the debtor (the person who owes
money) is financially stable (solvent), this guarantee only applies :

●​ at the moment of transfer

●​ only for the value paid for the debt.
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Section 134 : Mortgaged Debt

●​ Person A owes Person B a debt of ₹1,00,000.

●​ Person A also owes Person C a debt of ₹50,000 and wants to secure this debt by
transferring the ₹1,00,000 debt from Person B to Person C.

●​ So, Person A transfers the ₹1,00,000 debt from Person B to Person C, to secure the
₹50,000 debt that Person A owes to Person C (this is like using the ₹1,00,000 debt as
collateral for the ₹50,000 loan).

●​ Person C now holds a claim over the debt owed by Person A to Person B, but only as
security for Person A’s ₹50,000 debt.

●​ Person C can try to recover the ₹1,00,000 debt from Person A, but first, Person C must
use the recovered money to settle the ₹50,000 debt that Person A owes to Person C. Once
Person C has received ₹50,000, any remaining amount will be used to pay the costs and
then be returned to Person A.

1. Recovery Costs: First, if the ₹1,00,000 debt is recovered by either Person A or Person C (say,
they manage to collect the debt from Person B), the costs of recovery (like legal fees, expenses)
are paid first.

2. Satisfying the Secured Debt: After covering the recovery costs, the next thing is to use the
remaining amount to pay off the ₹50,000 that Person A owes to Person C (the debt being secured
by transferring the ₹1,00,000 debt).

3. Remaining Amount: If any money is left after paying the recovery costs and settling Person
C’s ₹50,000 debt, that remaining amount (₹1,00,000 - ₹50,000 - recovery costs) goes to Person A
or whoever else is entitled to it.

Section 135 : Assignment of Rights Under Policy of Insurance Against Fire

This section explains the rules when someone assigns (transfers) a fire insurance policy to
another person.

If a person (the assignor) transfers a fire insurance policy to another person (the assignee) by
endorsement (writing on the policy or in another form), the assignee becomes the owner of the
property insured under that policy.

The assignee will also have all the rights to sue or take legal action as if the insurance contract
was originally made with them.
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Eg. If goods entrusted to a railway company are damaged by fire, and the consignee (receiver of
goods) has an insurance policy, they can make a claim from the insurance company.

The consignee can still sue the railway company for damages, even after obtaining damages
from the insurance company.

The subrogation rights do not prevent the consignee from seeking additional compensation from
other responsible parties.

Section 136 : Incapacity of Officers Connected With Courts of Justice

This section prevents certain officials connected to the court system from dealing with actionable
claims in specific ways.

Judges, legal practitioners (lawyers), and court officers.

These individuals cannot:

●​ Buy, traffic, or trade in actionable claims.

●​ Receive any share or interest in actionable claims, either directly or indirectly.

Judges, lawyers, and court officers are prohibited from buying or receiving interests in actionable
claims because they could misuse their position. If they do so, the court will not enforce those
claims. However, there are exceptions like cases where the transaction was made by mistake or
does not involve their professional duties.

Section 137 : Saving of Negotiable Instruments etc.

This section clarifies that the rules about the transfer of actionable claims do not apply to certain
financial instruments and documents.

What is Excluded:

●​ Stocks, shares, and debentures: These are not actionable claims and are not covered by
the transfer rules mentioned earlier.

●​ Negotiable instruments: This includes instruments like promissory notes, bills of

exchange, etc., which can be transferred without following the same formalities as other
claims.

This section excludes stocks, shares, debentures, and negotiable instruments (like promissory
notes) from the usual rules about actionable claims. It also allows mercantile documents (e.g.,
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railway receipts) to be transferred easily in business transactions, typically without formal

documentation, just through endorsement or delivery.

Mercantile documents of title to goods: These documents, like bill of lading, railway receipts,
dock-warrants, etc., prove possession or control of goods and allow the transfer or receipt of
goods by endorsement or delivery.
These are documents used in business transactions that represent possession or control of goods.
These documents can be transferred by simply endorsing or delivering them, which makes the
possessor entitled to the goods represented by them.

Unlike other actionable claims, negotiable instruments and mercantile documents can be
transferred without a written instrument, just by endorsement or delivery, according to the
custom of business practice.