SUMMARY THE TRANSFER OF PROPERTY ACT DEFINITIONS (S. 3) Immovable property : immovable property does not include (a) standing timber, (b) growing crops, or (c) grass. Instrument Instrument means a non-testamentary instrument. :\lfested Attested means attested by two (or more) witnesses, each of whom has— (a) seen the executant sign the instrument; or (a) seen some other person sign the instrumenT in the presence, and under the direction of the executant: • or (a) received from the executant a personal acknowledgement of his signature (or the signature of such other persons); and (b) signed the instrument in the presence of the executant. Attached to the earth : Attached to the earth means anything— (a) rooted in the earth (e.g. trees and shrubs): or (b) imbedded in the earth (e.g. W311S or buildings); or (c) attached to what is so imbedded (e.g. doors and windows). Notice A person. is said to have notice of a fact— (a) when he actually knows that fact; or (b) when. but for (I) wilful abstention, or (ii) gross negligence,— he would have known it. Rcistration of an instrument operates as a notice, if (!) . The instrument is compulsory regiscabie. (2) The regisTration is ' completed in the manner prescribed by the Indian Registration Act. (3)The instrument and its particulars are correctly entered in the Register and in the Index. Actual possession by any (othe) person is also notice of the title, if any, of such other person. Notice to the agent also operates as notice to the principal, if the agent gets such notice(i) whilst acting of the principals behalf, (ii) in the course of business, (iii) to which business 'that fact is material. But. if the agent fraudulently withholds the notice from his principal, the latter is no deemed to have had notice as against any person who was (a) a party to, or (b) otherwise cognizant of, the fraud. "Transfer of property' (S. 5) Transfer of property means any act by which a living person conveys property, in present -• SUMMARY 201 or in future, to (I) one or more other living persons; or (ii) himself; or (iii) himself and one or more other living persons. What property can be transferred (S. 6) Property of any kind can be transferred. However, the toliowing nine rights or interests cannot be transferred 1. Spes successionis, namely,— (iv the chance of an heir-apparent succeeding to an estate; or (i the chance of a relation obtaining a legacy on the death of a kinsman: or (iii) any other mere possibility of a like nature. 2. A mere right of re-entry for breach of a condition subsequent (unless the transfer is to the owner of that property). An easement apart from the dominant heritage. An easement in property restricted in its enjoyment to the owner personally. A right to future maintenance, in whatsoever manner arising, secured or determined. A mere right to sue. A public office, or the salary of a public officer, whether before or after it has become payable. 8. Stioends allowed to military, naval, -air-force and civil pensioners of Government, as ais political pensions. 9. A transfer (a opposed to the nature o f the interest affected thereby; or (b) for an unlawful object or consideration (within the meaning of S. 23 of the indan Contract Act); or (C) 13 a person who is legaIi'' disqualified to be a transferee. Persons who are competent to transfer (S. 7) Ever\ person who is (a) comoetent to contract (under S. 11 of the Indian Contract Act) 3. 4. 5. 6. 7. and (b) entitled to transferable properl y- or (b) authorised to dispose of transferable property which is not his own,— is compe:ent to transfer such popert. Persons who cannot assign their interests (S. 8) 1. A tenant having an untransferabie right of occupancy cannot assign his interest as such tenant.. 2. A farmer of an estate in respect of which a default has been made in paying revenue, cannot as'sign his interest as such farmer. 3. The lessee of an estate under the management of a Court of Wards cannot assign his interest as such lessee. Operation (effect) of transfer (S. 8) Unless a different intention is expressed or implied, a transfer passes to the transferee all the interest which the transteror is capable of passing in the property and its legal incidents. Thus, - THE TRANSFER OF PROPERTY ACT (i)(a) the easements; (b) rent and profits after the transfer; and (c) all things attached to the earth.. (ii) Transfer of machinery attached (ii) the movable prts thereof. 202 (I) Transfer of land to the earth (iii) Transfer of a house passes to the transferee (iv) Money (or other property yielding income) (v) Debt (or other actionable claim) (iii) (a) the easements, (b) rents after the transfer, and (C) locks, keys, bars, doors, windows etc. (iv) the interest (or income) after the transfer. (v) the securities therefor, but not arrears of interest accrued before the transfer. Oral transfer (S. 9) A transfer of property can be effected orally, if writing is not expressly required by law. Condition restraining alienation (S. 10) If property is transferred subject to a condition which absolutely restrains the transferee from parting with (or disposing of) his interest in the property, such condition is void, unless(i such a condition is in a lease, and the condition is for the benefit of a lessor; or (ii) such a condition is in a transfer to a woman (not being a Hindu, Muhammedan or Buddhist), and provides that during her marriage, she would not have the power to transfer or charge the property (or her beneficial interest in it). Restriction on free enjoyment of property (S. 11) In the case of an absolute transfer, if it is directed that the transferee is to apply or enjoy the property in a particular manner, the direction is invalid, unless such direction is made in respect of one immovable property for the beneficial enjoyment of another immovable property. Condition making interest determinable on insolvency or attempted alienation (S. 12) A transleror cannot direct that the transerees interest in the property will cease if (I) he becomes insolvent, or (ii) he tries to dispose of such property, - unless the direction is in a lease, and is for the benefit of the lessor or persons claiming under him. Directions for accumulation of income (Ss. 17 &. 18) If, under a transfer, the income of the property is to be accumulated longer than (a) the life of the transferor, or (b) 18 years from the date of the transfer,— such direction is void to the! extent that the accumulation which is directed exceeds the longer of the above periods, and at the end of such period, the property can be disposed of as if the accumulation period has elapsed. But, a direction for accumulation beyond the above period is valid, if such direction is for— (i) the payment of the transferors debts; or (ii) the provision of portions for children (orremotes issue) of the transferor; or 'SUMMARY 203 (ii) the preservation or maintenance of the property transferred; or (iv) the benefit of the-public. Transfer for benefit of unborn pè.rsons (Ss. 13 & 14) 1. If a transfer of property creates an interest in favour of a person who is not in existence on the date of transfer (subject to a prior interest), the unborn persons interest will not take eflect unless it extends to the whole of the transferor's interest in the property. 2. Under the rule against perpetuity, a transfer cannot create an interest which is to take effect after (I) the life-time of one or more persons living at the date of the transfer and (ii) the minority of some person who must be in existence at the expiry of that period, and to whom the interest is -to belong if he attains majority. Transfer to a class (Ss. 15, 16 & 22) 1. If an interest is created for a class of persons, and it fails as regards some such persons because of S. 13 or S. 14 (above, such interest wU fail ony as regards such perscns, and no:' as regards the whole class of person. 2. If an interest fails because of S. 13 or S. 14, any interest created in the same transaction and intended to take effect on such failure, also fails. Thus, a limitation following upri a limitation which is void under S. 13 or S.14 is also void. 3. If a transfer creates an interest only for the benefit of those persons of a class who have attained a particular age, the interest does not vest in any person who has not attained that age. Vested Interest (Ss. 19-22) 1. On a transfer of property, an interest is said to be vested if it is created (i) without specifying when it is to take effect: o(ii) in terms specifying that it is to take effect (a) forthwith (i.e. i mmedi ately), o.' -. (b) on the happening of an event which must happen. 2. A vested interest is not defeated if the transferee dies before he obtains actual possession of the property. 3. An interest will be a vested interest, even if (I) the enjoyment thereof is postponed or (U) a prior interest in the same property is given to some other person; or (iii) income of the property isthected to be accumulated Until the time of enjovmet arrives; or (iv) tnere is a provision that, if a particular event happens, the interest is to pass .10 another person. 4. It an interest in property is created in favour of an unborn person, he acquires a vested interest immediately upon his birth, although enjoyment thereof is postponed. 5. If a persqn is entitled to property only -on attaining a particular age,-but is entitled to the income thereof before he reaches that age (or if such income is to be applied for his benefit), the interest is said to be vested. 6. If a transfer creates an interest only for the benefit of those persons who have attained a particular age, the interest does not vest in any person who has not attained that age. Contingent interest (Ss. 21-24) It a transfer creates an interest in favour of a person, to take effect only on the - happening (or not happening) of a specified uncertain event, such interest is contingent. 204 Such contingent interest becomes a vested interest on the happening (or not happening) of that event. • • • THE TRANSFER OF PROPERTY ACT DIFFERENCE BETWEEN Vested Interest I Contingent Interest 1. Definition (See above) 2. It is solely dependent on the fulfilment of a condition. 3. Whether or not it passes on the death of the transferee depends on the nature of the contingency. 4. It is transferable. Whether it is heritable or not depends on the nature of the contingency. 5: Present right of enjoyment : It confers a 5. There is no present or immediate right of enjoyment. present and immediate right td the properly, even if enjoyment thereof is postponed. 1. Definition (See above) 2. Fulfilment of condition: It does not depend on the fulfilment of any condition. 3. Effect of ' transferee's death : It is not defeated by the transferee's death, if he dies without obtaining possession. 4. Whether transferable and.heritàble : It is both transferable and heritable. Conditional Transfers (Ss. 25-34) Conditions are of 3 kinds (I) A condition precedent is one which delays the vesting of a right until the happening of an event. (ii) A condition subsequent is one which destroys or diverts a right on the happening of an event. (iii) A conditional limitation is one which diverts an estate (which had already vested), and vests it in another person. Characteristics of a condition precedent 1. It must happen before the estate can vest. 2. The estate will not vest until the condition is performed. 3. If the condition precedent is impossible or immoral or opposed to public policy, the transfer is void. 4. t s deemed to be fulfilled, it It is substantially camp/led with. Characteristics of a condition subsequent 1. It is one, on the happening of which an existing estate is defeated (or divested). 2. When there is a condition subsequent, the estate vests, immediately, subject to being divested if the condition is broken. 3. If the condition subsequent is impossible, immoral or opposed to public policy, the transfer will be valid, and the condition will be ignored. 4. A condition subsequent must be strictly complied with. Two Rules governing Conditions Precedent (Ss. 26 & 27) 1. A condition precedent is deemed to be fuifilled, if it has been substantially complied with. 2. If an interest is created in favour of one-person, and by the same transaction, an ulterior disposition of the same interest is made in favour of another person, if the first disposition fails, the ulterior disposition immediately takes effect. even-if the failure has not occurred in the manner contemplated by the. transferor. (This is known as the doötrineot acceleration.) SUMMARY 205 But, if the intention of the parties is that the ulterior disposition is to take effect only if the prior disposition fails in a particular manner, thentrie ulterior disposition will take effect only if the first disposition fails in that particular manner. (See also Rule 4, below.) Four Rules governing Conditions Subsequent (Ss. 28-34) 1. The ulterior disposition will not take effect unless the condition subsequent is strictly complied with. 2. If the ulterior disposition is not valid, the prior disposition is not affected (i.e. the prior disposition remains valid). 3. If no time is specified in a condition subsequent. the condition is deemed to be broken if the person renders tie performance of the act impossible,— . permanently or indefinitely. 4. If fulfillment of a condition is prevented by fraud. 1 urther time (equal to the dela y cause '- 4 such fraud) is to be given to the person to perform the act. (This rule also.app/ies to a condition precedent.) DIFFERENCE BETWEEN Condition Precedent 1. Precedes the vesting of the estate. 2. Vesting is postponed until performance of the condition. 3. Once the interest is vested, it cannot be divested. 4. A condition preceoont affects the acquisition of an estate. a. If the condition is impossible. immoral or opposed to public POiCy, the transfer is voic. 6. The condition must be valid in law. 7 It may be substantia;y complied with (i.e. the doctrine of cy-pres applies. Condition Subsequent 1. Follows the vesting of the estate. 2. Vesting is immediate. 3. Even if interest vests, it is liable to' be divested. 4. A condition subsequent affects the retention of an estate. 5. If tne condition is impossible etc., transfer Wi be absolute, and the condition will be ictnored. 6. If tne condition is not valid in law, it will be ignored. 7. It must be strictly complied with (i.e. the aotrine of cy-pres doos not apply) --.... tlection (S. 35) The doctrine of electcn arises when a persor professes to transfer property which tie nas no right to transfer, and as a part of the same transaction, confers any benefit on the owner of the property. In such cases, the owner of the property must either confirm the transfer or dissent from it. If the owner dissents,— (a) he also relinquishes the benefit conferred on him: and (o) the benefit so relinquished reverts to the transferor. Although the benefit reverts Ic the transferor, it is subject to the charge of making good, to the disappointed transferee, the amount or value of the property, if (i) the transfer is gratuitous, and before the election, the transferor dies or becomes incapable of making a fresh transfer: or (ii) the transfer is for consideration. . - THE TRANSFER OF PROPERTY ACT 206 -' The following further points are also to be 'kept in mind 1. It is immaterial whether the transferor does or does not believe that the property which he professes to transfer is his own property. 2. A person who takes on benefit directly under a transaction, but derives a benefit under it indirectly, need not elect. 3. Likewise, a person who takes a benefit in one capacity may dissent therefçom in another capacity. 4. In case of a dissent, only that particular benefit is to be relinquished; any other benefit conferred on him by the same transaction is not to be relinquished. 5. If a person accepts a benefit for 2 years (or more), there is a presumption that he has elected in favour of the transfer. 6. If the owner does not, within a year's time, signify to the transferor, his intention to confirm or dissent, the transferor may require him to make an election. If he does not comply with such requisition. he is deemed to have elected to confirm the transfer. DIFFERENCE BETWEEN English Law I Indian Law 1. The doctrine of forfeiture applies. 1. The doctrine of compensation applies. for making an 2. A period of one year is prescribed for no fixed time There is 2. making an election. ' election. Apportionment (Ss. 36 & 37) 1. All rents, annuities, pensions, dividends and other periodical payments are deemed to accrue from day to day. The transferor is entitled to such payments for the period before the transfer, and the transferee for the period after the transfer. However, the actual payments are to be made only on the appointed days. 2. When, as a result of a transfer, property is divided and held in several shares, the benefit of any obligation relating to the property passes from one to several owners. The corresponding duty is to be performed in favour of each ower in proportion to the value or his snare in the property. Transfer by person authorised to transfer only under certain circumstances (S. 38) If a person is authorised to dispose of immovable property only under certain circumstances. and he transfers such proPertY. '(i) for consideration. (ii) alleging the existence-of such circumstances, then those circumstances are deemed to have existed, as far as the trasnsferee is con- cerned, provided— (a) he acted in good faith, and' (b) he took reasonable care to ascertain the existence of such circumstances. Transfer of ostensible owner (S. 41) Where— (a) a person is the ostensible owner of immovable property, (b) with the consent of the persons interested in such property,— and he transfers it for consideration, the transfer is not voidable on the ground that the transferor was not authorised to make such transfer, provided that the transferee— (a) took reasonable care to ascertain the transferor's power to transfer and (b) acted in good faith. . 'SUMMARY Transfer by unauthorised person who subsequently acquires interest (S. 43) It a person• - fraudulently or erroneously represents that he is authorised io transfer immovable property and - proposes to transfer such property for consideration,— if the transferee so opts, such 'transfer will operate on any interest which the transferor may, subsequently acquire in the property. The above rule will not, however, affect the right of a transferee who (a) acts in good faith, (b) for consideration, ..and (c) without notice. Transfer when a third person is entitled to maintenance (S. 39) • If a third person has a right— (I) to receive maintenance, or (ii) to a provision for advancement or marriage from the profits of immovable property, and such property is transferred, - the right can be enforced against the transferee— IF (i) he has notice thereof, or (ii) the transfer is gratuitous; BUT NOT (a) against the transferee for consideration, and (b) without notice of such right. Burden of obligation imposing restriction on use of land (Covenant running with I land) (S. 40) (a) If a third persoa has,-for the more beneficial enjoyment of his own immovable property, and independntIy of— (I) any interest in the immovable property of another, or (ii) any easement thereon, a right to restrain the enjoyment of the other's property in a particular manner; OR (b) It a person is entitled to The benefit of an obligation(i) arising out of a contract and (ii) annexed to the ownership of immovable propert (but not amounting to an interest or easement), such right or obligation can be enforced against— (I) a transferee with notice thereof, or (ii) a gratuitous transferee. However, such right or obligation cannot be enforced against a transferee (a) for consideration and (b) without notice. Transfer by person having authority to revoke former transfer (S. 42) On a transfer of property, if the transferor reserves the power to revoke Theiransfer, any subsequent transfer of that property for consideration to another transferee operates as a revocation of the earlier transfer. -• Transfer by co-owners (Ss. 44 & 47) 1. If one co-owner of immovable property transfers hIs share, the transferee acquires the transferor's right— . 208 THE TRANSFER OF PROPERTY ACT (a) to joint possession of the property; and (b) to enforce a partition of that properly. 2. If several co-owners of immovable property transfer a share in such property without specifying that the transfer is to take effect on any particular share (or shares), such transfer takes effect: (a) equally, if the shares were equal, and (b) if the shares are unequal, in the same proportion as the shares. Joint transfers (Ss. 45 & 46) 1. When immovable property is purchased by two or more persons and the consideration is paid by them from a common fund, their interests in such property will be in the same proportion as their respective interests in the fund. But, when such purchase is made from separate funds, their interests in the property will be in proportion to the amounts advanced by each of them. - 2. Likewise, when immovable property is transferred for consideration by persons having distinct interests in the property, the transferors are entitled to (a) an equal share in the consideration, if their interests were of ar equal value; or (b) a proportionate share in the consideration, if their interests were not of an equal value. Priority of rights (Ss. 48 & 78) 1. If a person transfers the same immovable property at different times, and ail such rights cannot exist together, each later right is subject to the rights previously created. (This is, however, subject to a contract to the contrary.) 2. If, through the fraud, misrepresentation or gross neglect of a prior mortgagee, a subsequent mortgagee is induced to advance mone)4 on the security of the mortgaged property, the subsequent mortgagee gets a preference over the prior mortgagee. Transferee's right under insurance policy (S. 49) When immovable property, which is insured against loss or damage by fire, is transferred tor consideration, in case of such loss or damage, the transferee can call upon the transferor to apply any money which he actually receives under the policy (or a part of such money) to reinstate the property. (This rule is, however, subject to a contract to the contrary.) 8ona fido holders under defective title 1. It a person has, in good faith, paid any rent (or profit) to another person from whom he held such properly, he cannot be made liable to pay it once again, if it afterwards turns out that such other person had no right to receive such rent (or profit). 2. It a transferee of immovable property makes an improvement on the property, believing in good faith that he is absolutely entitled to such property, and he is subsequently evicted by any person having a better title, he can call upon the person causing the eviction (a) to pay him the value of the improvement; or (b) to sell his interest in the property to the transferee at the market-value of the property, irrespective of the value of the improvement. Transfer of property pending suits (LisPendens) (S.52) When a suit or proceeding (which is not collusive) is pending in any Court, and any right to immovable properly is directly and specifically in question, such property cannot F53 SUMMARY 2C be transferred (or otherwise dealt with) by any party to the suit, except with the authorry of the Court. Such pendency commences from the date of the presentation of the plaint or th.e institution of the proceeding in a competent court. The pendency continues until a final decree is passed, and the decree is comptey satisfied (or if it cannot be satisfied because of limitation). . ..: Fraudulent transfer (S. 53) If a transfer of immovable property is made (a) to delay or defeat the transferor's creditors - it is voidable at the option of Euc:-1 creditors; (b) to defraud a subsequent transferee, the first transfer being without consideration, it is voidable at the option of the subsequent transferee. The above does not (I) impair the rights of a transferee in good faith for consideration; (ii) affect any law relating to insolvency. Part performance (S. 53A) If a person contracts to transfer any immovable property (a) for consideration, (b) by a signed document, and the transferee has t--:.ken possession of such property in part performance or the contract, then even if (i) the contract is not registerçd (though required to be so); or (ii) the document of transfer is not completed in the prescribed manner, the transferor cannot enforce against the transferee any right in respect of such proer, except a right expressly allowed under the contract. This rule does not affect a transferee for consideration, who has no notice (i) of the contract, or (ii) of the part performance thereof. SALE (Ss. 54-57) Definition of "sale" (S. 54) A sale is a transfer of ownership in exchange for a price paid or promised, or partly p&d and partly promised. How sale is effected (S. 54) A sale requires a registered instrument in case of (i) tangible immovable property of the value of Rs. 100 or more; (ii) a reversion; (iii) any other intangible thin: In case of tangible immovable property worth less than As. 100, a sale can be made b': (a) a registered instrument, or (b) delivery of the property. • • Definition of "contract of sale" . A contract for sate of immovable property is a contract that a sale of such property 517afl take place on terms settled between the parties. • • 14. .•. • •. • ••• 210 THE TRANSFER OF PROPERTY ACT DIFFERENCE BEIWEEN SALE CONTRACT FOP SALE 1 Sale involves a transfer of ownership 1. There is no transfer of ownership. It does not even create an interest or chnr q ,, the property. 2. Sale conveys legal title to the purchaser. 2. A contract for sale does not convey any legal title. 3. It creates a right in rem. 3. It creates a right in personam. 4. A registered instrument is required in 4. A contract for sIo need ec.' be ree cases stated above, at aU. Rights and liabilities of buyer and seller (S. 55) Rights of buyer Before completion of sale, the buyer is entitled to (1) a charge on the property for purchase-money already paid by him; (ii) interest on such purchase-money; (iii) earnest and cots awarded to him in a suit for specific performance, in case he properly declines to accept delivery. Alter coro!etion of sle, the buyer is entitled to (I) the benefit of any.improvement or increase in the value of the p roperly; end ti the reriis and profits of the property. Liabilities of buyer Before completion of sale, the buyer is bound () to disclose to the seller any fact which materially increases the value of the property, and of which the buyer, but not the seller, is aware; (ii) to pa,' or tender the purchase money. After completion of sale, the buyer is bound (i) to bear any toss arising from destruction, injury or loss in the value of the property; (ii) to pay public charges and rents payable in respect of the property. RIghs of-seller Before completion of sale, the seller is entitled to the rents and profits, until ownership passes to the buyer. After completion of sale, the seller is entitled to a charge on thp property for his unpaid purchase money. Liabilities of seller Before completion of sale, the selle is bound (i) to disclose to the buyer, any material defect in the property of which the seller is, but the buyer is not, aware, and which the buyer could not discover with ordinary care (ii) to produce all documents of title for examination by the buyer; (iii) to answer all relevant questions of the buyer as regards the propertyand the t/tiethereto; (iv) to execute a proper conveyance - on payment or tender of the price; (v) between the date of the contract of sale and delivery, - to take prudent care of the property and the documents of title; and (vi) to pay all public charges and rent upto the date of the sale. SUMMARY 211 After completion of sale,(i) the seller is bound to give possession of the property to the buyer; (ii) the setter is bound to deliver all documents of title to the buyer when the entire purchase-money has been paid; (iii) the seller is deemed to contract with the buyer that the sellers interest subsists and that he has the power to transfer the same. Marshalling by subsequent purchaser (S. 56) If the owner of two (or more) properties mortgages them to one person, and then seis one (or more) of such properties to another person, the buyer is entitled to have the mortgage-debt satisfied (so far as is possible) from the property (or properties) not sold to him. However, this cannot be done so as to prejudice the rights of (a) the mortgagee, or (b) any person claiming under him, or (c) any other person who has acquired any interest in any such property for consicè.ra tic'i. MORTGAGES (Ss. 58-104) Terms defined A mortgage is the transfer of an interest in specific immovable property, for the purpose of securing (a) the payment of money-advanced or to be advanced, by way of a loan; or (b) an existing or future debt; or (C) the performance of an engagement which may give rise to a pecuniary 7iaiLtilil,. - The transferor is called the mortgagor. - The transferee is called the mortgagee. - The principal money and interest of which payment is secured is called the rnGrtgage- money. - The instrument by which such a transfer is effected is called the mortgage-deed. Six kinds of mortgages (i) Simple mortgage In a simple mortgage,— (a) possession of the mortgaged property is not given to the mortgagee; (b) the mortgagor gives personal obligation to N?Y the mOrtgaemoriey; (c) the mortgagor agrees that if he fails to pay, the mortgagee can have the poperty sold through the Courts Remedies available :- Sale through the intervention of Court. - No foreclosure. (ii) Mortgage by conditional sate In this type of mortgage, the mortgaged property is ostensibly sold to the mortgagee on the following conditions, viz.— (a) if the mortgage money is not paid on a certain date the sale is to become absolute (b) but if such payment is made,(I) the sale is to become void and (ii) the buyer is to re transfer the property to the seller. Remedies available Foreclosure only. - No sale THE TRANSFER OF PROPERTY ACT 212 (iii) Usufructuary mortgage In a usufructuary mortgage, the mortgaged property is delivered to the mortgagee, who is authorised to retain such property until payment of the mortgage-money, and in the meanwhile, to receive rents and prots accruing from the property. Remedies available: - No sale. - No foreclosure. - Only remedy is to retain the property until the mortgage-money is paid. (iv) English Mortgage In an English mortgage,- the mortgagor (a) binds himself to repay the mortgage-money, and (b) transfers the property to the mortgagee, on condition that when the mortgage-money is paid up, thepopértñill be re-transferred to the mortgagor. Remedies available: - Sale -only. - No foreclosure. (v) Mortgage by deposit of title-deeds (Equitable mortgage) In this type of mortgage (which only in specified towns), the mortgagor delivers to the mortgagee, documents of title of the mortgaged property, with intent to create a security thereon. Remedies available: - Sale through intervention of the Court. - No foreclosure. (vi) Anomalous mortgage An anomalous mortgage is one which is not any of the We types of mortgages seen above. Remedies available:- Sale, if allowed by the terms of the mortgage. - Foreclosure, if allowed by the terms of the mortgage. Whether registration and attestation necessary for a mortgage (S. 59) (i) If the principal-money is Rs. 100 or more, the mortgage (other than an equitable mortgage) must be by (a) registered document, (b) signed by the mortgagor, and (c) attested by at least 2 witnesses. (ii) If the principal-money is less than Rs.100, the mortgage may be effected as above, or (except in the case of a simple mortgage), by delivery of the property. Rights of a mortgagor (i) Redemption At any time after the principal money has become due, on payment (or tenaer) of Uc mortgage-money, the mortgagor has the right (a) to get back his property; and (b) to demand (I) return of the mortgage-instrument and title-deeds; (ii) delivery of possession of the mortgaged property; and (iii) a re-transfer of the property. This right of redemption is a statutory right based on the maxim, Once a mortgage, always a mortgage". Any condition in the mortgage-deed which takes away this right will be a clog on redemption, and will not be valid. Redemption can be exercised: (a) by paying (or tendering) the mortgage-money to the mortgagee: or . (b) by depositing the mortgage-money in Court; or (c) by a regular suit for redemption. SUMMARY 21 The right of redemption is extinguished: (a) by act of parties; or (b) by an order of the Court. If the mortgagor has executed two or more mortgages in favour of the same mortgagee, he can, in the absence of any contract to the contrary, redeem one (or more) of such mortgages separately. Thus, the doctrine of consolidation does not apply. (ii) Re-transfer to a third party (S. 60A) The mortgagor can require the mortgagee to assign the mortgage-debt to a third party, and transfer the property to such person instead of re-transferring it to the mortgagor. (iii) Right to inspection and production of documents (S. 60B) As long as his right of redemption subsists, the mortgagor can, at his cost, inspect and make copies from documents of title of the property, which are with the mortgagee. (iv) Right to accession (Ss. 63 & 64) Accessions to the mortgaged property enure for the benefit of the mortgagee's security, and on redemption, belong to the mortgagor, in the absence of a contract to the contrary. But, if the accession is acquired at the mortgagee's expense and is capable of separate possession, the mortgagor must pay for it, if he desires to acquire it. If, however, it is not capable of separate possession, it must be delivered to the mortgagor with the property and the mortgagor must pay the cost thereof. (v) Right to grant lease (Ss. 65 & 65A) Unless a contrary intention is expressed in the mortgage-deed, the mortgagor who is lawfully in possession of the property, can grant a lease of the property, subject to certain conditions laid down in S. 65A. (vi) Right to reasonable waste (S. 66) A mortgagor in possession is not liable for allowing the property to deteriorate. But, he cannot commit any act which is destructive or permanently injurious to the property. if the security would thereby be rendered insufficient. Implied contracts by the mortgagor (S. 65) In the absence of a contract to the contrary, the mortgagor is deemed to have entered into the following five implied contracts with the mortgagee 1. Covenant for title,—namely that the interest which he professes to transfer to the 2. 3. 4. 5 mortgagee subsists, and that he has the , power to transfer the same. Covenant for defence of title,—namely, that he will defend his title to the propertc and if the mortgagee is in possession, that he will enable the mortgagee to defend the mortgagor's title to the property. Covenant for payment of public charges—namely, that he will pay all public charges in respect of the property, as long as he is in possession of the property. 'Covenant for payment of rent,—namely, that when the mortgaged property is a ease, he will pay the rent payable under the lease and observe all other conditions of the lease Covenant for payment of prior encumbrances —namely, that when the mortgage is a second (or subsequent) encumbrance the interest and principal money due on prior encumbrances will be paid as and when they become due All the above five covenants run with the land 214 THE TRANSFER OF PROPERTY ACT Rights of a mortgagee The mortgagee has the following nine rights 1. Right to foreclose or sell (S. 67)—After the mortgage-money is due and before redemption, the mortgagee can, 6btain from the Court a decree for foreclosure or sale of the property. (A dGcree of foreclosure is one where the mortgagor is absolutely debarred Irom redeeming the mortgaged property.) 2. Riiii to sue for mortgage-money (S. 68)—The mortgagee can sue for the mortgage money (a) when the mortgagoi binds him- Self -to repay the same; or (b) when the mortgaged 'property is destroyed or the security is rendered insufficient (by any cause other than the wrongful act or default of the mortgagor or the mortgagee) and the mortgagorhas failed to provide further security,or (C) when the mortgagee is deprived of the security, due to the wrongful act or default of the mortgagor; or (d) when the mortgagee is entitled to possession of the mortgaged property, and the mortgagor has failed to deliver the same to him. 3. -Right to se ll Without intervention of the Court (S. 69) The mortgaged property can be sold without the intervention of the Court in three cases: (a) in the case of an English mortgage, if neither the mortgagor the mortgagee is a Hindu, M uhammedan Buddhist or a member of a specifiednor race or tribe; (b) when the Government is the mortgagee and the mortgage-deed contains an express power of sale without intervention of the Court; (c) when the mortgaged property is situated in Calcutta, Madras, Bombay or any other Gazetted town, and the mortgage-deed contains an express power of sale without intervention of the Court. 4. Right to appoint a Receiver (S. 69A)—A mortgagee who has the power to sell without intervention of the Court, can also appoint a Receiver of the income of the mortgaged property. 5. Right to accession (S. 70)—After the date of the mortgage, if any accession is made to the mortgaged property, the mortgagee is entitled to such accession. However, this is subject to a contract to the contrary. 6. Right to renewal of mortgaged lease (S. 71)—If the mortgaged property is a lease, and the mortgagor renews the lease, the mortgagee is entitled to the new leae (for the purpose of the security). This is also subject to a contract to the contrary. 7. Right to spend money (S. 72)—A mortgagee can spend such money as is necessary (i) for the preservation of the monteaged property from destiuction forfeiture or sale (it) for supporting the mortgagor's title to the property (iii) for making his own title to the property good as against the mortgagor and (iv) for renewal of the leasehold mortgaged to tjtm The amount spent as above can be added to the mortgaged debt and rec 'overed by the mortgagee with interest at the stipulated rate (or at 9% p a) SUMMARY 21 _5 8. Rights of proceeds of revenue sale or compensation on acquisition (S. 73) (a) If the mortgaged property is sold for failure to pay revenue, public charges or rent in respect of the property, and such failure is not due to any default of the mortgagee, then the mortgagee can claim payment of the mortgage-money from the proceeds, after payment of such revenue, charges, rent etc. (b) Similarly, if the mortgaged property is acquired under the Land Acquisition Act, the mortgagee can claim payment of the mortgaged money out of the payment due to the mortgagor as compensation. 9. Right of mesne mortgagees.—When a property is mortgaged to successive mortgagees. a mesne (or puisne) mortgagee has the same rights against subsequent mortgagees, as he has against the mortgagor. This is an application of the maxim, "Redeem up, foreclose down". Liabilities of a mortgagee 1. Mortgagee must bring one suit on several mortgagees (S. 67A).—When a mortgageeholds two or more mortgagees executed by the same mortgagor, if he sues to obtain a decree on any of the mortgagees, he must sue on all the mortgagees in respect c which the mortgage-money has become due. However, this is subject to a contract tc the contrary between the parties. 2. Liabilities of a mortgagee in possession (Ss. 76-77).----.lf the mortgagee takes possession of the property during the continuance of the mortgage, the mortgagee is bcund (i) to manage the property as a man of ordinary prudence would manage his ownproperty-, (ii) to use his best endeavours to collect rents and profits; (iii) to pay Government revenue and other public charges out of the income of the property, in the absence of a contract to the contrary; (iv) to make necessary repairs, the income of the property permitting (in the absence of a contract to the contrary); (v) not to commit any act which is destructive or permanently injurious to the property(v i) if he has insured the property against fire, and receives insurance money for this reason, he must either (a) reinstate the insured property from such money, or (b: discharge the mortgage-debt from such money, - as may be directed by the mortgagor; (vii) to keep clear, full and accurate accounts of all amounts received and spent by and give such accounts to the mortgagor, whenever asked for; (viii) to debit • receipts from the property, first against interest on the mortgage money, and then against the principal amount; (ix) to account for receipts from the property, when the mortgagor tenders and deposits the amounts due. Priority of securities (Ss. 78 & 79) If, on account of the fraud, misrepresentation or gross neglect of a prior mortgagee another person is induced to advance money on the security of the same property, the priCir mortgagee is postponed to the subsequent mortgagee. This rule is an exception to the application of the maxim of equity. "Qui prior est tempc(e, potior est jure'. (He who is first in time is first in law.) 216 THE TRANSFER OF PROPERTY ACT Tacking not allowed (S. 93) (a) By paying off a prior mortgage, a mortgagee cannot thereby acquire any priority in respect of his original security. (b) Similarly, subject to one pxception (below), a mortgagee making a subsequeit advance to the mortgagor, cannot thereby acquire any priority in respect of his security for such subsequent advance. Exception (S. 79) However, an exception is made in the case of a mortgage to secure (a) future advances; or (b)rerforrnancp of A n Pn Cem't: Cr (c) balance of a running account. In such cases, if the mortgage expresses the maximum amount secured, a subsequent mórtàge of thO same property, made with notice of the prior mortgage, will be postponed to the prior mortgage, in respect of all advances (within the maximum amount), although made with notice of the subsequent mortgage. Marshalling (S. 81) If the owner of two (or more) properties mortgages them to one person, and then mortgages one (or more) of the same properties to another person, the subsequent morl ga ^ bb can have the prior mortgage-debt satisfied out of the properties not mortgaged to him, to the extent possible. This is, however, subject to a contract to the contrary. The above rule cannot also be applied so as to prejudice the rights of the prior mortgagee or any person acquiring an interest in any of the properties for consideration. Contribution (S. 82) If the mortgaged property belongs to two (or more) persons, who have distinct and separate rights of ownership, the different shares of such property are liable to contribute rateably to the mortgage-debt. This rule is, however, subject to a contract to the contrary. CHARGES (Ss. 100 & 1.01) When immovable property of one person is made security for the payment of money , to another person, and the transaction does not amount to a mortgage, a charge is said to be created on the property. (This can take place either by act of parties or by operation of law.) All the provisions which apply to a simple mortgage also apply to a charge. The above does not, however, apply to the charge of a trustee on the trust-property, for expenses properly incurred by him in executing the trust. It is also to be noted that a charge cannot be enforced against property in the hands Of a person who is a transferee for consideration without notice of the charge No mergar in certain cases (S 101) A mortgagee of immovable property (or any transferee from him) car' purchase that property without causing the mortgage to be merged as between himself and any r-' subseaunt mortn a ri pp of th SUMMARY 217. (The same rule applies to a person having a charge on 'immovable property) Also, a subsequent mortgagee (or charge-holder) cannot toeclose or sell such proper, without redeeming the prior mortgage or charge. DIFFERENCE BETWEEN MORTGAGE AND CHARGE Mortgage 1. 2. 3. 4. 5. 6. Charge -.---------.----------A mortgage is a security for the 1. A charge ,. isa security for the paymert --- - I payment of a debt.of any money. A flnillyge may be a -security for the 2. Not so, in the -case of a charge. performance of an act giving rise to a pecuniary liability. A mortgage may contain a covenant to 3. There is no covenant to pay in the case pay. of charge. A mortgage involves a transfer of an 4 A car docn . tr.-,er aiy interest in specific immovable property. in the property. A mortgage arises only by an act of 5. A charge can arise (I) by act of parties parties. or (ii by operation of law. A mortgage gives rise to a right in rem. 6. A charge does not create any right ir 7. A mortgagee can follow his security in rem. 7 A charge-holder cannot do so. the hards of a third person. A mortgagee can follow a bona tide 8. A charge-holder cannot do so. purchaser for value without notice. 9. The defence of bona tide purchase 9. The defence of bone tide purchase wtthwithout notice cannot be set up against out notice is a good defence against a a mortgagee. -charge. 8. LEASES (Ss. 105-117) Definition:- A lease of immovable property is a transfer of a right to enjoy such prc-çerty for a certain time (or in perpetuity), in consideration of (i) a price, paid or promised, or (ii) money, or (iii) a share of crops, or (iv) service,, or (v) any other thing of value, to be rendered periodically (or on specified occasions) to the transferor by the transferee, Who accepts the transfer on such terms. - The transfeçor is called the lessor. - '.- The transferee is called the lessee. - - - - The price is called the premium - The money, crops, service or other thing to be rendered is called the rent. How made - In the fol lowing three cases, a lease of immovable property can be made only by a registered Instrument VIZ ar _,_,_,., i.ij d icse j..,- t ._ ior a term exceeding one year and r THE TRANSFER OF PROPERTY ACT 218 (c) a lease reserving a yearly rent. In all other cases, a lease can be made (I) by a registered instrument, .4 Of (ii) by an oral agreement along with delivery of possession. Duration & Termination - A lease for agricultural or manufacturing purposes is deemed to be a lease from year to year. - It is terminable by a six months' notice expiring with the end of a year of the tenancy. -- A lease for any other purpose is deemed to be a lease from month to month. - It is terminablefr 15 days' notice expiring with the end of a month of the tenancy. Rights and Liabilities of Lessor 1. The lessor must disclose to the lessee any material defect in the property, of which the lessor is aware, but the lessee is not, and which the lessee could not discover with ordinary care. 2. The lessor is bound, at the request of the lessee, to put him in possession of the property. 3. The lessor is deemed to contract with the lessee that if the lessee pays the rent and performs his conditions, he may hold the property without interruption. Rights of the lessee 1. Any accession to the property, made during the continuance of the lease, is deemed to be comprised in the lease. 2. If any part of the property is destroyed or rendered unfit by fire, tempest, flood etc., the lease becomes void at the option of the lessee. 3.' If the lessor neglects to repair the property, the lessee may make such repairs, and deduct the expenses from the rent payable to the lessor. 4. If the lessor neglects to make any payment which he is bound to, and which payment .can be recovered from the lessee, the latter may make the payment, and deduct it from the rent payable to the lessor. 5.- Even after termination of the lease, the lessee may, whilst he is in possession, remove alLthings attached.to the earth. 6. When a lease of uncertain duration comes to an end, the lessee can remove all crops On the property planted or sown by him. He is also entitled to free ingress and egress to gather and carry such crops. 7. The lessee can transfer the whole or any part of his interest in the property, and the transferee can do so again. However, in such cases, the lessee continues to be subject to the liabilities attaching to the lease. - Liabilities of the lessee 1. The lessee must disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take, of which the lessee is, but the lessor is not, aware, and which materially increases the value of such interest. SUMMARY 219 2. The lessee must pay (or tender) the premium and rent to the lessor at the proper time and place. 3. The lessee must keep the property in good condition reasonable wear and tear excepted. (The lessor and his a g ents can enter the property to inspect the same.) 4. If the lessee becomes aware of any encroachment on the property or any proceedings to rcvr tb h mt fo:m deligence. ' . arne with reasonable 5. The lessee must use the property as a man of ordinary prudence would use his own, but he cannot use it for any other purpose or commit any act which may destroy or permanently injure the property. 6. Without the lessors consent, the lessee cannot erect any permanent structure on the property (except for agricultural purposes). 7. When the lease is over, the lessee must put the lessor in possession of the prop.rty. Rights & Liabilities of lessor's transferee 1. Th lessor's transferee possesses all rights, and if the lessee so elects, is subjec to all the liabilities of the lessor, as regards the property. 2. The lessor's transferee is not entitled to the arrears of rent due before the transfer. Determination (i.e. termination) of lease A lease terminates in eight ways 1. By efflux of time. 2. If the duration of the lease is until the happening of some event, when that e. ent happens. 3. If the lessor's interest in the property is to terminate on the happening of some e';=-,,it, - when that event happens. 4. By merger. 5. By express surrender. 6. By implied surrender. 7. By forfeiture. 8. On expiry of a notice to determine the lease or a notice to quit. Forfeiture of lease:— A lease determines (i.e. terminates) by forfeiture in three cases: (i) if the lessee breaks an express condition, which provides that on breach of the condition, the lessor may re-enter; (ii) lithe lessee renounces his character, (a) by selling up a title in a third person; or (b) by claiming title in himself; (iii) if the lessee is adjudicated insolvent, and the lease provides that if That happens, $h lessor may -ire-enter. However, in all such cases, the lessor must give notice in writing to the lessee of his intention to terminate the lease. A forfeiture is waived in three cases • (I) by acceptance of subsequent rent; or (ii) by distress for such rent; or •• b°. -•. .. ... ... . - THE TRANSFER OF PROPERTY ACT 220 (iii) by any action on the lessor's part showing an intention to treat the lease as subsisting. Holding over (Tenancy-at-will) If the lessee remains in possession of the property after the termination of the lease, and the lessor accepts the rent (or otherwise assents to the lessee' continuing in possession), the lease is renewed (from year to year, or month to month, as the case may be). EXCHANGE (Ss. 118-121) In an exchange, — two persons mutually transfer the ownership of one thing for the ownership of another thing, and - neither thing or both things are money only. An exchange is to be made in the same manner as a sale. If any party to an exchange is deprived of the property due to a defect in the title of the other party, such other party is liable to him (a) for any loss caused . tiereby; or (b) at the option of the party so deprived, for the return of the thing transferred, if it is still in the possession of (I) the other party, (ii) his legal representatives, or (iii) a transferor from him without consideration. Each party to an exchange has the rights and is subjected to the liabilities of a seller as regards that which he gives, and the rights and liabilities of a buyer as regards that which he takes. When there is an exchange of money, each party is deemed to warrant the genuineness of the money given by him. GIFTS (Ss. 122-129) - A gift is the transfer of property made (I) voluntarily, and (ii) without consideration, by one person (dono,) to another 7erson (donee) and accepted by the donee This acceptance must be made during the donor's lifetime, and while he is still capable of giving If the donee dies before acceptance the gift will be void A gift of immovable property can be made only by a registered instrument signed by the donor and attested by two witnesses A gift of movable property can be made by a registered instrument signed and attested as above or by the delivery of the property. SUMMARY 221 Onerous gills 1. If the gift is one single transfer, and a part of it is burdened with an obligation, the donee gets nothing unless he accepts it fully. 2. But, if the gift is in the form of two or more separate and independent transfers, ne can accept one and refuse the others. 3. If a donee who is not competent accepts an onerous gift, he is not bound by his acceptance. But, if after becoming competent to contract, he retains the property, being aware of the obligation, he is bound by the obligation. Universal donee If a gift consists of the donor's whole property, the donee is personally liable for all the debts of the donor at the time of the gifts, to the extent of the property comprised in the gift. Revocation (or suspension) of gifts Once a gift is made, it is irrevocable,—except in two cases 1. When the parties agree that on the happening of a specified event (not dependent on the donor's will), the gift is to stand suspended or revoked. 2. A gift can also be revoked in those cases in which a contract can be rescinded (e g. for fraud, misrepresentation etc.) These rules do not, however, affect the rights of a transferee for consideration with--it, notice. Gifts not covered by the Act The above provisions do not (i) apply to gifts of movable property made in contemplation of death; or (ii) affect any rule of Muhammadan law. A CTIONA BLE CLA IMS (S. 130-137) Definition An actionable claim is a claim to (a) any debt, not being a debt secured (i) by mortgage of immovable property, or (ii) by hypothecation or pledge of movable property; or (b) any beneficial' interest in movable property which is not in the possession of he - claimant, -i which the civil courts recognise as affording grounds for relief. (The debt or benefical interest may be existent, accruing, conditional or contingent.) Transfer, how effected An actionable claim can be transferred only by an instrument in writing signed by transferor. 222 THE TRANSFEROF PROPERTY ACT Rights' of transferee 1. All rights and remedies of the transferor vest in the transferee. 2. The transferee can sue (i) in -his own name, (ii) without the transferor's consent, and (iii) without making him a party to the suit. (These rules do not apply to the transfer of a marine or fire insurance policy.) Liability. of transferee The transferee takes the transfer subject to all the liabilities and equities to which the transferor was subject. Rights of assignee of marine and fire policies An assignee of .a marine or fire policy has all the rights of suit as if the insurance contract had been made with him. - Court officers not to deal in actionable claims Judges, legal practitioners and Court Officers am debarred from buying, or trafficking in, actionable claims, and no such claim can be enforced in a court of law at his instance. Saving of negotiable instruments etc. The above provisions do not apply to stocks, shares, debentures and negotiable instruments.