PROPERTY LAW

UNIT I General principles of Transfer of Property by act of parties 1 - 35

inter- vivos - Concept and meaning of immovable property-
Transfer of Immovable Property-Persons Competent to
transfer-Operation of Transfer-Conditions restarting
alienation and restrictions repugnant to the interest created-
rule against perpetuity and exceptions-Direction for
accumulation-Vested and Contingent interest, void
conditions, Rule of acceleration, fulfillment of conditions
subsequent.

UNIT II Doctrine of election-transfer by ostensible and co-owner- 36 - 53

Apportionment-Priority of rights-Rent paid to holder under
defective title-Improvements made by bonafide holder-
Doctrine of lispendens- Fraudulent transfer and part-
performance.

UNIT III Mortgages of Immovable property: Definition-Kinds of 54 - 71

mortgages and their features-Right and liabilities of
mortgagor and mortgagee-Priority of securities-Marshalling
and contribution-Changes.

UNIT IV Sale of immovable property: Rights and liabilities of seller and 72 - 89

buyer before and after completion of sale-Difference between
sale and contract for sale; Leases of immovable property:
Definition-Scope-creation of lease-rights and liabilities of
lessor and lessee-Determination and holding over; Exchange:
Definition and mode Actionable Claims; Gifts: Scope-
meaning-mode of transfer - unIversal gifts-onerous gifts.

UNIT V Law of Trusts with Finduciary Relations: Definitions of Trust 90 - 111

and its comparison with other relationships like Debt, Owner
ship, Bailment, Agency and Contract. Kinds of Trusts-
Creation of Trust-Appointment of Trustees-Duties and
Liabilities to Trustees- Rights and Powers of Trustees-
Disabilities of Trustee-Rights and Liabilities of the
Beneficiary-Vacating the office of trustee and Extinction of
Trusts.

QUESTION PAPERS 112

 UNIT-I

THE TRANSFER OF PROPERTY ACT, 1882

GENERAL PRINCIPLES OF THE TRANSFER OF PROPERTY ACT, 1882

Introduction:- The property is one of the fundamental elements of socio-economic life of an

individual so, judicially, a bundle of rights existing either in a thing or land, the word” property”
has gradually been given a wider meaning to include every kind of proprietary or quasi-proprietary
claims. Such as, shares in a limited company, mortgage on another‟s land and also the intellectual
property e.g., copyrights, patents etc.

However, the economic significance of property rests more on its disposition rather on its abstract
content so, property law has, therefore, been an important branch of civil law.

T.P.Act, 1882 deals with inter-vivios of immovable properties albeit some of its provisions are
applicable to the transfers also of movable properties.

Before this enactment, the transfer of immovable properties were governed mostly by the English
equitable principles as applied by Anglo-Indian courts. But, Application of English equity was
doing less than justice to social conditions of this country the law was neither certain nor uniform
due to conflicting decisions of various High Courts. Accordingly, the Transfer of property Act
(T.P.Act, 1882), was enacted to provide a definite and uniform statutory law governing transfers of
immovable properties in India. Several amendments have been made to this Act from time to time
to make suitable changes for further exposition of a definite law on this subject.

These definite amendments necessitated amendments also in some other related enactments e.g., the
Indian registration Act, specific Relief Act, the Limitation Act and the Civil Procedure Code etc.

History:-India was rife with conflict under British rule in the 1800s. British occupation of India in
the early 19th century caused conflicts of landlords and taxation. Indian land-owners grew anger
because of property loss, limited means of entrepreneurship and high taxation. The Republic of
India gained its independence 1947 after nearly 200 years of violent and non-violent struggles.

Purpose: The T.P. Act of 1882:- states that any person can be transferred between parties with the
following exceptions Hair-specific transfers, right of re-entry, Easement property that cannot be
enjoyed by anyone but the owner, the right to sue, public office or salary, military & civil pensioner
stipends and property given to transferees legally disqualified to receive it . The transfer of
property Act also out-lines transfers of property by act of parties, sales of immovable property,
mortgages and charges leaves of immovable property, exchange, gifts and actionable claims.

The T.P. Act of 1882 means an act by which a living person conveys property, in present or future,
to one or more other living persons or to himself and one or more other living persons and to
transfer of property “ is to perform such Act. In this section “living person includes a company or
associations or body of individuals, whether incorporated or not, but nothing herein contained shall
affect any law for the time being in force relating to transfer of property to or by companies,

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associations or bodies of individual. ” Property is divided into real property and personal property.
Property is also divided, into absolute and qualified, when it consists of goods and chattels .
Absolute owner-means a man being a owner of a articles like watch, book, horse, sheep etc.

Qualified property:- is right to possession and kept subject to their power as a deer, buffalo and if
possession is lost, his property is gone. property is divided into corporeal an incorporeal, land,
House, goods, merchandise. Incorporeal-Legal rights as chooses in action, easements etc.,

Meaning and Definition of Property:- In general sense, property is any physical or virtual entity
that is owned by an individual or jointly by group of individuals. An owner of the property, It has
economic, Socio-political, sometimes, religious and legal implications. It is the legal domain which
institutes the idea of ownership. The basic thing of this idea is exclusive control of an individual
over something. The most important aspect of concept of ownership and property is the word
traditional principles related to property: viz.,

1. Control
2. Right to take any benefit from property
3. Right to transfer/sell the property
4. Right to exclude others from the property.

Definition of Property:- Section 2(c) of Benami transactions (Prohibition) Act, 1988 defines
property as:

Property means property of any kind, whether movable or immovable, tangible or intangible and
includes any right or interest in such property.

Section 2 (11) of sale of Good Act, 1930 defines property means General property in goods and not
merely a special property. Movable property includes cart-waded of earth, Store a quarries, carried
from land become movable, standing timber growing crops and grass, fruits in the tree.
Immovable property: Buildings, land, hereditary allowances, rights to ways, liquidations, ferries,
fisherier, things attached to land, please of land, right to collect rent. Etc.,

Tangible: property that can be moved attached to land or building like furniture, clothing jeweler,
art –writings, household-goods, car, house, currency etc.

OBJECT AND SCOPE OF T.P.ACT-1882:- The Act and amendment law relates to T.P.by act of
parties, but does not includes transfer by operation of law. The T.P. Act again may be of two types
Intervivos or testamentary.

Intervivos transfer means transfer between two living persons where as testamentary transfers
relates to transfers by will etc.

1. The act applies only to transfers by living persons. It is not regulated by operation of law. In
case of transfer by living persons both transferor and transferee are living at the time of transfer. In
case of transfer by operation of law, the property is transferred even though the transferor is not
alive on date of transfer. For example, Devolution of property upon legal heirs or legatees by
inheritance or under wills is by operation of law.

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2. The Act deals mainly with transfers of immovable property from Section 5 to 37 (Chapter-II)
although contains provisions which are applicable for both kinds of property whether movable or
immovable property. Transfer of movable property is regulated by Sale of Goods Act, 1930.

3. Chapter-II contains General principles of transfer does not affect transfer by Muslim even if it is
against any of the provision of Chapter-II. This means that if any provision in the Transfer of
Property Act which is against any rule of Muslim law, the rule of Muslim law will prevail over the
conflicting provisions of Act.

The gifts made by Muslims are governed by Muslim law of Hiba .However; such exemptions are
given only in respect of those rules of Muslim law which are in conflict with any of the provisions
of the Act dealing with the transfer in general.

4. The Act has not only defined the existing rules of transfers but also amended and modified some
of them.

SCOPE OF THE ACT: - The scope of the T.P. Act is limited. It covers only T.P. between living
persons. The limitation is also with regard to the territorial jurisdiction of the Act. And has no
uniform application in all the parts of the country. The Scope of T.P. Act may briefly be stated as
under:

1. Not Exhaustive: - The Act is not exhaustive. Mode of T.P. differs and is of several methods, it is
inclusive of many correlated matters for which there is only a passing reference; detailed rules on
such allied matters are not available. For Example: the Act deals with mortgages and charges but
with respect o these transactions, the Act has not been regarded to be exhaustive.

2. Transfers by operation of law Excluded:–The Act does not apply to transfers by operation of
law. As discussed earlier, transfer of properties may take place either by act of parties or, by
operation law. Transfer by act of parties is a transfer between such living persons. On the other
hand, in the transfer by operation of law the property is transferred even though the transferor is not
a living person on the date of transfer. In such transfers, the property is transferred automatically by
the process of law; the transferor has to do nothing. For example, in the case of inheritance or
under wills the devolution of property upon the legal heirs or legatees is a transfer by operation of
law.

Similarly, transfers are by not by owners of the property but by court of law. Thus, transmission of
property in the case of insolvency, forfeiture or sale in execution of Court‟s decree, are transfers by
operation of law.

3. TRANSFERS MAINLY OF IMMOVABLE PROPERTIES: - The Act deals mainly with the
transfer of immovable properties. Transfers of movable properties are regulated by the Sales of
Goods Act, 1930. However, it may be noted that T.P. Act, 1882 incorporates certain basic rules of
T.P. irrespective of their kind. These fundamental principles relates to the nature of Transfers in
general. The provisions of the T.P. Act, deals with such principles, are applicable also to transfer of
movable properties Section 5 to 37 of Chapter-II are applicable to the transfer of both kinds of
properties, movable as well as immovable. The remaining Section (38 to 53-A) of the Chapter
contains rules for the Transfer of only immovable properties.

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4. MUSLIM LAW: - According to section 2 of the Act, provisions of Chapter II of this Act do not
affect any inconsistent rule of Muslim Personal law. Chapter-II of this Act deals with concept and
principles of transfers generally. Accordingly, if there is any provision in the T.P. Act which is
against any rule of Muslim law, the rule of Muslim Law would prevail over the conflicting
provisions of this Act. For example, provision of section 14 of the act dealing (Waqf-alal-aulad)
created by Muslims because rules of the family-waqfs under Muslim law are inconsistent with the
provisions of Section 14. Moreover, gifts made by Muslim are governed by the Muslim law of
Hiba.

5. Savings of certain incidents and Right: - Section 2 of the Act exempts certain incidents of a
contract or constitution of property from the operation of this Act. Constitution of property means
essential nature of property. Thus, the provisions of this Act cannot be applied so as to change or
affect the basic nature of the property itself. The Act also saves certain property rights from the
mischief of this enactment. For example, right of partition of immovable properties is an incident
of property, but this right is not affected by the provisions of the Act and a valid partition may be
made orally.

6. Territorial Limitations: - The TP Act has territorial limitation as well the Act is not applicable to
the territories included in the State of Punjab. In other parts of the country where the Act is now
applicable, it was not enforced at one stretch. The Act was made applicable to different territories
in India on different occasions.
IMMOVABLE PROPERTY(Section 3):- The transfer of property Act has not define this term. It
only says that “Immovable property” does not include standing timber, growing crops or grass. The
Registration Act, 1908 define “”Immovable property as follows;

“Immovable property shall include land, buildings, hereditary property, allowances rights to ways,
lights ferries fisheries or any other benefit to arise out of land or things attached to earth of
permanently fastened to anything which is attached to the earth but not standing timber, growing
crops or gross.”

SECTION 3(25) of general clause Act, 1897 defines term “Immovable property ”. “Immovable
property ”. shall include land.

“Immovable property”. - In Section 3, the definition of “Immovable property” is neither clear nor
complete. It simply says that immovable property excludes standing timber, growing crops or
grass.

According to Section 4 of general clauses Act “Immovable property” includes land, benefit to
arise out of land and things attached to the earth. The definition of immovable property given in
General clause Act, 1897 is applicable to T.P.Act (Babulal v/s. Bhawani),
“Immovable property”.includes:
1. Land
2. Benefit to arise out of land
3. Things attached to the earth i.e.,
a. things embedded in the earth
b. things attached to what is so embedded in earth.
4. Things rooted in the earth except:

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 a. Standing timber
b. growing Crops and
c. growing grass.

Physical rights: such rights can be known only when they are being exercised. Thus, right of way
exercised on land or right to use a land under lease/tenancy is immovable property. For example.
Right of tenant to live in land-lords house and right of fishery i.e., right to catch fish from a
pond/river is immovable property.

Things attached to Earth: -

(I) things embedded in earth-things firmly fixed in the earth and become parts of the land. For
example: Houses, building, walls or electricity poles are immovable properties.

Machinery like nuts and bolts road-roller an anchor fixed to land to stop the movement of ship.
They are therefore regarded as accessory to the business and not an annexation to premises.

Narayana sa v/s Balaguruswami (AIR 1924) The court held “large vessels were fixed in a
distillery for brewing liquors. It held that vessels were movable properties because they were fixed
in the land not with the intention of any beneficial enjoyment of land as such, they are fixed for
trade purposes.

ii. Things attached to what is so embedded: - where a thing is attached to something which is
embedded in the earth for its permanent beneficial enjoyment, the thing so attached would also
become immovable properties example: doors, windows or shutters of a house are attached to walls
for permanent use is immovable property. For example: electric bulb, window screen or articles are
attached to walls but are not permanent and are movable and are not for beneficial enjoyment but
for use only.

iii. things rooted in the earth:- Trees, plants or shrubs which grow on land are rooted in the
earth, with the help of their roots, they keep themselves fixed in the earth and becomes part of the
land, so , general term in trees plants, herbs and shrubs are immovable property.

Where as in harvesting season tree, plant is cut down will be treated as immovable. However
exception to this general rule standing timber, growing crops and grass rooted in earth are movable
properties.

Standing Timber: Standing timber is movable property. A green tree rooted in the earth is called
a “standing timber” provided its woods are generally used for timber purposes i.e., for making
houses or furniture. For example: Sheesham, Neem, babool or teak trees have been held movable
properties. Bamboo tree is not movable property as their utility is only for making houses or poles.
Fruit-bearing trees are not standing timber, is not standing timbers. They are planted and grown for
taking fruits. They are immovable property (mango, palm, date-trees) If trees are used for timber it
is movable but other trees which are not timber a rule called Marshall v/s. Green (33 L.T. 404)
there was a sale of trees to be cut and takes away immediately so, the sale was not immovable
property. The principle of this rule is do the parties have intention that tree should continue to have
benefit of further nutriment to be afforded by land. If answer is yes, it is immovable. For example,
In Shanti Bai v/s State of Bombay(AIR 1958) the S.C. has held that if the owner of the tree,
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intends to cut down tree reasonably early, the tree in standing timber(movable). If the owner of the
tree is interested in further vegetation growth of the tree for long period (i.e. to keep alive) it is a
tree for immovable property.

Seeni Chettair v/s. Santhanathan (1897 PC 58):-There was an agreement between the transferor
and transferee the right to cut the tree, sale and enjoy trees was assigned for four years. The
question arose whether the document effecting this transaction required registration. If it was
dealing is with immovable property, it would have required registration.

It was held that the parties contemplated further growth of the trees for four years and the purchaser
was to derive the benefit from this process of further vegetation so, if the document or agreement is
relating to sale of immovable property has to be registrable.

Therefore, the purchaser of a teak tree from the promoters should get it registered under the Indian
Registration Act, 1908, as growing the teak trees, nourishment comes under immovable property

Ansari b/s. Board of revenue, A.P-1969:- Andrapradesh and other states, we see that beedi leaves
are collected every year for the purpose of beedies. The government collects leaves from tribal,
year-wise rate and contract basis previously; it was collecting beedi leaves through contracts. Now,
government collects rates from tribals for leaves and the rates differ from year to year.

The High Court held the right to take away beedi leaves, bamboos, and standing timber over a
period of one year should not come under immovable property and should be dealt as movable
property. Therefore, beedi leaves, bambos etc. are liable for Sales tax such contracts need not be
registered. Further, if the bamboo continues for several years, then it comes under immovable.

State of Orissa v/s. Titaghur Paper Mills Co, Ltd (1985):- Facts; the government of Orissa and
Titaghur paper Mills Co. Ltd entered into contract, for supply of bamboo and the company would
pay money for right to cut bamboo from forest and for number of years. The State Government,
thereafter levied Sales tax on the company, treating bamboo contract as movable. The company
resisted it.

Decision: S.C. held bamboo contract was in respect of benefit to arise out of land and contract was
for number of years. So, it is immovable and not movable property. Therefore, the state
government cannot impose tax on company.

Jagdish V/s Mangal Pandey (1986 SC 182) Mango Tree case:

Brief facts: The mango trees were sold as Movable property in execution of a decree passed by a
court of small causes. In fact, the court of small causes has no jurisdiction to pass order in respect
of immovable property.

Judgment: the Supreme Court held that there was no intention to cut the trees. Hence it would
come under immovable property. Here, there was no intention to cut trees and sale comes under
immovable. Therefore, order passed by courts of small causes was set-aside.

Ananda Behara V/s State of Orissa (Right to catch fish):-The S.C. answered this question
stating “that such a right to catch a fish from lake, pond arising out of immovable property.
Therefore the sale agreement to catch the fish from lake requires a registered instrument for its
validity under Sec. 54(Sales) of T.P. 1882.”

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Problems: A orally grants to B for Rs. 1,000/-the right to catch and carry away fish from his lake.
Is the grant valid?

If the right in question relates to movable property the sale may be oral, (Refer Ananda Behra
Case). So here in the above problem, the oral grant is invalid and cannot pass any title in favour of
B.

Growing crops and Grass: Growing crops and growing grass are movable properties. Growing
crops means crops standing in the field, although the crops say of wheat, Barley are nothing but a
collection of plants rooted in the field yet, they are not immovable property because every crop is
bound to be cut in the near future when it becomes ripe. The crops in the field have no use except
their produce.

The crops of wheat or paddy and also the vegetable crops of potato etc are therefore movable crops
or movable property. Like crops, the growing grass rooted in the earth, is also movable property,
grass in the field has no other utility except that it could be used as fodder for the cattle. For this, it
is bound to be cut down or be grazed by some animals. No further vegetative growth may be
intended by owner of the land, upon which the grass is grown. However, since the right to cut the
grass is a right exercised upon the land, the right is a beneficial interest in the land and as such an
immovable property.

Movable property: - A property which is not immovable is movable. Movable property has been
defined in the T.P. Act. Section 3 of Act excludes standing timbers, growing grass and the crops
from the definition of immovable property.

This simply means that standing timber, growing grass or crops are “Movable property”. The
general clause Act, 1897 defines movable property as “Property of every description except
immovable property.

According to Section 2(9) of registration Act, 1908:- movable property includes standing timber,
growing crops and grass fruits on the trees, fruit-juices in the fruits on the trees and the property of
every description except immovable property besides well known movable properties such as
tables, chairs, cars etc. following properties and interests have been regarded as movable properties
because they are immovable property.
Example of movable property.

1. Standing timber, growing crops and the growing grass.

2. Things placed on the land or attached to it without any intention of making them a permanent
part of the land e.g., machinery attached to land but capable of being shifted from that place is
movable property.
State Bank of Patiala v/s. M/s Chohan Huhtamaki(India )Ltd AIR 1982
Large vessels were fixed in a distillery brewing liquors. It was held that vessels (Vats) were
movable properties because they were fixed in the land not with the intention of any beneficial
enjoyment of the land as such, they were fixed for trade purposes. (Narayana sa V/s
Balaguruswami AIR (1924)

3. Government Promissory Notes:- (As per Sec. 4 of Negotiable instrument Act, 1881 it is an
instrument in writing containing unconditional undertakings, signed by maker, to pay money, to
certain person or bearer at definite time).

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4. Royalty or copy-right (Krishna kishore v/s Kusunda Nyadi Cololieries (1922)
5. Right of worship i.e., right to offer prayers.
6. Yajman vritti i.e., right to receive offerings in cash or kind form from Yajmans.
7. Payments made to pandas by pilgrims.
8. Decree for arrears of rent.
9. Decree for the sale of any immovable property on a mortgage (Jiwan ali V/s Basumal All. 108)
10. Right to get maintenance allowance even if its payment is a charge on some immovable
property (Altaf Begum V/s Brij narin -1929)
11. Right to enjoy the usufruct (benefit) of fruit trees e.g., right to enjoy palm nuts (Sultan Ahmed
V/s State of Madras 1954)

Importance of nature of property:- Properties may be movable or immovable and tangible or

intangible. The T.P. act has laid down specific rules of procedure for transfer of these different
kinds of properties (Refer to Sec. 9 and section 54, 58,107,118,123 and 130)
Movable properties may generally be transferred by delivery of possession writing and registration
is not essential. But immovable properties are required to be transferred generally through written
and registered document. If the procedure prescribed by the Act is not followed the transfer is void.
For example: Under section 123 of the Act, gift of an immovable property must be made through
registered document, but if the gift of movable property may be made only by delivery of
possession. Accordingly, if gift of tree (immovable) is made is not lawful, if it is made without
registered deed. But if the same thing Tree is standing timber the gift of tree is valid.
Fixtures:- Nature of fixtures: Movable property or chattels when attached to buildings, sometimes
becomes immovable property and called fixtures. Thus machinery, ceiling fans, door, window etc
can become fixtures.

Illustration: “A” sells his house, the fixtures appertaining to house pass along with house and need
not mentioned in sale deed. They are treated as part of immovable property, sold. So „A‟ cannot
remove coat stands, boxes and book racks for these are not fixtures and are only movable property.
Thakur Paramanick Chunder V/s. Ra, Dhone, (6 W.R.228):- An alienee from a Hindu Widow
erected certain buildings on the land. He was sought to be evicted by the reversioner. Who
succeeded to the property (No will is present). On the death of the widow, it was held that
reversionary could evict the alienee as the alienation was not supported by necessity. The alienee
was, However, allowed to remove the materials for the building constructed by him. So, Sir Barnes
peacock observed: “We have not been able to find in the laws or customs of this country any traces
of the existence of an absolute rule of law that whatever, is affixed or built on the solid becomes a
part of it and is subjected to the same rights of property as the soil itself”. Revendds v/s. Ashoy
and sons.
A gas engine was let-out on hire-purchase system under an agreement in writing. The engine was
fixed to free-hold land of the hirer by bolts and screws, to prevent it from shaking and used for
purpose of trade.

Default was made in payment and owner claimed the engine and also mortgagee of land who took
the mortgage after hiring agreement and without notice of it and had entered into possession while
the engine was still on the land.

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The court held, that engine was sufficiently annexed to the land to become a fixture and that any
intention to be inferred from the terms of hiring agreement that it should remain a charters, did not
prevent it from becoming a fixture, and consequently it passed to mortgagee as part of the
freehold(immovable property).

Instrument:- Instrument means a legal document. Where a property is transferred through any,
written document, that document is called „instrument‟.

Section 3 of T.P. Act defines „instrument‟ as used in this Act excludes testamentary instrument or
will takes place only after the death of the testator (one who makes the will). T.P.Act is applicable
only to transfers taking place between living persons i.e., where transferor and transferee both are
alive on the date of transfer. It excludes transfer under wills. Thus, if a gift of an immovable
property is made through a registered document, the registered document is called as the instrument
of gift.
Criteria for determining whether chattel has become a fixture:- there are two tests to be
observed.
i) Mode of Annexation:
ii) Purpose of annexation.

i) Mode of Annexation: If the Chattel(article) is resting merely by its own weight upon the floor
and can be removed easily whenever wanted, If it is presumed not to be a fixture and is called
chattel, until it is shown that intention was to make it part of the land (fixture).

In Holland v/s. Hodgon : Mill was mortgaged through mortgage deed inside the Mill. The stone
floor of the mill certain looms were attached by means of nails. It was held in House of lords that
looms were fixtures and so were also covered by the mortgage, though they were not expressly
mentioned as having been mortgaged. Ex: water fittings, Bore wells, latrine fittings etc. are
fixtures.

ii) Purpose of annexation: to become a fixture, the chattel should have been attached to
immovable property for the permanent beneficial enjoyment of that to which it is attached.

Md.Ibrahim v/s. Northern Circars fibre Trading co., Canada ILR 1945: The owner of the mill
executed in favour of plaintiff, who was managing the mill, an unregistered document by which he
created a charge over his assets in respect of money which plaintiff was to invest for managing the
mill. The plaintiff brought the suit for enforcing the charge. The question was whether charge
could be claimed over the machinery installed by the owner in the mill. If such machinery was
immovable property could not be created by means of an unregistered document. Whether
Machinery was movable or had become fixture (Chattles).

The machinery was installed on cement platform and was held in position by being attached to Iron
pillars which were fixed in the ground to a depth of six feet. Since installation was made by the
owner of the mill, the purpose could only be the permanent beneficial enjoyment of the Mill. The
court held the machinery was accordingly held to be immovable property. So the instrument of
charge could not therefore, cover the machinery.

Md. Ibrahim‟s case dissented I.e., to differ in opinion from Perumal naicker v/s.
Ramaswami,AIR 19969 Mad.346.The pump set fixed in the land only for making use of it as a

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pump set was not meant for the permanent beneficial enjoyment of the land and so it continues to be
only movable property.

ATTESTATION: a property may be transferred either orally i.e., by delivery of possession or

through a written document. Where a property is transferred through document, the transfer is said
to execute the deed of transfer, such transferor is called Executants.

Under the law, 2 persons must affirm or become witness to the fact that executants, and no- body
else has written or signed the deed of transfer. This Act of giving evidence or becoming witness is
called attestation and when these persons have done so, the deed is said to have been attested. The
witnesses are called attesting witnesses.

In English law, an attesting witness is one who has witnessed that is, actually seen the execution of
the document.

In India, Section 50 of the Indian succession Act, (now Sec. 63 of I.s. Act, 1925) 1865,
recognized the validity of an attestation on admission or acknowledgement of execution though the
witness had not actually seen the execution. It was held by the Allahabad and Bombay High Courts
that even to transfers governed by the T.P. Act, attestation on admission of execution was sufficient.
But the Madras and Calcutta High Court took a different view and required that an Attester should
have actually witnessed execution. The Privy Council held in Shamu Patter v/s. Abdul Kadir
(35, Mad. 607(P.C.). That “Attested” means that a person signed the document by way of
testimony to the fact that he actually saw it executed. (This decision over-ruled the earlier
Allahabad and Bombay High Court decisions).

The T.P. Act- XXVI of 1917 was passed to validate instruments attested by witnesses on receiving
an admission of Execution from execution in reliance on correctness of Allahabad and Bihar High
Court. Even an illiterate person can validly attest a document.

Who can attest? Any 2 persons who are of the age of majority and possess sound mind, can act as
attesting witnesses. Since Attestation is a special act of certifying the signature of the executants,
any other person e.g., the scribe or the typist cannot be presumed to have attested the document.
However, a scribe may perform dual role. In that case scribe shall put his signature mentioning
specially that he is also attesting the document.

A party to the transaction cannot be an attesting witness. The parties to the transferable are
transferor and the transferee. Thus for example, the transferee cannot attest the document.

Attestation by any party to the transaction is invalid:-However, a person who is not a party to
the transaction but is a party “interested in the transaction “is competent to become an attesting
witness.

Illustration: Where “X” takes some loan from “Y” by mortgaging his immovable property. The
parties to the mortgage deed are „X‟ (Mortgagor) and „Y‟ (Mortgagee). Now, if y who lends
money has no sufficient money with him and takes some money from his brother „Z‟ and gives the
full amount to „X‟ then „Z‟ would be a person who is interested in the mortgage deed although he is
not a party to it‟. Z „can act as attesting witness in this mortgage deed.

Kumar Harish Chandra v/s. Bansidhar Mohanty (AIR- 1965) there was a mortgage in which
the money was advanced not by this third person, who advanced the money.

10
It was held by the Supreme Court that although the money-lender (who gave the money to
mortgagee who finally gave it to the mortgagor) was a person interested in the transaction of
mortgage but cannot be regarded as a party to it. Accordingly, the attestation by the money-lender
was held valid.

DIFFERENCE BETWEEN INDIAN LAW AND ENGLISH LAW:-In English law attestation
implies that the attesting witness was present at Execution and can testify that the deed was
executed voluntarily by the proper person. The definition of attestation in Section 3 of T.P. Act
makes a 2 fold departure from the English Law.

According to English Law:-

1) Both witnesses should be present at the same time and
2) They should actually see the execution of the instrument.
In India it is not necessary that both witnesses should be present at the same time or see the actual
execution of the document.
Essentials of valid Attestation:-
1. It is confined only to non-testamentary instrument. It will not apply to will etc.
2. Minimum 2 attesting witnesses are needed maximum is not mention.
3. Three modes of attestation are recognized for example.
i. Each sees the executants signing or fixing mark.
ii. Each see some other person signing in the presence and by the direction of executants or
iii) Each has received from the executants the personal acknowledgment.
a) of Executants sign.
b) Executants‟ sign/mark.
c) Sign of one who signed for the executants in his presence and by his direction.
iv. Each witness sign the instrument in presence of executants.
v) Presence of both or all attesting witnesses one and at the same time is not essential.
vi) No particulars form of attestation is prescribed.

In Kundan lal v/s. Mushar (LR 635 PC 207-1936) Rafi Begum, the executants was a Pardanashin
lady and was sitting behind a thin curtain when attestations signed. The Privy Council held that the
attestation was valid as the executants, if so minded, could have seen the witnesses, even if she did
not actually see them, through the curtain, it is tantamount to say that an attesting witness should
sign his name in the presence of the executants.

In Rao Ganga Prasad Singh v/s. Isturi Prasad Singh (34 MLJ 545 PC)
Deed of Mortgage was singed behind the Purdah and was brought to the witness bearing a signature
which the son of the lady said was her signature. The privy council held that there was no valid
attestation because for a valid attestation, the attestator must have actually witnessed execution or
received from the executants an acknowledgement of execution.

Padarath Halwai v/s. Ram narayana upasdhya (37 All 474 (PC):- The hand of the executants
who was behind the purdah was seen and her voice was heard and recognized by the witness. It
was held that Attestation was valid.

ATTESTING WITNESS (QUALIFICATION OF ATTESTER):- An attesting witness should be

sui-juris. He may be an illiterate marks man in which case he may attest his mark, a scribe may also
be an attesting witness provided the document is not executed by the scribe himself on behalf of the
executants. (Paramasiva Udayan v/s. Krishna Padayachi). A party to the deed cannot attest was
11
held in Gomathi v/s. Krishna Iyer). A power of attorney agent executing document on behalf of
another cannot attest. Conflict of decisions on question whether a registering officer may be an
attesting witness. The Madras and Nagpur High Courts held that registering officer may be an
attester but Allahabad, Bombay and Rangoon High Court had taken a contrary view.

Recently in Abudl v/s. Venkata Shastri (1969 SC 1147 ). It has been held that an attestor should
animo attestandi i.e, Intention to attest, so, a registering officer cannot be treated as an attestor.

Requirements of valid attestation:- In Sari lal mahton v/s. Kamala Prasad (1951 SC 1968)
A mortgage document was written by the scribe in the village of the Mortgage on 8-4-1927, on the
same day the attesting witnesses also belonged to that village signed the document as attestors.

On 12-4-1927 the Executant (Mortgagor) put his signature on document. It was held by Supreme
Court that attestation was invalid. The attestor should sign only after execution in complete.
Otherwise “It is no attestation in the eye of law.”

In Podarath Halwai v/s. Ram Nain Upadhya (37 All. 474 PC). The hand of the Executant who
was behind the Purdah was seen and her voice was heard and recognized by the witness. It was
held that Attestation was valid. In (Sari Lal Mahton v/s. Kamala Prasad { 1951 SC J 768 }

Registration:- Registration is a process through which a document is officially recorded. It takes

place under the provisions of the Indian Registration Act, 1908. When a document is registered, it
becomes an important and valuable evidence regarding the Statements made in the document.
Under T.P. Act, certain transfers are made only through registered deed.
For example: - Gift of an immovable property of any valuation, sale of immovable property above
Rupees: One hundred (Rs.100/-) simple mortgage can be made only through a document duly
attested and registered.

In other words, the deeds of such transfer are compulsorily registrable. Section 17 of the
Registration Act provides a list of documents which are compulsorily registerable. On the other
hand, there are certain documents dealt with under Sec. 18 of Registration Act, the registration of
which is option for example, wills, Sale of immovable property of valuation less than Rs. 100/- etc.,
Wills where a document is compulsorily registerable but has not been registered, the transfer under
it is not valid and courts do not recognize that transfer where registration is optional. For example
Wills, the transfer is valid even though deed is unregistered.

The procedure for registration of a document is under. The transfer which is to be made through a
deed is first of all, written on the stamp papers of prescribed value. Thereafter, the executants put
his signature and 2 attesting witnesses attest the execution. This document which is now duly
executed and attested is presented before the sub-registrar or Registering Officer having appropriate
Jurisdiction, Registration fee is prescribed under law. The document is then recorded in prescribed
register. After formalities, the sub-Registrar certifies on the back of the deed that document has
been duly registered on the date and time mentioned by him. After affixing the official seal, the
deed is returned to the parties concerned *(Indian Registration Act).

In M. Ramakrishna Reddy v/s. Sub-Registrar, Bangalore. It is deemed to be duly registered on

the date and at a time which is mentioned by the Sub-Registrar under his certificate. It is also be
noted that registration must have been completed in all respects strictly according to the provisions
of Indian Registration Act.

12
However, once a document has duly been registered, the Registering Officer (sub-Registrar) has no
authority to modify or delete any entries made in any of the books of record relating to validity of
that document.

Therefore, on a subsequent date he cannot delete or modify any entry made in the “encumbrance
certificate ” except where it relates to a clerical error.
Further, section 3 of the T.P. Act provides that if a document is duly registered in any part of the
country to which this Act extends, it would mean to have been “registered ” for other places too. In
other words, court would accept a registered document as evidence irrespective of the fact as to
where it was registered.

The following have been judicially held to be Actionable claims:

1. Claim for arrears of rent (Re-stephen)
2. The benefit of an executor, contract for the purpose of goods is a beneficial interest in movable
interest (claim for benefit arising out of a contract for purchase of goods) Johar Meher Ali v/s.
Budge-Budge-Jute Mills.
3. A right to get by division of piece of land reserved by a donor for his own use in his deed of gift
but possession of which was with the donee (Rudra Prakash v/s. Krishna Mohan).
4. An interest of the partner in dissolved firm or share in partnership (In Rebai bridge case)
5. A claim for return of earnest deposit.
6. A fixed deposit in a bank or post-office
7. The benefit of contract for sale and purchase of immovable Property may also be assigned as
actionable. Where there is only completed contract as per Contract Act.
8. Usufructuary Mortgagee‟s liability to pay to the Mortgagor the balance left after paying the
Mortgagor‟s creditors.
9. Both ordinary and endowment life policies (Shamdas v/s. Sabitri Bai)
10. The right to the proceeds of business (Alkas Akli v/s. Nath Bani Ltd.)
11. P.F. amount payable after retirement and not presently (Official Trustee v/s. Chippendale
1944 Cal. 335.).

The following are not actionable claims.

a. Claim to copy right.
b. Shares in company.
c. Claim to mesne profit.
d. Mortgaged-debt.
e. Mere right to sue.
f. Right to recover profits from co-sharer etc.

Definition of Transfer of property:

Synopsis:
1. An Act of which
2. A living person
3. Conveys
4. In present or future
5. Property
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6. to another living person
7. Family settlement
8. Compromise
9. Partition
10. Surrender
11. Relinquishment or Release
12. Charge

Definition of transfer of property: - Section 5 defines “Transfer of property” means an act by

which a living person conveys property in present or in living person conveys property in present
or future, to one or more other living person (or to himself) and to transfer property is to perform
such act.

In case of partition, charge, relinquishment (reversions) surrender, release deed, does not amount to
transfer of property.

1) Transfer of property is an act: transfer of property is an activity; under this activity something
is done by the person who wants to transfer his property. As in case of will property is not
transferred automatically without transferors “act”.

2) Living person: Transfer of property by living person, person who makes transfer is called
transferor (Human person or juristic person like company, firm, corporation, university etc.). Living
Person must be in existence, major, sound person & qualified.

Sec 5 para 2 – Transfer may be by one person or class or group of persons. It may be association,
corporation (jurist person).

Court is not a Living Person:-Transfer made by court sale is not transfer of property Act. So
transfer of property by will, in heritance, court order are excluded (will or inheritance property is
transferred by testator or only after death).

3) Conveys: The word „conveys„ include any form of assurance inter-vivos (living person) in
which some new title or interest is created in favour of Transferee(official assignee )Madras v/s.
Tehming Dinshaw Tehrani (Air 1972 Mad. 187)

After transfer of property, the transferee get that particular interest which is given by transferor gets
new title or interest which he did not have before transfer is called conveyance.

For example: „A‟ and „B‟ are owners of their houses „B‟ has no title in „A‟ house „D‟ makes
gift/sale to „B‟ by which „B‟ becomes owner also of „A‟ house here, a is act is conveyance
because this has effect of creation of new title or interest

4). In present or future: A transfer of property may be made so as to take place with immediate
effect or to take place on future date. The transferor can make arrangement that property is vested or
accrues to the transferee immediately after completion of transfer. He can also Transfer the property
upon certain conditions.

Illustrations: -a. „A‟ makes gift to „B‟. He has not mentioned and does not lay down any
condition. But, still transfer is present and B gets the property with immediate effect.

14
b. „A‟ Transfers his property of „B‟ for life and then to „C‟ the transfer in favour of‟ „B‟ is present
(although he gets only life-interests) but the transfer in favour of „B‟ is future transfer.
c. „A‟, makes gift of his watch to „B‟ provided „B‟ gets first division in next examination, there,
although the gift has been „C‟ declared today but it shall take effect only if „B‟ gets first division.
Such transfers are called conditional transfers.
Therefore conveyance, property has been used in a comprehensive sense. It includes both movable
like car, table etc., and immovable like lands or houses. In Sunil Siddharthbai v/s. Commissioners
of Income Tax (AIR 1986)
Supreme Court held “In general, transfer of property means passing of right in the property from
one person to another. ” It may be (absolute ownership or partial interest.)

Thus, „A‟ makes gift of his house to „B‟ there is transfers of absolute interest. But if a transfers
right of enjoyment of his house to „B‟ for a certain period is called “Lease” (Partial interest).

5).Property: The word “property” has not been defined in the Act, but has used in its widest and
most generic sense. It includes an actionable claim and a right to a reconveyance of land, but not a
power of appointment.

6) To another living person: There must also be an another person, whom the property may be
transferred such other person is known as transferee. The transferee must also be a living person.

The Transferee need not be a competent person. Transferee may be minor, insane or child in
venture (child in mothers‟ womb). The transferee must be in existence. Property cannot be
transferred to a person who is not in existence on the date of transfer.

Where transferee is not a living person: Narasimha v/s. Venkatalingam (50 Mad.687) A executed
an unregistered document conveying his immovable property to “GodSri
Kothandaramachandramurthy”. It was contented that the document was ineffective as it was a gift
which required for its validity registration under Sec.123 of T.P. Act. This contention was rejected.
There is no transfer in this case since”Transferee” was not a living person.

The Madras High Court observed by no stretch of imagination legal or otherwise, can it be held that
almighty is a living person within meaning of Section 5 of T.P. Act.

To himself: A transfer of property under Sec. 5 of the Act requires 2 living persons. The transferor
and the transferee one cannot transfer a property to himself. But, one can transfer a property to
himself in some other capacity.
The words ”to himself” added by amending Act, 1929 to include in transfer of property also a case
where a person makes any settlement of his property in a trust and appoints himself as the sole
trustee Naranbhai v/s. suleman {(1975) 16 Guj. L.R. 289} Here, the transferor and the transferee
are physically the same person but as transferor he has legal status of settler whereas as transferee
his legal status of sector whereas transferee his legal status is that of a trustee.

7. Family settlement: in Sudhu Madho Das V/s Pandit Mukand Ram (1955 2 SCR 22) The
Court has observed that, in the case of family settlement, there is an antecedent title of some sort in
the parties, and the agreement acknowledges and defines what that title is, each party relinquishing
all claims to property other than that falling to his share and recognizing the right of the others as
they had previously asserted it, to the portions allotted to them respectively. Therefore, a family
settlement is not a transfer.

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8. Compromise: The Bombay High Court and the Nagpur High Court have held that a compromise
of a doubtful claim does not amount to a transfer. But in Sonepalli Mutyaly V/s Veerayya (AIR
1946 Mad 452) The Madras High Court has held that where one of the parties to a settlement gives
up a claim to receive a certain sum of money from the other, in consideration of the latter‟s giving
up the right to certain property claimed by him, it would amount to a transfer. The High Court of
Madhya Pradesh has held, on similar facts that a compromise arrangement between the parties
amounts to a transfer. However, the court rightly added in the case of Hussiaa Banu V/s
Shivnarayan (AIR 1968 M.P. 307) that this is a question of fact to be answered with due regard to
the facts and circumstances of each case.

9.Partition: there was a conflict of judicial decisions on whether a partition amounts to a transfer as
defined in Section 5 of the Act. In Soniram V/s Dwarkabai (53 BLR 325), the Bombay High
Court held that a partition amounts to a transfer, inasmuch as it involves a conveyance by the co-
sharers of their respective right, title and interest in the property. The same view was reinterated by
the Bombay High Court in two later decisions, Jagannath Puri V/s Godabai (AIR 1968 Bom. 25)
& Dahyabhai v/s State of Bombay (62 BLR 348). The Madras High Court has held in the cases of
Radhakrishnayya V/s Sarasamma (ILR 1951 Mad 607) & Stremann V/s C.I.T (AIR 1962 Mad,
26) that a partition is not a transfer either for the purpose of Sec.53A of the Act or within the
meaning of 16(3)(a)(iv) of the Income Tax Act 1922. The Supreme Court, in C.I.T. V/s Keshvlal
(AIR 1965 SC 866) expressed its approval of the two decisions of the Madras High Court, cited
above, to the effect that, in a partition, there is no transfer of assets.

10.Surrender: As held in Makhanlal v/s Nagendranath (60 Cal. 379) the surrender of a lease is
not a transfer within the meaning of Sec.5 of the Act, as it is the merger of a lesser estate with a
greater one. On the question as to whether surrender of a life-estate by a Hindu widow amounts to a
TRANSFER, the High court of Bombay and Allahabad had earlier held that it does. However, in
Natyvarlal V/s Dadubhai (56 BLR 447) the Supreme court has subsequently held that such a
surrender is not a transfer, since it amounts only to an act to self-effacement by the widow, and
accelerates the succession to her husband‟s estate.

11.Relinquishment or Release: A relinquishment or a Release Deed necessarily involves the

extinguishment of a right, and therefore, it cannot amount to a transfer within the meaning of Sec.5
of the Act, as there is nothing left to transfer {Provident Investment Co., v/s C.I.T.(AIR 1954
Bom. 95)}. Thus, a relinquishment by a reversioner of his reversionary interest does not amount to
a transfer.{Barati Lal V/s Salik Ram, (38 All 107)}.
12. Charge: A charge on property is not a Transfer within the meaning of Sec.5 of the Act, as the
only right created by such a charge is the right to payment out of the property subject to the charge.
{Bobinda V/s Dwarkanath (35, Cal, 837)}.

We may now examine certain transactions as to whether they are transfer of property or not
within the meaning of this Act.

TRANSFERABILITY OF PROPERTY:- For a valid transfer of property, the property must be a

transferable property. But there are certain kinds of properties the transfer of which is not allowed
under the law. Such properties are called non-transferable properties. Transfer of any non-
transferable property is void. According to Section 6, property of any kind may be transferred
except:
a) properties which cannot be transferred by any law, for the time being, in force in India and
16
 b) The properties which cannot be transferred otherwise as given in this Act.

Under Section 6 of this Act, not-transferable properties have been divided into two
categories.

First, those properties which cannot be transferred under any law enforced in India.

Secondly, the properties which have been mentioned specifically under clauses (a) to (i) of Section
6 of the Transfer of property Act.

NON TRANSFERABLITY

Section 6 lays down ten kinds of specific properties or interests which cannot be transferred.
Those are
SPES-SUCCESSIONIS:- Spes-Succession means expectation of succession. Expectation of
succession is expecting or having a chance of getting a property through succession. Spes-
Successioes is, therefore, not any present property. Spes-succession is it includes
1) chance of an heir-apparent succeeding to an estate
2) chance of a relation obtaining a legacy on the death of a kinsman
3) any other mere possibility of a like nature

1) CHANCE OF AN HEIR-APPARENT

Heir-apparent is apparently an heir but not legal heir. Heir-apparent us a person who would be heir
in future if he survives the propositus and if the propositus dies intestate.

Illustration:-A has two sons B and C. A has become very old and is also suffering from an
incurable disease. But he is still alive. Expecting that A must die very soon and he is in need of
money, B sold his half share in A‟s property to X. This transfer is void because before A‟s death B
is not legal heir, he is simply an heir-apparent. B would be A‟s heir and entitled to half-share in A‟s
property only after A‟s death and that too if A dies intestate, i.e. without making any will.

Rights of reversionary under old Hindu law; „SPES-SUCCESSIONIS‟ –it was merely a chance
of getting properties and as such it was known to be Spes-successionis. Reversioner was a person
who used to inherit the properties of a widow held by her for life, Such person were called
reversioner because during the life of the widow, their rights of inheritance were suspended but it
reverted to them after widow‟s death provided they survived her. Thus, during widow‟s life the
Hindu reversioner had no right or interest in present in the property which the female owner held
for her life and until it vested in him on her death provided he survived her, he had nothing to assign
or transfer. Being a Spes-successionis the agreement to transfer the properties by a reversioner was
not valid. In annada Vs/ Gour Mohan (AIR 1921 Cal.501) the Privy Council held that since the
interest of a Hindu reversioner is a Spes-successionis, an agreement to transfer, or a transfer of such
an interest does not become effective; the agreement is void.

2) CHANCE OF A LEGACY

Chance of a legacy means expectancy of getting certain property under a will. The well settled law
of wills is that a will operates only after the death of the testator not on the date when it is written.
The legatee has simply a chance of getting property because
17
i) the legatee may not survive the testator
ii) The will in his favour might not be the last will. Before a will operates i.e., before the death
of a testator, legatee has merely a hope of getting property in future, provided it is the last
will.

3) ANY OTHER POSSIBILITY OF A LIKE NATURE

Any other possibility of the like nature would mean any other possible interest or property which is
an uncertain as the chances of an heir-apparent or chance of a relation of getting property under a
will.

The possibility of getting a property in future as contemplated here is like the possibility of getting a
prize in a competition or winning a lottery. Thus, future wages of a servant before they are actually
earned by him, are mere possible interest and as such cannot be sold, attached or otherwise
transferred. Where a fisherman contracts to transfer the fish which he would get in his next catch
before throwing his net, the transfer would be a transfer of mere possible interest of the same kind
as that of a chance of an heir-apparent receiving property in future. The fisherman may or may not
get any fish at all in his next catch. Customary right to scavenge i.e., right to collect things from the
rubbish has been held non-transferable rights. As in case: Radya v/s. Kaviraya, (AIR 1951
N,B.120).

MERE RIGHT OF RE-ENTRY:-

Section 6(a) provides that mere right of re-entry cannot be transferred. Right of re-entry means
right to resume possession. Where a person gives the possession of his property to another for a
certain periods and is afterwards entitled to get it back, his right of entering into the possession of
that property once again, is technically called as his right of re-entry.

Illustration:A has leased his land to B for a period of three years with an express condition that B
shall not dig any well on the said land. B digs a well on the land. A asks C to take possession form
B i.e. A transfers his right of re-entry upon the breach of condition by B. C cannot take possession
from B because A has transferred to him mere right of re-entry.

EASEMENT APART FROM DOMINANT HERITAGE:-

Easement is a right which exists for the beneficial enjoyment of a land and is exercised upon the
land of another person. The land or tenement for whose beneficial enjoyment this right exists is
called dominant heritage and the land or tenement upon which the right is exercised is called
servient heritage. For example, A who is the owner of a house has a right of way upon the land
owned by B so that he may reach the main road. A‟s house is dominant heritage. For example, A
who is owner of a house has a right of way upon the land or tenement upon which the right is
exercised is called servient heritage. A‟s right of way is eseamentry of A‟s house; therefore,
technically, the right is not of A i.e. it is not his personal right but a right attached to the house.
Since this right is part and parcel of this house.

Certain goods are delivered under hire-purchase agreement giving the bailor a right to re-enter the
go-down where goods are kept and take possession in default of payment of any installment. The
bailor assigned his rights under the agreement by way of security to his creditor. The assignment is
invalid. Creditor cannot enforce the right of re-entry because it is merely a personal licence
18
unaccompanied with any interest in the goods As in the Case: Re Davis & Co, ex-parte,
Rawlings(1889).

RESTRICTED INTEREST:-Under this clause an interest in property restricted in its enjoyment

to the owner personally has been made non-transferable. Beneficial interest or an interest by virtue
of which a person derives certain benefit is the property of that person. Such property is owned by
that person but he cannot transfer it. In K. Balakrishnan v/s. Kamalam, (AIR (2004) S.C.1257) –
a lady inherited some property from her maternal-father as owner. She gifted this property to her
minor child reserving personally the possession and the right of enjoyment to herself. It was
argued that since the gift was of restricted interest, which was prohibited under section 6-d,
therefore, the gift deed effectual and void. But, the Supreme Court held that it cannot be said that
the gift deed was effectual merely because the donor has restricted to herself the possession and
enjoyment of the property gifted also S.C. observed that Clause (d) of Section 6 which provides
that all interests in property restricted in its enjoyment to the owner personally cannot be
transferred by him is not attracted on the terms of the gift deed herein because it was not a
property, the enjoyment of which was restricted to the owner personally, She was absolute owner
of the property gifted and it was not restricted in its enjoyment to herself.

For example: A gives the possession of his house to B for a week so that B may perform the
marriage ceremony of his daughter. B transfers the possession of the house for the said week to C
and performs the marriage of his daughter in a hotel. The transfer of possession of the house by B
to C is invalid because B‟s interest in the house of A was an interest given to him only for some
specific purpose. It is A‟s restricted interest, therefore, non transferable.

CLAUSE (5) : RIGHT TO FUTURE MAINTENANCE:- Where a person is entitled to receive

maintenance allowance, it is his personal right because it is given or is promised to be given in
future solely for his own benefit. As such, the right to future maintenance is a restricted interest
which is non-transferable under Section 6(d). According to Calcutta High Court, the maintenance
granted by court was not transferable because essentially right to maintenance was a personal right
whether granted by court or by personal contract. But according to madras high Court, rights to
future maintenance, when granted under a decree of court was a secured right and was transferable.
The Amending Act, 1929 has inserted clause (dd) to resolve this judicial conflict. Under clause
(dd) the right to future maintenance is now non-transferable right even if it has been granted under
any decree of the Court of law.

CLAUSE (6) : MERE RIGHT TO SUE:- Right to sue for a certain sum of money is actionable
claim; actionable claim is a claim for a certain amount of money and can be transferred. But right to
sue for uncertain or indefinite sum of money is not transferable.

Illustration: There is a contract between A and B under which A agrees to transport certain goods
of B from Calcutta to Bombay within a month. A fails to transport the said goods within the
stipulated time and thereby commits a breach of contract. Due to delay caused in transportation of
goods by A, B has to incur loss in the market. B is entitled to claim damages from A. B assigns this
right to C. the assignment being transfer of mere right to sue for damages, is invalid and C cannot
recover damages form A.

IN M/s. Mc. Domwell & Co. Ltd. V/s. District Registrar, Vishakapattanam, (AIR(2000)AP.
374) a manufacturing company insured its goods with an insurance company for the loss or damage

19
of its goods during transportation. The Insurance company in turn was entitled to proceed directly
against the transporter in the event of such loss or damage of the goods. A document to this effect,
was executed by manufacturer in favour of the Insurance company wherein the manufacturer had
suborgated its right to sue the transporter for any loss or damage to goods in consideration of the
payment of amount under insurance conveyance for purposes of stamp-duty. The Andhra Pradesh
High Court held that the document was not a deed of conveyance because the right of manufacturer
was mere right to sue for damages and the same right was given to Insurance Company.
Accordingly, the Court held that the question of treating the disputed documents as a document of
conveyance or assignment would not arise; the document is a Power of Attorney under which
company had given merely a right to sue for damages.

MENSE PROFITS: is also a claim for an indefinite sum of money like damages, therefore, mere
right to claim this is non-transferable under Section 6(e). It means profits or produce of a property
which is in the unlawful or adverse possession of a person who is not entitled to possess it.

Illustration: A is the owner of a piece of land which B occupies illegally. A files a suit against B
to get back the possession of land held unlawfully by B. After two years of litigation, the court
decides in favour of A, and B has to vacate the possession, But, during the unlawful possession B
has already enjoyed the profits or produce of the land say crops of paddy. A entitled to claim the
mense profits for the period of two years. B assigns this right to C the assignment is invalid.

CLAUSE (7) : PUBLIC OFFICE AND SALARY OF PUBLIC OFFICER:- Under this clause
this is prohibition in the transfer of a public office and the salaries of public officers. The reason
why these interests are non-transferable is, to insure the dignity to the office held by a person
appointed for qualities personal to him and getting salary for due discharge of his public duties.
Case Law: The salary of a public officer whether before or after it has become due, is also non-
transferable. Attachment or transfer of the salary of a public officer is illegal and opposed to public
policy, thus a railway servant cannot agree to the attachment of a part of his salary as seen in case:
M S M Railway V/s. Rupichand.A (AIR (1960) Bom.155). However, leaving apart a minimum
amount for bare subsistence the remaining salary can be attached in execution of a decree under
Section 60 of the CPC.

CLAUSE (8) : PENSIONS AND STIPENDS:- The stipends allowed to military, naval, air force
and civil pensioners of the Government and the political pensions, and cannot be transferred. The
pensions or stipends etc. of the Government servants whether civil or military, are non-transferable
on the same principle on which the salaries of public servants are not transferable under the
preceding clause. Pension means a periodical allowance or stipend granted not in respect of any
right or privilege or because of an office but on account of past services or particular merits or as
compensation to the families and depends as seen in Case: Secretary of State V/s. Khem Chand,
{(1880) 4, Bom 432}.

CLAUSE (9) : TRANSFER OPPPOSED TO NATURE OF INTEREST ETC:- There is a

prohibition in the Transfer of Property under certain „situations‟;
i) where the transfer is opposed to the nature of interest created thereby
ii) where the transfer is for an unlawful object or consideration
iii) Where the transfer is made to a person who is legally disqualified to be transferee.

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i) TRANSFER OPPPOSED TO NATURE OF INTEREST CREATED THEREBY

There are certain properties which by their very nature can neither be owned nor transferred. For
example, air, light, space, sea are such properties which in their natural form are nobody‟s
property. Such properties are called res-communes i.e, Property of the whole community of the
world.

ii) TRANSFER WHERE ITS OBJECT OR CONSIDERATION IS UNLAWFUL

Any property which is otherwise transferable shall become non-Transferable if the object or
consideration of the transfer is unlawful within. Thus, under this sub-clause, the object or
consideration of a transfer of property is unlawful in the following situations

a) it is forbidden by law
b) it is of such nature that if permitted it would defeat the provision of any law or
c) it is fraudulent or
d) If involves injury to a person or property of the other or
e) It is immoral or opposed to public policy
Illustration: A gives to B Rs.1000/- so that B assaults C or commits his murder. Or destroys C‟s
house by burning it. The transfer of Rs.1000/- is void being unlawful.
TRANSFER MADE TO A DISQUALIFIED TRANSFEREE

Any living person inexistence can be a competent transferee. But, the transferee must not be legally
disqualified to be a transferee. Judges, legal practitioners or officers connected with any Court of
justice are incompetent transferee in any dealings of actionable claims.
5) (i) : UNTRANSFERABLE RIGHT OF OCCUPANCY:- As a general rule occupancy rights
or the leasehold properties are transferable interests. But an exception to this general rule.

ESSENTIALS OF A VALID TRANSFER

In a valid transfer of property, following essential conditions must be fulfilled.
The property must be a transferable property. According to section 6 of the Act, there should
not be any prohibition in the transfer of that property.

1) Transferor must be competent. Transferor is the person who conveys property. Person may be a
human person or a juristic person such as company or association.
2) The transferor must also have right to transfer the property being transferred. Every adult person
of sound mind may have capacity to transfer but has right to transfer only those properties or
interests in which he has ownership.
3) The transferor must also have right to transfer the property being capacity i.e., age of majority
and sound mind.
4) Necessary formalities prescribed by law for the transfer must also be completed. The Transfer
of Property Act makes provision for various kinds of transfer of property e.g. sale, gift,
exchange, mortgage, lease and the transfer of actionable claims.

PERSON COMPETENT TO TRANSFER:- Section 7 of the Act provides;

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1) COMPETENT TO CONTRACT

Section 11 of the Indian Contract Act, 1872, a person is competent to contract if he is

(i) of the age of majority
(ii) of sound mind
(iii) is not otherwise disqualified from contracting by any law

i) Age of majority:-When the transfer is being made, the transferor must be an adult person and
must have attained the age of majority, a person attains majority at the age of eighteen yeas.
But, if a guardian has been appointed under the Guardian & Wards Act, 1890, the minor attains
majority at the age of twenty- one years.

As in the Case: Sadiq ali Khan v/s. Jaikishore (AIR-1928 PC 152). A person who is below the age
of eighteen years is a minor; transfer of property by a minor is void and cannot be validated by his
subsequent ratification on attaining majority.

ii) Soundness of mind:- Transfer must possess a sound mind at the time of the transfer i.e., he
must not be of unsound mind. Unsoundness of mind is to two kinds, idiocy and lunacy. Idiocy is
incurable and permanent. Lunacy is not permanent and a lunatic may sometimes possess a sound
mind. If a person has been adjudged lunatic by a Court, he is incompetent to make transfer even
during lucid interval.

iii) Not otherwise disqualified:- The transferor must be free from any legal disqualification.
Disqualification means legal inability. Minority and insanity are legal inabilities. Legally
disqualification means legal inability. Minority and insanity are legal inabilities. Legally
disqualified means that the transferor should not be legally prohibited to transfer the property by
any other law to which he is subject. For example, a judgment debtor whose property is being
sold in execution of decree is legally disqualified to transfer his own properties.

2) ENTITLED TO TRANSFER:- The transferor must be entitled to transfer the property

concerned. He is entitled to transfer the property if he has title of the property or if he has no such
title, has got the authority to transfer it. No persons entitled to transfer any interest which he himself
does not have at the time of the transfer.

As in the Case law: Balal C Mandal v/s. Indurekha debi, (AIR (1973)SC 782)Thus, an agent
who is authorized by the principal to transfer certain property, has right to transfer the property.
However, an agent who has not been given any express authority also to transfer the property has no
authority to transfer any property in his management.

UNQUALIFIED OR, UN-CONDITIONAL TRANSFER:- Transfer of property may be subject

to certain conditions or reservations respecting the interests being transferred or, without any such
condition. Where the transferor does not lay down any condition it is presumed that the transfer is
unqualified.

LEGAL INCIDENTS OF TRANSFER:- Legal incidents of a property are everything which

belong to that property by way of its necessary consequence or which necessarily depend on such
property. Thus, a house has several incidents appertaining to it,. Such as, right of easement, right of
enjoyment, right to get rent from it etc. and also the duty to pay its revenue of taxes.

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1. LAND:-The legal incidents of a piece of land include
i) everything annexed to it for permanent enjoyment
ii) the beneficial interests arising out of the land
iii) the things attached to the earth

Transfer of the land would include transfer of everything annexed to it permanently everything
which is part and parcel of the land and also everything beneath the land.

2. MACHINERY:-Where a machinery is part of land, together with land such machinery is also
transferred and along with such machinery are transferred its nuts, bolts and other parts.

3. HOUSE:-Legal incidents of a house are the easements, such as, right of way, right of support,
and any quasi-easement or easement of necessity annexed to the house. House includes also the
permanent fixtures e.g. doors, windows locks, keys bars etc.

4) DEBTS:-Legal incident of debts is the security for the debt. Thus, in an unqualified transfer of
debt or actionable claim, the security also passes on to the transferee along with the debt.

5. INTEREST:-Where the property transferred is money or other property yielding income, the
transferee is entitled to get the interest on that money or other income accruing thereof after the
transfer.

MODES OF TRANSFER:

There are two types of transfer of property

a) delivery of possession
b) registration

a) Delivery of possession

Where writing is not necessary under this Act, the property may be transferred orally i.e. only by
delivery of possession. Normally the movable properties may be transferred by delivery of
possession. But, other kinds of properties in which writing is not necessary under this Act, may also
be transferred orally.

For example, sale of immovable property valuing less than one-hundred rupees.

b) Registration

Where registration is necessary, the transfer must be in writing. Following transfers must be made
only through a written deed duly registered:
1) gift of an immovable property
2) sale of an immovable property exceeding rupees one-hundred sales of reversion or other
intangible property irrespective of its value
3) Leases from year to year or for a term exceeding one year or resaving a yearly rent.
4) Simple mortgage irrespective of the amount secured.
5) Other kinds of mortgage(except mortgage by deposit of title-deeds) where the sum secured
exceeds rupees one-hundred.
6) Exchange of immovable property exceeding rupees one-hundred.
7) Transfer of actionable claims (registration is not necessary, writing is sufficient.
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TRANSFER FOR THE BENEFIT OF AN UNBORN PERSON:- There cannot be any direct
transfer to an unborn person. An unborn person means a person who is not in existence even in
mother‟s womb. Property can be transferred to a child in mother‟s womb. But, property cannot be
transferred to any person who is not even in the mother‟s womb because such person is an unborn
person. If a property is transferred directly to a person who is not in existence, the interest so
transferred shall be divested or be away from the transferor but it would have to remain in abeyance
and wait for the transferee to come into existence, in whom it could vest.

Property cannot be transferred directly to an unborn person but property can be transferred for the
benefit of an unborn person. Section 13 provides that property can be transferred for the benefit of
an unborn person subject to following conditions.
i) Transfer for the unborn must be preceded by a life interest in favour of a person in
existence at the date of the transfer.
ii) Only absolute interest any be transferred in favour of the unborn.

1) PRIOR LIFE-INTEREST

The transfer for the benefit of an unborn must be preceded by a life interest in favour a living
person in existence at the date of the transfer. Where a person intends to transfer certain properties
for the benefit of an unborn person, such unborn is the ultimate beneficiary. But since this unborn or
ultimate beneficiary is not in existence at the date of the transfer, property cannot be given to him
directly. There must be a poor life interest in favour of living person so that such living person
holds the property during his life and till that time the unborn would come into existence. After the
termination of this interest i.e. after the death of the living person holding property for life interest
would pass on ultimately to the unborn who, by that time, comes into existence.

Illustrations: i). A transfer his house to X for life and thereafter to U. B who is an unborn son of A.
the transfer of house in favour of U. B is valid. Here since U. B is not in existence at the date of the
transfer, A could not transfer the house directly to him. So A had to make a direct transfer of life
interest in favour of X who is a living person at the date of the transfer. After the death of X the
interest o the house shall pass on to U. B who is the ultimate beneficiary.

ii). A transfers his properties to X for life and then to Y for life and then to Z for life and thereafter
to the unborn child of Z. here X, Y, and Z are all living persons in existence at the date of the
transfer. This disposition of property is valid. The property may be given to more than one living
persons successively „for life‟ before it ultimately vests in the unborn (X‟s unborn child).

2) ONLY ABSOLUTE INTERST MAY BE GIVEN:-

Only absolute interest of the property may be transferred in favour of an unborn person. Limited or
life interest cannot be given to an unborn person. Transfer of property for life of an unborn person is
void and cannot take effect. Section 13 enacts that interest given to the unborn person must be the
whole of the remaining interest of the transferor in the property.

Illustrations:
i) A transfers his properties to X for life who is unmarried and then to the eldest child of X
absolutely. The transfer in favour of eldest child of X is valid.
ii) A transfers his properties to X for his life and there after to U.B. for life X is a living person at
the date of the transfer. U.B. is not in existence at the date of the transfer. Here, the transfer of
24
 life-interest in favour of X is valid. But, transfer of life-interest in favour of U.B. is void because
although the transfer in favour of U.B. is preceded by a life interest to X but U.B himself has not
been given an absolute interest. The result is, therefore, that X shall hold the property during his
life but after his death if shall not pass on to U.B but shall revert back to A or to A‟s legal heirs.

As seen in the Case of Girish Datta v/s. Data Din (AIR 1934 Oudh 35). The facts were as under
A made a gift of her properties to her nephew‟s daughter B for life and then absolutely to B‟s male
descendant, if she should have any, But in the absence of any male child of B, to B‟s daughter
without power of alienation and, if B has no descendants male or female then to her (A‟s) nephew.
B died issueless. The Court held that the gift for life to B was valid as B was a living person at the
date of the transfer. But gift in favour of B‟s daughter was void under Section 13 of the T.P. Act
because it was a gift of only limited interest (gift without power of alienation); she had not been
given absolute interest. Further, since this (prior) transfer was invalid the subsequent transfer
depending on it (i.e., to A‟s nephew) also failed.

RULE AGAINST PERPETUITY

Perpetuity means indefinite period. Rule against perpetuity is the rule which against a transfer
making the property inalienable for an indefinite period or for ever. Where a property is transferred
in such a way that it becomes non-transferable in future for an indefinite period, the property is tied
up for ever.

OBJECT OF RULE AGAINST PERPETUITY:- The object of the rule against perpetuity is to
ensure free and active circulation of property both for purposes of trade and commerce as well as
for the betterment of the property itself. A transfer who renders property inalienable for an
indefinite period is detrimental to the interests of its owners who are unable to dispose it of even in
urgent needs or for any higher value. It is also a loss to society because when property is tied up
from one generation to another in one family, the society as such would be deprived of any benefit
out of it.
Rule against perpetuity is, therefore based also on broad principles of public policy. Stating the
object of rule against perpetuity, Jekyll M.R. in Stanley vs. Leigh (1732-Ajll. E.R. 917) has
observed that if the rule were otherwise then: “a great mischief would arise to the public from
estates remaining for ever or for a long time in alienable or in transferable from one hand to
another, being a damp to industry and a prejudice to trade, to which may be added the
inconvenience and distress that would be brought on families whose estates are so fettered.

RULE AGAINST PERPETUTITY UNDER SECTION: 14

Sec. 14 of the transfer of property Act, provided that in a transfer of the property, vesting of interest
cannot be postponed beyond the life of last preceding interest in the living person and the minority
of the ultimate beneficiary.
Essential elements of the rule against perpetuity.

1) there is a transfer of property,

2) the transfer is for the ultimate benefit of an unborn person who is given absolute interest,
3) the vesting of interest in favour of ultimate beneficiary is preceded by life or limited
interests of living person,
4) the ultimate beneficiary must come into existence before the death of the last preceding
living person,
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 5) Vesting of interest in favour of ultimate beneficiary may be postponed only up to the life or
lives of living persons plus minority of ultimate beneficiary; but not beyond that.

MAXIMUM REMOTENESS OF VESTING: Under Section 14, the maximum permissible

remoteness of vesting is the life of the last preceding interest plus minority of the ultimate
beneficiary. In case Saundara Rajan V/s. Natarajan, (AIR 1925 P.C. 244), the Privy council
has held that since at the date iof the transfer it is not known whether or not a guardian would be
appointed by court for the minor in future, for purpose of Section 14 the normal period of minority
would be eighteen years. So, the vesting may be postponed up to the life of the last person (B)
holding property for his life and the minority (18 years ) of the ultimate beneficiary

ULTIMATE BENEFICIARY IN MOTHER‟S WOMB:- Where the ultimate beneficiary is in the

mother‟s womb i.e. it is a chills en venture as mere, the latest period up to which vesting may be
postponed, is the minority plus the period during which the chills remains in mother‟s womb.
Where the ultimate beneficiary is in mother‟s womb when the last person dies, the property vests
immediately in him while he is still in mother‟s womb.

Illustration: A fund is bequeathed to A for his life and after his death to B for his life, and after B‟s
death to such of the sons of B as shall first attain the age of 25 years. A and B survive the testator.
Here, the son of B who shall first attain the age 25 years may be a son born after the death of the
testator; such son may not attain 25 years until more than 18 years have elapsed from the death of
the longer lives of A and B and the vesting of interest may thus be delayed beyond the lives of A
and B and the minority of the sons of B. the bequest after B‟s death is void.

CONTINGENT INTEREST :- Under section 14, vesting of interest in favour of the ultimate
beneficiary may be postponed up to his minority. The property does not vest in him until he attains
the age of majority. The period when last person dies and the majority of the ultimate beneficiary,
has contingent interest which becomes vested upon his attaining majority.

Where the ultimate beneficiary is already born at the death of the last person but does not survive to
attain majority e.g. dies at the age of fifteen years, the interest does not vest in him and therefore it
reverts back to the transferor or his legal heir if the transferor is dead by that time.

Illustration: A makes a gift of his properties to his daughter B for her life and then to their children
when they attain the age of 21 years. B has no children at the date of the gift. The gift in favour of
B‟s children is void because the vesting in favour of B‟s children has not been made within normal
period of minority but three years later. It may be noted that the maximum period up to which
vesting can be postponed after B‟s death is the minority of B‟s children who are the ultimate
beneficiary. Normally minority terminates extends up to 21 years. Thus, at the date of gift the
probable remoteness should have been 18 years, instead of 21 years. When the gift was made it was
probable that no guardian would be appointed by Court for the children of B. when B died, it was
not certain that many of the children would actually have guardians appointed. Accordingly, the gift
in favour of B‟s children is void under this section even if the guardians were actually appointed for
them. After B‟s death the property would revert back to A or his legal heirs. (Saundara Rajan V/s
Natarajan), (AIR 1925 P.C. 244), the Privy council has held that since at the date of the transfer
it is not known whether or not a guardian would be appointed by court for the minor in future, for
purpose of Section 14 the normal period of minority would be eighteen years. So, the vesting may

26
be postponed up to the life of the last person (B) holding property for his life and the minority (18
years) of the ultimate beneficiary).

EXCEPTIONS TO THE RULE AGAINST PERPETUITY:- The rule against perpetuity is not
applicable in the following cases.

a. Transfer for the benefit of public:-Where a property is transferred for the benefit of public in
the advancement of religion, knowledge, commerce, health, safety or any other object beneficial to
mankind, the transfer is not void under the rule against perpetuity.(Section 18 of T.P.Act,1882) this
exemption is necessary because transfers of property for the benefit of the public generally are
made through the medium of religious or charitable trust.

b.Personal agreement:-Personal agreements which do not create any interest in property are
exempted from the rule against perpetuity. Rule against perpetuity is applicable only to a transfer of
property. If there is no transfer of property i.e. no transfer of interest, the rule cannot be applied.
Rule against perpetuity is not applicable to mortgages because in mortgage there is no certain of any
future interest. -In Ram Baran V/s. Ram Mohit (AIR 19657 SC 744), the Supreme Court has
held that a mere contract for sale of an immovable property does not create any interest in
immovable property and, therefore the rule cannot apply to such contracts. In Maharaja Bahadur
V/s. Balchand (AIR (1922) P.C 165,) the Privy Council had held that an agreement of pre-emption
created an equitable estate and is hit by this rule.

Venkata Subnna v/s D. Chinna Panayya, -In this case the husband executed a settlement deed
under which he created a life estate in favour of his wife so that she may enjoy the property during
her life together with husband and after his death up to her remaining life and after her death the
property was to vest in their children who would be born by that time. The Court held that the
settlement deed was valid and it did not violate the provisions of Section 14.

Illustration: A makes a gift of certain properties to B for life and then to B‟s unborn children with
a condition that the first child of B shall get life interest and the rest shall get the property
absolutely, here the ultimate beneficiate is a class of unborn persons at the time of the transfer. As
required under section 13 these unborn person must get absolute interest. B‟s first child who is not
of his unborn children should also be given absolute interest bur B‟s first child is to get only life
interest. Thus. Transfer in regard to B‟s first chills fails under Section 13. But, transfer in favour of
rest to B‟s children is valid and takes effect.

Illustration: A transfers his properties to B for life and then to X, Y, and Z with a condition that X
and Y shall get the property when they attain the age of majority but Z shall get when he attains the
age of 25 years. The transfer in regard to Z fails under Section 14 but in regard to X and Y the
transfer is valid and shall take effect.

Rule against perpetuity under Hindu and Muslim law:- The transfer of property Act was made
applicable also to Hindus by the amending Act of 1929. Now, the provisions of this Act including
Section 14 are applicable to Hindus, but, even before the amendment, the rule against perpetuity
was applicable to transfers made by Hindus by local enactments e.g., Hindu disposition of Property
Act, 1916 and madras Act 1914. However, apart from these statutory provisions, a transfer of
property in perpetuity was held void under Hindu law except gifts for religious or charitable
purposes.

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 RULE AGAINST ACCUMULATION: - Accumulation of income of any property means
restraining the free enjoyment of its incidental benefits such as rents, produce or profits. In other
words, direction for accumulation of income would mean limiting the beneficial enjoyment of the
property or condition which restrains the enjoyment of property.
The maximum permissible period up to which income of the property may be accumulated is life of
the transferor, a period of eighteen years whichever a longer period is any direction which makes
accumulation of income beyond this period of maximum permissible postponement.
Illustration: A) A transfer a property to B for life and thereafter to B‟s such son who first attains
the age of 25 years with a direction for accumulation of income till B‟s first son attains 25 years.
The direction for the accumulation of income is void.
B) A transfer‟s property to B in 1960 with a direction for the accumulation of its benefits upto 1990.
A dies in 1985. Thus the transferor lives for 25 years which is more than 18 years. The direction for
accumulation is valid upto 1985 because it is the longer period.

EXCEPTIONS
a) PAYMENT OF DEBTS:-Where the purpose of such accumulation is payment of debts incurred by
the transferor or any other person having an interest in the transfer. A makes a gift of his house to B
with a directing that form the rents of the house shall pay 500-per month towards the satisfaction of
a debt of Rs. One lac incurred by A. the direction of the accumulation of income is valid even
though it continues after the life of A.
b) RAISING PORTIONS:- Raising portions means providing for portion of the income for
maintenance. Where the direction for accumulation of income is for providing portions for the
children or remoter issues of the transferor or any other person interested in the transfer, the
accumulation of income may exceed the prescribed period. „Portion‟ ordinarily means a part or
share which points to the arising of something out of less for the benefit of some children or class
of children.

c) PRESERVATION OF PROPERTY:- Income of the property may be directed to accumulate for

the maintenance or preservation of the property transferred. Such accumulation shall not be void
even if it exceeds the life of the transferor or eighteen years form the date of transfer.
VESTED INTEREST:- In a transfer of property, there is transfer of interest. The interest may be
either absolute or partial the interest may either be vested or contingent. When the interest
transferred is vested the transferee gets that interest immediately. As soon as the transfer is
complete, the interest accurse to the transferee with immediate effect and the transferee‟s title is
complete.
In a transfer of property the interest created in favour of the transferee is vested where
(a) no time has been specified as to when is shall take effect,
(b) it is specified that it shall take effect immediately,
(c) It is take effect upon the happening of an event which must happen.

Illustrations:

(i) A makes a gift of his house to B. He simply executes the gift deed but dose not specify
any date on which the ownership is to be transferred. The interest of B is a vested interest.

28
 (ii) A makes a gift of Rs.10,000/- to B on the death of C.B has a vested interest in Rs.10,000/-
even before C dies. But the money shall be paid to B only upon C‟s death. If B dies before
the death of C the money shall be paid B‟s legal heirs.

Essentials of vested Interests

(1) Postponement of enjoyment:- Postponement of the enjoyment of property does not mean that the
interest of transferee is not vested. In a transfer of property, the primary thing is the transfer of
interest of title. Possession of the property is secondary.

Where A transfers his property to B to be given to B on B‟s attaining the age of majority, the
interest of B is vested although he shall get the possession and enjoyment of property only on
attaining the age of majority. As soon as he attains the age of majority, he shall get the possession
and enjoyment. However, if B dies before attaining the age of majority, the possession and
enjoyment of the property shall go to B‟s representatives or legal heirs together with title which B
already had and died having it. The postponement of enjoyment of property, therefore, does not
prevent that vesting of interest in favour of transferee. In Lachman V/s. Baldeo, (1919 :21
O.C.312: 48 I.C.396,) A made a gift of his property to B and directed that B was to take possession
of a portion of the property only after the death of A and A‟s wife. It was held by the Court that
the interest of B was a vested interest.

(2) Prior interest:- Where a prior interest is created in the same transfer, there is postponement of the
enjoyment of property. The vesting of interest is not postponed. Where A transfers property to B for
life and then to C the interest of C is a vested interest. It may be noted that here, C has a vested
interest immediately when the transfer was made but his right of enjoyment is postponed till the life
of B. B‟s death is a future event of „must‟ nature. Accordingly, although a prior life interest
intervenes, yet C immediate vested interest.

(3) Direction for accumulation of income: Direction for accumulation of income is valid provided it
is within the period prescribed in Section 17 of this Act. Where a property is transferred with such
direction, the interest of the transferee is nevertheless vested. When in a transfer of property, if the
direction is that right of enjoyment is to terminate only on the death of the transferors, does not
create a vested interest.

In Kokilambal v. N. Raman Kokilambal, there was a deed of family settlement in which the
settler created a limited interest (right to receive the income from rents). The property of settler was
to vest in the settle (brothers of the settler) only on death of settler. The Supreme Court held that the
family settlement does not create a vested interest in favour of the settle (i.e. brothers of the settler)
and settle cannot be absolute owner during the life of settler. Therefore, the settle cannot succeed
the property on the settler‟s death.

(4) Conditional limitation:- A condition that upon the happening of a particular event the interest
vested in a person shall pass on to another person is called a conditional limitation. In India this
provision is contained in Section-28 of the T.P.Act. In T.P.Act, a conditional invitation does not
prevent the vesting of the interest rather it is implied that the interest which had already been vested
may be divested and may vest somewhere else.

For example, A transfers his house to B with a condition that if B does not take possession of this
house within six months from the date of the transfer, the house shall belong to C. the interest of B
29
is a vested interest although it is likely to be divested in case B does not fulfill the condition within
six months.

NATURE OF VESTED INTEREST

a) Present fixed right:- Vested interest is a present fixed right to property where a vested interest
is created in favor of the transferee; the transferee gets a present fixed right to property.

b) Transferable and heritable interest:-Vested interest is transferable and heritable. Being a

present fixed right and also since the title of the transferee is complete, a vested interest is
divisible and transferable interest. A vested interest is such a present fixed right of the transferee
that it is regarded as his property.

ILLUSTRATION:- A transfers his property to B and C in equal shares to be paid to them on their
attaining the age of 18 years and if B and C die under the age of 18 years, the property shall go to
D. B and C have vested interest even though their interests are likely to be divested upon the
happening of an uncertain future event.

In Rajes Kanta roy v/s. smt. Shanti Devi (AIR (1957) SC. 255) is an interesting case on this point,
Briefly, the facts of this case were as under. Ramani kanta Roy executed a trust-deed. The deed
provided that the trust existed for the payment of debts incurred by settler after termination of the
trust, the property was to belong absolutely to settlor‟s two sons. The trust was to terminate 1)
Upon the death of the settler and 2) full payment of all the debts. The deed further provided that if
either of the sons died before the payment of all the debts, the heirs of the sons were entitled to get
the shares of the sons. The settler died before total discharge of debts. Question before the Court
was: whether the interest of the two sons was vested or contingent? The supreme Court held that
under the trust deed the interest conferred upon the two sons was a vested interest. The Supreme
court further observed that since it was provided in the deed that if either of the two sons dies before
full payment of debts, his heirs were entitled to get their shares the interest of the sons was a
heritable interest. And, since the interest conferred upon the two sons was made heritable, their
interest was vested.

Illustration: In a trust deed, the settlor directed that after the death of the tenant for life and after
making provision out of the trust fund for the payment of a monthly allowance to the widow for
life, the benefit of his sons „to be made over to them‟ on their attainting the age of 21 years. It was
held that the language of the trust-deed suggested that vested interest was conferred to the sons.

CONTINGENT INTEREST:- Contingent means uncertain future event. In a transfer of property

where the vesting of interest depends on any contingency i.e. uncertain future event, the interest is
contingent. In a transfer of property where the vesting of estate is dependent upon an event that may
or may not happen the interest is contingent. A contingent interest is an interest which is created to
take effect only when
i) Some specified uncertain future event happens.
ii) Specified uncertain event does not happen.

Ex: where A makes a gift to B provided X survives the age of 20 years, the interest of B is
contingent. Similarly, where A makes a gift to B provided X does not survive the age of 20 years,
here too the interest of B is contingent. The happening or not happening of an uncertain future event
is the condition precedent for vesting.
30
Contingency or specified uncertain event may be of two kinds. First, where the happening or not
happening of the event depends upon the will and desire of the parties e.g. marriage, payment of a
sum of money or execution of a deed etc.

NATURE OF CONTINGENT INTERST

a) Future possible interest:- contingent interest is a future is a future possible interest. In a
transfer of property where the transferee‟s interest is contingent, he has only a future possible
right in respect of property transferred to him. It is neither a present right nor a certain right.
b) Not heritable:- a contingent interest is not a heritable interest where a person having contingent
interest dies legal heirs of not get anything, not even the contingent interest. After the death of
person has legal heirs are entitled to inherit only those properties in which he had a vested
interest at the time of his death. In Rajesh kantha Rao v/s. Smt. Shantidevi AIR 1957, The
Supreme Court observed “ In a case a contingent interest, one of the features is that if a person
dies before the contingency disappears, and before vesting occurs, the hires of such persons do
not get the benefits of the gifts. (transfer).
c) Transferable interest:- contingent interest is a transferable interest. However, since a
contingent interest is itself an uncertain interest in the property and transferor‟s own title is not
perfect, the transferee too gets an imperfect title.

DISTINCTION BETWEEN VESTED AND CONTINGENT INTEREST

1) When accurse?- on a transfer of property, a vested interest accurse immediately to the

transferee. A contingent interest does not accrue to the transferee until the specified uncertain
event happens or does not happen.
2) Nature of the title:- a vested interest confers complete and perfect title. In contingent interest
the title is dependent on uncertain future event which may or may not occur the title is therefore
imperfect. Vested interest is owned absolutely, whereas, contingent interest is owned
conditionally.
3) Transferee‟s right in property:- vested and contingent interests both are transferable. But, in a
vested interest the transferee gets complete title whereas, in contingent interest the transferee
has merely a future possible right in the property. A vested interest confers a present right to
property even if the enjoyment Is postponed or suspended whereas, in contingent interest all the
right of property, including the enjoyment, are dependent on an event which may or may not
occur.
4) Transferability:- vested and contingent interests both are transferable. But, in a vested interest
the transferee gets complete title whereas, in contingent interest the transferee takes an interest
which may be defeated by non-fulfillment of condition precedent or non-happening of the event.
5) Attachment and sale in execution of decreed:- a vested interest is capable of being attached
or sold in execution of a decree whereas, a contingent interest cannot be sold in execution of
any decree. A merely contingent or possible interest is not liable to attachment and sale in
execution of a decree.
6) Heritability:- a vested interest is property of the transferee, therefore, it may be inherited by his
heirs even though he could not obtain possession at the time of his death. A contingent interest
confers no title.

31
ILLUSTRATIONS
1. A makes a gift of his property to B when he attains the age of 18 years or, marries under that age
with the consent of C with a condition that if B neither attains that age nor marries with the consent
of C the property shall go to D. B and D both take a contingent interest in the property.

2. A bequeaths to B Rs. 500/- when B shall attain the age of 18 years and directs that a certain sum,
out of another fund shall be applied for his maintenance until B arrives that age. The legacy in
favour of B is contingent.

CONDITIONAL TRANSFERS:- Property may be transferred either absolutely or conditionally.

Where property is transferred absolutely, it is unconditional transfer and transferee gets the interest
without any subjection or limitation. Conditions are of three kinds:
i) Condition precedent ii). Condition subsequent iii). Collateral conditions.

i. Condition precedent:- A condition precedent is that condition which precedes the transfer of
property. Where the terms of a transfer of property impose a condition to be fulfilled before a
person can take an interest in the property the condition is a condition precedent. For example,
where A makes a gift of his house to B if B marries C, the condition is a condition precedent. Gift
in favour of B shall take effect only if B marries C; if he does not do so the house cannot be
transferred in his favour.

ii Condition subsequent:- A condition subsequent is that condition which required to be fulfilled

after the transfer of property has already taken place. Where a condition subsequent has been
imposed in a transfer, the interest of the transferee which has already been vested in him is affected
by fulfillment or non-fulfillment of that condition.

iii Collateral condition:- A condition is collateral if it is required to be fulfilled simultaneously

with the transfer. Where A leases his property to B so long as B resides in the house of A, the
conditions collateral. The transfer i.e. the lease remains in operation only till B fulfils the condition.
Viz. he continues to live with A.

VOID CONDITION PRECEDENT

Following cases the conditions are void

a) Impossible to perform:- condition which cannot be practically performed is called impossible

condition. Such condition can never be performed; the transfer of property too can never take
place. For example: No human being can walk hundred kilometers an hour. Therefore, where A
lets a farm to B on condition that she shall walk a hundred kilometers in an hour, the farm to B
on condition that he shall walk a hundred Kilometer in an hour, the lease is void. Case:
Rajendra lal V/s. Mrinalini Dassi (AIR 1922 Cal. 116).

b) unlawful :-In the following cases the conditions are unlawful

Forbidden by law:- If a condition by law, it is void. Transfer of property with such condition
cannot take place. Illustration: A transfers his house to B on condition that B shall transfer his
excise-licence to C. Transfer of licence is forbidden by law and the condition cannot be performed.

i) Defeats the provision of law:- Where the condition is such that if performed it would
defeat the provisions of any existing law it is void. Illustration: Where A transfers his
32
 properties to B (a married Christian whose wife is alive) on condition that B shall marry C,
the transfer fails.

ii) Fraudulent:-A condition the fulfillment of which amounts „fraud‟ is unlawful. For instance
unlawful and the gift cannot take place. Illustration: Where A makes a gift of his house to
B, who is agent of C, on condition that B shall give a false receipt on behalf of his principal
C. Performance of this condition would be fraudulent, therefore, the condition is unlawful
and the gift cannot take place.

iii) Involves any injury to person or property:- A condition the performance of which is an
offence causing injury to person or property of another person is unlawful and a transfer
with such conditions fails. Illustration: A transfers property to B on condition that B kills C
(or sets fire to C‟s house) is void and does not take place.

iv) Opposed to public policy:- Where the condition precedent is immoral or opposed to public
policy, the transfer with such condition cannot take place because the condition is void.
Illustration: A makes a gift of Rs. 1000/- to B when B deserts her husband. B can never be
entitled to get Rs. 1000/-.

PERFORMANCE OF CONDITION PRECEDENT:- Where a transfer of property is dependent

on the fulfillment of any condition is precedent, the vesting of interest cannot take place unless the
condition is performed. Where the condition is valid and lawful, its performance is necessary for
passing of the interest in favour of transferee.

For example, A transfers Rs. 5000/- to B on condition that B shall marry with the consent of C, D
and E.E dies and his consent is not possible. B marries with the consent of C and D. the condition
has been carried out in substance though not strictly according to its terms. B gets Rs.5000/- if he
marries with the consent of only C and D.

Conditional Limitation:- Section 28 provides that in a transfer of property, interest may be created
in favour of a person with a condition that if an uncertain event does not happen the interest shall
pass on to another person. A conditional limitation is a condition of defeasance, which terminates
the interest of one person and invests another person with it.

PERPORMANCE OF CONDITION SUBSEQUENT:- As a general rule, law disfavours

divesting of interest. Therefore a condition subsequent which operates to divest an interest is to be
performed strictly. This section provides a condition subsequent upon the fulfillment of which the
second transfer is to take place, must be strictly fulfilled. Illness or neglect cannot be taken for non-
compliance of a condition subsequent.

Illustration:-A makes a gift to B with a provision that if B marries without the consent of C, D and
E, the property shall go to X. Before the marriage of B, E dies. B marries without the consent of C
and D. Property shall not go to X because the condition subsequent which divests the interest of B
and vests it into X has not been performed strictly.

CONDITION SUBSEQUENT:- The condition subsequent which operates to terminate the interest
must be valid condition. If the condition is void, it does not terminate the interest. Thus, where the
condition is that the interest created in the transfer of property shall cease to exist upon transferee
shall not be terminated.
33
 Illustration:- A transfer a farm to B for his life, with a provision that in case B cuts down a certain
wood the transfer shall cease to have any effect. B cuts down the wood. The life interest of B
terminates and reverts back to A as soon as B cuts down the wood.

VOID CONDITION SUBSEQUENT:- A subsequent condition may terminate the interest of the
transferee. But, it is necessary that such condition must be valid Where a condition subsequent
providing for termination of interest is itself void, it shall not be effective and the interest shall not
cease.

No time for performance of condition subsequent :- Where some specific event or a particular
time has been fixed for the performance of that condition it must be performed with in that time or
upon happening of that very event. However, there might be cases in which a transfer is subject to a
condition subsequent but no time has been fixed for performance of the same.

Illustration:- A gift is made to A on condition that unless he joins army the gift shall go to B. A
joins Church and thereby renders it impossible that he may join army and fulfill the condition. B is
entitled to get the property.

PRIORITY:- Sec. 48 of the T. P Act says that owner of an immovable property is at liberty to
transfer any kin of interest in his property to any person. He may transfer partial interest to one
person and absolute interest to one person and absolute interest of the same property to another
person.
Ex: A owner give his house on lease to A and mortgage the same house to B and ultimately sell it
to C. whenever such successive transfers are made, the ultimate transferee takes the property subject
to prior interests.
Essential elements of priority:
1. A person purports to create rights in or over the same immovable property.
2. At different times.
3. The subsequent transfers are such the rights in property cannot be exercised to their full
together.
Different Dates:- Two transfers are made successively have been made on different dates or, if
made on the same date, one is earlier to other. Where the transfers are made through registered
instruments, it is the date of execution and not the date of registration which determines the
precedence.

Exceptions to the rule of priority:- Sec. 48 of the will not applicable to the following cases:
1. Where the instrument if transfer is executed by fraud, misrepresentation or in gross-negligence etc.
2. In a suit for partition, if a receiver, under the order of the court, mortgages whole or part of the
estate, the mortgagee would be entitled to priority over an execution creditor by whom the property
was attached after the commencement of the suit for partition.
3. The lieu of a co-sharer for owelty money on partition though subsequent in time, is given priority
over earlier mortgagees of property allotted to the co-sharer who is liable to pay owelty.
IMPROVEMENTS
Sec. 51 of the Act provides that one who seeks equity must do equity. This section gives relief to a
transfer who makes improvements in good faith on the land held by him and is being evicted
subsequently by a person having better title.
34
The person claiming eviction of a bona fide purchaser, who made improvements, must be estopped
from refusing to pay the compensation because his own acquiescence was responsible for those
improvements.

Essential elements of Sec. 51

1. When the transferee of immovable property.
2. Makes any improvements on the property
3. Believing in good faith that he is absolutely entitled thereto,
4. He is subsequently evicted there from by any person better title.

Essential conditions
1. the person who is being evicted is a transferee
2. Such transferee had made improvements believing in good faith that he was absolutely
entitled to do so.

Transferee of immovable property:

It gives relief to the transferee of an immovable who believes himself to be absolutely entitled to
make improvements. In the following cases the transferee has been given the benefit of his section:

1. Where the transferee who purchased a property was given possession of a larger area then he
was entitled under the deed and who made improvements on excess land under a mistaken
belief that he was entitled to do so.
2. Where the transferee had purchased in immovable property exceeding Rs. 100 under an oral
agreements.
3. Where the transferee has purchased a life-estate believing that the vendor was absolutely
entitled to sell the property.
4. Where the transferee purchased the property bona fide in ignorance of mortgage.
5. Where the transferee had purchased a minor property from de facto guardian believe that the
guardian was authorized to sell the property.
6. Where the transferee was a grantee from a Tahasildar but believing that he was absolutely
entitled to do so had planted certain trees on the land.

In following cases the transferee cannot be given the benefit of this section:
1. Lessee:-A lessee cannot be regarded as a transferee and as such he cannot claim compensation
for any improvements made by him.
2. Mortgagee:- A mortgagee is also not a person who could believe that he is absolutely entitled
to the property mortgaged to him.
3. Trespasser:- A trespasser can never be regarded as transferee therefore, he cannot claim
compensation for any improvements made on the property held by him illegally.

Nature of relief to transferee:-Where bona fide transferee makes improvements in good faith on
the property from which he is evicted, the transferee may get any one of the following relief‟s.
a) He may claim compensation for his improvements.
b) He may require the evictor to sell the property to him.
Valuation of compensation:- Where the transferee selects to have compensation for the
improvements, he can claim the market value of the improvements made by him.

35
 UNIT – II

DOCTRINE OF ELECTION

Section 35 incorporates the doctrine of election. Election means choosing between two inconsistent
or alternative rights. Under any instrument if two rights are conferred on a person in such a manner
that one right is in lieu of the other, he is bound to elect only one of them.

The doctrine of election which is based on equity is applied to every species of instrument whither
deed or will and to every kind of property movable or immovable.

Election is the obligation imposed upon as party by courts of equity to choose between two
inconsistent or alternative right and claims in case where there is clear intention that he should not
enjoy both.
Section 35 of the Act makes following provisions in respect of the rule of election:

i) where a person professes to transfer a property not his own,

ii) in lieu of this transfer the transferor confers certain benefits upon the owner of the
property and,
iii) The two things i.e. transfer of property and conferring of the benefit forms part of
the same instrument.

Transferor professes to Transfer Property Not His Own:- Section 35 applies where a person
professes to transfer the property of another person. Professes means purports of makes contract.
Since such person is not owner, he cannot transfer that property. But he can, contract or make
arrangement for a transfer of a property which he does not own.

For example: A may profess to transfer of a property to B which is owned by C and also confer on
C a benefit of Rs 1000/-. In this contract A is not transferring C‟s property, he is simply professing
to transfer a property which he does not own. Therefore, A is not transferor. But for the sake of
convenience, hereinafter A may be called as a transferor.

In lieu of this transfer the transferor confers certain benefits upon the owner of the property:
The occasion for election arises only where a benefit is directly confirmed on the owner of the
property. Where benefit is given to the owner otherwise than for transferring property or is given to
him indirectly, there is no case for election.

Illustration:-A professes to transfer C‟s property to B and gives Rs.5000/- to wife of C.

This is not direct benefit to C and therefore, C has no duty to elect. Case law: In valliammai v/s.
Nagappa, Cooper V. Copper {(1874) 7 HL.53} a testator purported to bequeath a joint family
property to his coparcener. The coparcener was otherwise under Hindu law entitled to that property.
The Supreme Court held that coparcener cannot be said to have derived any benefit under the will
and is not put to election.

Transferor has no authority to transfer the property is immaterial for applicability of the rule of
election. The rule applies whether the transferor does or does not believe that the property which he
is professing to transfer is not his own.
36
Part of the same transaction: The rule of election operates only when the „transfer‟ and „benefit‟
from part of the same transaction. By same transaction is meant that the transfer of property is to be
made evidently only in lieu of the benefit. Thus where the „benefit‟ and transfer are interdependent
and inseparable there from, part of the same transaction. In Muhammad Afzal v/s. Gulam Kasim
{(1903) 30.CAL.843} after the death of Nawab of Tank, the Government while transferring
chiefship to nawab‟s eldest son, transferred some cash allowance to Nawab‟s second son. The
Nawab in his life-time had already granted two villages to the second son for his maintenance. The
Privy Council held that since the two grants (cash by the Government, and villages by Nawab
himself in his life ) came to second son from two different sources, they were not part of the same
transaction. The second son was not put to election.

Owner‟s Duty to Elect – If a property is professed to be transferred and in the same transaction
some benefit is given to the owner of property then such owner is under a duty to elect. By his
election he may either accept the instrument with its all contents or reject it altogether. He has no
option to accept the instrument, he is entitled to get the benefit; but he is bound to transfer his
property. If he elects to reject the instrument he cannot claim benefit; but he may retain his
property.

Where a person has no act in two different capacities

Mode of Election – Election may express or implied. Where election is express, it is final and
conclusive. The intention of the owner may also be inferred from his act or conduct. This is implied
election.

PRESUMPTION
1. Where the owner has enjoyed the benefit for two years without doing any act of refusal
or dissent of the transaction.
2. Where the owner of property exhausts or consumes the benefit.

SUSPENSION OF ELECTION:- Where at the time of transfer, the elector (i.e. owner of
property) is legally disabled; the election is postponed until such disability ceases or until the
election is made on his behalf by a competent authority e.g. his guardian. Legal disability may be
minority or lunacy of the elector. Thus, his duty to elect is suspended during his minority or lunacy
unless the election is made by his legal guardian.

RIGHTS OF DISAPPOINTED TRANSFERE

He has following rights.

(i) Where the transfer is gratuitous i.e. without consideration and the transferor dies or becomes
incapable of making fresh transfer and,

(ii) Where transfer is with consideration, whether he is alive or dead at the time of election, the
transferee is entitled to get a reasonable compensation from the transferor or his
representative. “Reasonable compensation equal to the value of property professed to be
transferred.

ILLUSTRATION:- The farm of Sultanpur is the property of C and its market value is Rs. 800/-. A
by an instrument , professes to transfer it to B, giving by the same instrument a benefit of Rs. 1000/-

37
to C.C elects against the transfer and decides to retain his farm. C forfeits the benefit of Rs. 1000/-
which reverts back to A or his representatives. Now, if A dies before C makes election, his
representatives must compensate B (disappointed transferee) by giving B Rs. 800/- out of Rs.
1000/-.

ENGLISH LAW: ENGLISH DOCTRINE OF ELECTION: Under English Law, where the
election is against the instrument, the benefit does not revert to the transferor, the owner of property
while rejecting the transfer may insist upon taking also the benefit conferred on him. He is,
therefore, called a refractory done or a rebullians done.
The owner of property C while electing against the transfer, would take also the benefit of Rs.
1000/- but, C would be liable to give Rs. 800/- to B, the disappointed transferee. A or his
representatives are not liable to compensate B.

DIFFERENCE BETWEEN INDIAN DOCTRINE OF ELECTION & ENGLISH

DOCTRINE OF ELECTION. Section 35(1):- lays down the principle which differs.
First Rule: - The doctrine under the English law is different from the rule in the section, Under the
English law, if the grantee (the owner of the property which is transferred) takes against the
instrument, the Court of equity assumes jurisdiction over the benefit intended for him under the
instrument and gives compensation to those who were disappointed by his election. The surplus,
after compensation, does not revert to the donor but is restored to the done. Under the Indian law,
the benefit conferred by the instrument reverts to the donor or his representatives, except in the two
cases specified in the section.

The illustrations to Section 182 of the Succession Act furnish additional illustrations of the doctrine
1. The farm of Sultanpur was the property of C A bequeathed it to B, giving a legacy of 1000
rupees to C. C has elected to retain his farm in Sultanpur which is worth 800 rupees. C forfeits
his legacy of 1000 rupees, of which 800 rupees goes to B, and the remaining 200 rupees fall into the
residuary bequest, or devolve according to the rule of intestate succession as the case may be.
2. A, a person of the age of 18,domiciled in India but owning real property in England, to which C
is heir at law, bequeaths a legacy to C and, subject thereto, devises and bequeaths to B. „all my
property whatsoever and wheresoever‟, and dies under 21. The real property in England does not
pass by the will. C may claim his legacy without giving up the real property in England.

The reason for this rule under Indian law is that the transfer of the benefit to the owner is regarded
as a conditional transfer. Hansbury, in his Equity, thinks the Indian rule is the better rule is based on
the principle of compensation.

SECOND RULE:- In applying the second clause of the section an interesting question might arise
where the transferor has some right in the property disposed of, but was not absolutely entitled to it.
In such cases, it must be established that the transferor intended to transfer more than he could,
before the doctrine can be applied. For example, A who owns a life interest in certain property
grants it to B and by the same instrument confers some benefits in certain property grants it to B
and by the same instrument confers some benefits on C who was entitled to the reversion. In such a
case C cannot be made to elect, unless it is shown that A attempted to dispose of not merely the life
interest which he was entitled to dispose of, but also, something more than such life interest. The
presumption in such cases is that the transferor only intended to dispose of what belonged to him,
though it is a rebuttable presumption.

38
THIRD AND FOURTH RULE: The Third and fourth clauses of the section are explained by the
illustration to Section 184 of the Succession Act, which is as follows: the lands of Sultanpur are
settled upon C for life, and after his death upon D, his only child A bequeaths the land of
Sultanpur to B, and 1000 rupees to C. C dies intestate shortly after the testator, and without having
made any election. D takes out administration to C, and as administrator elects on behalf of C‟s
estate to take under the will. In that capacity he receives the legacy of 1000 rupees and accounts to
B for the rents of the land of sultanpur which accrued after the death of the testator and before the
death of C,. In his individual character he retains lands of Sultanpur in opposition to the will. In this
illustration apart from the different characters of the benefit under the will which D gets, not being
direct but only derivatives and indirect, he cannot be compelled to elect between the legacy and his
independent title to the lands got by him after C‟s death.
Suppose again, a Hindu dies leaving a widow A who inherits the life estates in the property of her
husband and A surrenders the property to B and C the next reversioner. One of the items
surrendered is an item of property to which C had an independent claim. B however claimed a
half share in that item also and relied upon the Doctrine of election. On these facts, there is no
question of election at all, because A has not given any property of C to B and given C any
property in lieu thereof.

EXCEPTION: -Under A‟s marriage settlement his wife is entitled, if she survives him to the
enjoyment of the estate of Sultanpur during her life. A by his will bequeath to his wife an annuity
of 200 rupees during her life, in lieu of her interest in the estate of Sultanpur, which estate he
bequeaths to his son. He also gives his wife a legacy of 1000 Rupees. The widow elects to take
what she is entitled to under the settlement. She is bound to relinquish the annuity but not the
legacy of 1000 rupees.

A Hindu A, bequeathed his property to B and included therein also the property of his brother
which was inherited by his widow C, A, however made a provision for C‟s maintenance. C knew
that the provision for maintenance was in lieu of her husband‟s property. She filed a suit against B
and obtained a decree for her maintenance. Hereafter, she filed a second suit for her share in her
husband‟s property. It was held that the second suit was not maintainable because she had elected
to take the maintenance.
KNOWLEDGE: -The obligation to elect and an actual election are two distinct things. Suppose A,
who has a life estate in certain property, grants a perpetual lease to B, C the reversion, after A‟s
death, accepted rent from B for 3 years, but C was not aware of the terms of the lease between A
and B In such case C could not be held to have elected to confirm the lease.

Similarly, the one year rule in the section is also not found in English law where no time-limit is
fixed, and it is open to one party to make his election with a reasonable time. Unless the instrument
itself prescribes a time-limit. Another difference between the two system of law is, while in English
law, if the person asked to signify does not do so, it will be treated as if he elected against the
instrument, in India, he is deemed to confirm the transfer in similar circumstances.

BENAMI TRANSACTION ACT, 1988

Ostensible Owner:- Ostensible owner is a person who has all the indicta of ownership without
being the real owner or an ostensible owner has all the indications of ownership and looks like
owner of a property but is not its real owner.
39
 A person may have possession and enjoyment of the property and may also have his name entered
in the official records but even then he may not be the real owner of that property. When a person
purchases property in the name of another person it is called a benami transaction. A benamidar is
an ostensible owner. Where some property was purchased by a father in the name of his minor sons.

A person does not became ostensible owner if the real owner has entrusted him with temporary
control over the property only for some specific purpose or, where he holds a property as a
professed agent or as guardian of minor‟s property or in any other capacity of fiduciary character.
In Giridra Nath Mukherjee v/s. Soumen Mukherjee AIR -1988 Cal.375 the person in whose
name the property is purchased is called benamidar. A benamidar is an ostensible owner. Where
some property was purchased by a father in the name of his minor sons, the Calcutta High Court
held that sons were ostensible owners because minor sons had no means to acquire property and
they were not intended by the father to be real owners of property.
TRANSFER BY OSTENSIBLE OWNER:

Section 41 provides that where an immovable property is transferred by an ostensible owner with
express or implied consent of the real owner. Ostensible owner is not a real owner of the property;
he has no authority to make transfer.

Section 115 of the Indian Evidence Act provides that where a person by his declaration or Act
permits another person to believe a thing to be true and to Act upon such belief, he shall not be
allowed later on to deny the truth of that thing.

ESSENTIAL CONDITIONS FOR SECTION 41

(i) There is transfer of an immovable property by ostensible owner with express or implied consent
of the real owner,
(ii) The transfer is for consideration,
(iii) The transferee has acted in good-faith, and,
(iv) The transferee has exercised reasonable care in finding out the transfer power to make the
transfer.
1. EXPRESS OR IMPLIED COSENT OF REAL OWNER
The transfer of property must be made by an ostensible with express owner with express or implied
consent of the real owner. However whether the consent be expressed or implied, it must be a free
consent Where a benamider obtains the consent of the real owner by fraud, force, coercion, the
consent is not free and this section cannot apply.

The consent of the real owner is express if it is given in clear words authorizing him to make the
transfer .The consent is implied if the real owner knows that the benamidar is dealing with his
property as if it were his own but remain silent or acquiesces.
RAMCOOMAR KOONDOO V/s MAQUEEN:- In this case, One Alexander had purchased some
landed properties in Calcutta in the name of Bunnoo Bibee who was his mistress. Maqueen was one
of the two children born to him by this Mistress. The sale-deed was in the name of Bunnoo Bee and
she also used to manage the properties. Later on during the life of Alexander, Bunnoo Bee sale the
properties to Ramdhone (father of Ramcoomar). After the death of Bunnoo Bee, Macqueen filed a
suit against Ramdhone claiming the properties on the ground that her father Alexander had left in

40
her favour and that her father was the real owner, not Bunnoo Bibee who was merely a benamidar.
Ramdhone pleaded that he was a bona fide purchaser without notice of the benami title of the seller.
Finally held that even assuming that Alexander was the real owner and that Bunnoo Bibee was
merely an apparent owner, since Alexander had allowed Bunnoo Bibee to hold herself out as the
real owner, he or his representatives could not recover upon their secrete title unless they can prove
that purchaser had direct or constructive notice of the real title.
2. TRANSFER IS WITH CONSIDERATION:-Section 41 is applicable only where transfer is
by an ostensible owner is with consideration. It does not apply to gifts or gratuitous transfers.
3. TRANSFEREE ACTS IN GOOD – FAITH:-It is necessary that transferee acts in good faith
i.e. he has purchased the property in the honest belief that transferor had power to transfer the
property. Good faith means bona fide intention.

Where a person purchases property with full knowledge that the transferor is merely an apparent
owner his intention is not bona fide and there is no good faith on his part. Even if the purchaser
makes due enquiry about the title of the seller but has no good-faith, therefore purchasers the
property with dishonest intention, he cannot get the benefit of this section. In Guru Baksha Singh
v/s. Nikka Singh (AIR 1963 S.C. 1917) there was a partition of joint family property but there was
also some dispute over the respective shares. While the objection and application for the correction
of mistakes was still pending, a part of the property was sold. The Supreme Court held that since
parties lived in the same village and the facts establish beyond reasonable doubt that the purchaser
had knowledge of the disputed titled of the seller, the purchaser had no good-faith. The court
observed that in the absence of good faith on his part, the purchaser cannot claim the benefit of
Section 41.
4. Reasonable care of the transferee:-The transferee must also have exercised reasonable care in
ascertaining the title and authority of the transfer. Reasonable care means that care which a man
of ordinary prudent should take while making inquiries regarding the title of an immovable
property.
NAGESHAR PRASAD V/S RAJA PATESHRI In this case in the revenue records instead of A
the name of B was entered by mistake. B mortgaged the property to C who accepted the mortgage
relying on the revenue register. A denied the transfer on the ground that B was not authorized to
mortgage the property. C claimed the benefit of this section on the ground that he had taken
reasonable care in ascertaining the title of B by inspecting the revenue records. The privy council
held that since C had not exercised reasonable care in enquiring about the authority of B, he cannot
get the benefit of this section.

Finally the court held that if C had made further enquiries, he would have found that B‟s name was
entered in the register by mistake and A had already raised an objection against the wrong entry of
B‟s name in the register.
5. Subsequent transfers:- The first transferee and every subsequent transferee is entitled to the
protection; the subsequent transferee must be a transferee for value, without notice of the real
owner‟s title and having made reasonable enquiry of the transferor‟s power of disposition. If all
conditions are satisfied, such transferee shall not be deprived of the protection even if the first or
any intermediate transferee had notice of the title of the true owner.

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TRANSFER BY A CO-OWNER:- Where a property is jointly owned by two or more persons, it
is a co-owned property. Every co-owner is entitled to common enjoyment of property. Sec. 44
enacts that where a co-owner transfers his share, the transferee is substituted in the property to the
extent of the share transferred to him. The transferee too is entitled to common enjoyment of the
joint property together with other co-owners. It will acquire all the rights and liabilities which the
co-owner had in the joint property at the date o0f the transfer, just as the co-owner was entitle to
partition, the transferee shall be bound by the conditions and liabilities affecting the share
transferred to him with effect from the date of transfer.

Ex: A, B, and C co-owners of a piece of land having equal shares. The land is subject to mortgage.
C sells his one-third share to D without effecting partition. Under this section D would be
substituted in place of C for all rights and liabilities. D is therefore entitled to common enjoyment of
the land as C was before the transfer. D has also the right to one-third share partition from other co-
owners and have separate possession of his part of land. But, the one-third share which D has
purchased shall still remain subject to mortgage.

Dwelling house:- It means not only a residential structure or building but the expression includes
also the adjacent buildings, gardens, courtyard, orchard and all that is necessary of the convenient
use of the house. Where the co-owned property is a joint-family house in co-owner has right to
transfer his share but the transferee is not entitled to be substituted in his place. Where the transferee
gets a share in a residential house owned by family members of joint family he is not entitled to
have common enjoyment or possession of the property.
Where a share in a dwelling house is transferred without partition and the transferee too does not
maintain suit for partition but attempts to take possession of his share, the other co-owners may
restrain him from taking possession.

JOINT TRANSFEERS:- Sec. 45 of the Act deals with apportionment of distribution of interest in
property transferred to two or more persons. When property is transferred to several transferees
jointly then there might be two situations.
1. The consideration amount may be a common fund.
2. The consideration may be advanced separately by each transferee.
Where consideration is paid by the transferees from a common-fund, the interest of each transferee
in the property shall be identical with their interest in the common-fund. But, where the
considerations is paid by each transferee from their separate funds the transferees take interest in the
property in proportion of their respective share in the whole consideration amount.
Where a property is purchased out of common-fund in the name of any one of the contributor with
consent of the others then, the person in whose name property is purchased does not become the
exclusive owner of that property.
In the absence of any evidence to show the respective interest of the transferee in the common-fund,
or the shares which they have advanced, the transferees shall be presumed to have equal interests in
the property.

RAJESHWARI V/S BALCHAND JAIN In this case, in a joint Hindu family all the members
were residing in a house and carrying on joint business of the family. No partition had taken place.
A plot of land was purchased and the source of money appeared to be joint earnings. The court held

42
that there is no presumption that every property purchased by the members of joint Hindu family is
property of joint family.

APPORTIONMENT BY TIME:- Apportionment means distribution of a common fund between

two or more claimants.

Section 36 provides that in a transfer of property all rents, annuities, dividends and other periodical
payments in the nature of income shall be deemed to accrue from day to day and be apportion able
accordingly. The periodical income which the property shall be distributed between transferor and
transferee at fixed date on the basis of its accrual on each date. For instance A‟s house is on rent of
Rs. 300/- payable at the end of each month. A sells this house to B on 15 th April. Thus B became
owner of the house with effect from April 15. A the seller is entitled to get Rs. 140/- as rent for 14
days and B the purchaser shall get Rs. 160/- as rent for 16 days out of Rs. 300/- which is rent for the
whole month.

APPORTIONMENT OF BENEFIT OF OBLIGATION TO SEVERAL PERSONS:- Property

is divided and held in several shares, and thereupon the benefit of any obligation relating to the
property as a whole passes from one to several owners of the property. The severance does not
substantially increase the burden of the obligation; but if the duty cannot be served.

ILLUSTRATION:- A sells to B, C and D a house situate in a village and leased to E at an annual

rent of Rs. 30/- and delivery of one fat sheep. B having provided half the purchase-money, and C
and D one quarter each. E having notice of this, must pay Rs. 15/- to B Rs. 7.50 to C, and Rs. 7.50
to D, and must deliver the sheep according to the joint direction of B, C, and D.

APPORTIONMENT BY ESTATE:- Section 36 incorporates apportionment by time and

apportionment by estate where an estate is transferred in such a manner that after the transfer, it is
to be divided in several shares then, the obligation of the benefit of property must be performed in
favour of each sharer in proportion to the value of each shares.
Conditions
(i) The person under obligation to pay the benefit in proportion to respective shares must have
reasonable notice of the fact that on transfer the estate was divided into several specific
shares.
(ii) The obligation must be capable of being performed in parts in favour of each owner. The
property is capable of being severed or separated.
(iii) The severance must not substantially increase the burden of obligation.

EXCPECTIONS
a) Transfer by operation of law:- Transfer by operation of law or involuntary transfer e.g.
succession, are exempted from this rule.
b) Agricultural tenancies:-The rule is not applicable to agricultural tenancies because on
transfer, the division of obligation to pay to several owners may cause much inconvenience
and harassment, to agriculturists.
PRIORITY:- Sec. 48 of the T. P Act says that owner of an immovable property is at liberty to
transfer any kind of interest in his property to any person. He may transfer partial interest to one

43
person and absolute interest to one person and absolute interest of the same property to another
person.
Ex:- An owner give his house on lease to A and mortgage the same house to B and ultimately sell it
to C. whenever such successive transfers are made, the ultimate transferee takes the property subject
to prior interests.

Essential elements of priority:

1. A person purports to create rights in or over the same immovable property.
2. At different times.
3. The subsequent transfers are such the rights in property cannot be exercised to their full
together.

Different Dates:- Two transfers are made successively have been made on different dates or, if
made on the same date, one is earlier to other. Where the transfers are made through registered
instruments, it is the date of execution and not he date of registration which determines the
precedence.

Exceptions to the rule of priority:-Sec. 48 of the will not applicable to the following cases:
1. There the instrument if transfer is executed by fraud, misrepresentation or in gross-negligence
etc.
2. In a suit for partition, if a receiver, under the order of the court, mortgages whole or part of the
estate, the mortgagee would be entitled to priority over an execution creditor by whom the
property was attached after the commencement of the suit for partition.
3. In lieu of a co-sharer for owelty- money on partition though subsequent in time, is given priority
over earlier mortgagees of property allotted to the co-sharer who is liable to pay owelty.

IMPROVEMENTS:- Sec.50 Rent bona fide paid to holder under defective title:- No person
shall be charge able with any rents or profits of any immovable property, which he has in good
faith paid or delivered to any person of whom he in good faith held such property, notwithstanding
it may afterwards appear that the person to whom such payment or delivery was made had no right
to receive such rents or profits.

Illustration: A lets a field to B at a rent of Rs. 590/-, and then transfers the field to C. B, having
no notice of the transfer, in good faith pays the rent to A. B is not chargeable with the rent so paid.
Sec. 51 of the Act provides that one who seeks equity must do equity. This section gives relief to a
transfer who makes improvements in good faith on the land held by him and is being evicted
subsequently by a person having better title.
The person claiming eviction of a bona fide purchaser, who made improvements, must be estopped
from refusing to pay the compensation because his own acquiescence was responsible for those
improvements.

Provisions of Section 51-provides that

1. When the transferee of immovable property
2. Makes any improvement on the property
3. Believing in good faith that he is absolutely entitled thereto and
4. He is subsequently evicted there from any person having better title. Then the transferee has

44
right to require the person causing eviction to either give the value of improvement or to sell his
interest in the property.

Essential conditions of Section 51-A is clear from the analysis of provisions of this section,
following conditions are necessary for the applicability of this section.

a) The person who is being evicted is a transferee; and

b) Such transferee had made improvements believing in good faith that he was absolutely entitled to
do so.

Transferee of immovable property:- The equity enacted in this section gives relief to the
transferee of an immovable property who believes himself to be absolutely entitled to make
improvements. The scope of this section is limited in the sense that it applies only to transfers or
absolute interests e.g., sale, gift or exchange.

In the following cases the transferee has been given the benefit of this section;

i) Where the transferee who purchased a property was given possession of a larger area than he was
entitled under the deed and who made improvements on excess land under a mistaken belief that he
was entitled to do so. Natesa Thevan v/s. Distt Board of Tanjore (AIR 19260 Mad 921).

ii) Where the transferee had purchased an immovable property exceeding Rs.100/- under an oral
agreement. Tapanmal vs/. Chachalmal, (1940 kar.241).
iii) Where the transferee has purchased a life-estate believing that the vendor was absolutely
entailed to sell the property Nanjamma vs.Nacharammal (190717 Mad.L.J.622).

iv) Where the transferee purchased the property bonafide in ignorance of mortgage Narayana Rao
v/s. Basarayappa (AIR 1956 SC 727).

v) Where the transferee had purchased a minor‟s property bona fide in ignorance of mortgage.
Horilal v/s. gordhan (AIR (1927) Bom.611).

vi) Where the transferee was a grantee from a Tahsildar but believing that he was absolutely
entitled to do so had planted certain trees on the land Chennapragada v/s. Secretary of State,
(AIR (1925) Mad.963).

LIS PENDENS
Sec. 52 of the Transfer of property Act says the doctrine of lis pendens. Lis means litigation and
pendens means pending. So, lis pendense would mean “pending Litigation”. The doctrine of lis
pendense is expressed in the well-known maxim “PENDENTE LITE INNOVATURE”, which
means during pendency of litigation, nothing new should be introduced.
During pendency of any suit regarding title of a property, any new interest in respect of that
property should not be created; the doctrine of lis pendens prohibits the transfer of property pending
litigation.

The Indian Court have also taken the view that basis of Section 52 is not the doctrine of notice but
expediency i.e, the necessity for final adjudication and public policy. It has been held in Govinda
Pillai v/s. Aiyyappan Krishnan (AIR 1957 Ker.10) that the “ the foundation for the doctrine of lis-
pendens does not rest upon notice, actual or constructive; it rests solely upon necessity- the
45
necessity that neither party to the litigation should alienate the property in dispute so as to affect his
opponents”. In Rajendra Singh v/s. Santa Singh (AIR (1973) SC 2537) the Supreme Court has
said that the doctrine of lis pendens is intended to strike at attempts by parties to a suit to curtail the
jurisdiction of the Court by private dealings which may remove the subject matter of litigation from
the power of the court to decide a pending dispute and frustrate its decree.

Essential elements of doctrine of Lis pendens:

1. During the pendency of a suit or proceeding.
2. Property cannot be transferred or otherwise dealt with
3. If so transferred, the transferee is bound by the decision of the court whether or not he had
notice of the suit or proceeding.
Essential conditions:
1. There is a pendency of a suit or proceeding:-Only where a property is transferred during
pendency of litigation, pendency of a suit is that period during which the case remains before a
court of law for its final disposal. If a case is instituted in court, the first step is presentation of
the plaint, and the last step is passing of a decree. When the court gives its decision by passing a
decree, the case is terminated.
In Supreme general films exchange ltd. v/s. Sri nath singhji Deo (AIR1975 S.C.1810) a theatre
(Plaza Talkies) was attached in execution of a decree against its owner. During attachment, the
owner leased the theatre to M/s Supereme General films Exchange ltd. It was held by the Supreme
Court that the lease was hit by the Doctrine of lis-pendens.

2. Pendency in court of competent jurisdiction:-The suit or proceeding during which the

property is transferred, must be pending before a court of competent jurisdiction. Where a suit is
pending before a, court which has no proper jurisdiction to entertain it, the lis pendens cannot
apply.
3. Right to immovable property must be involved:-In the pending suit, right to immovable
property must directly and specifically be in question. The litigation should be regarding title or
interest in an immovable property. Where the question involved in the suit or proceeding does
not relate directly to any interest in an immovable property.
Scope of this section
2. a suit for partition(jogendranath v debendra nath,1898cal.127)
3. A suit on mortgage(faiyaz hussain khan v prag narain(1907)ALL339)
4. a suit for pre-emption(madho singh v skinner;AIR 1941LAH 433)
5. Easement suit(RAMANAMMA V ANTHAMMA;AIR1955ANDH 199)
6. Suit for maintenance by a Hindu widow in which she claims to have her maintenance made
a charge on specific immovable property and a decree is passed creating a charge on such
property.
4. Suit must not be collusive:-A suit is collusive if it is instituted with a mala fide intention. Mala
fide intention behind instituting a suit is inferred from the fact that parties to the suit know their
respective rights in the property and there is no actual dispute. A Hindu wife filed a
maintenance suit against her husband with a secret agreement that during litigation the husband
would transfer the property. During the pendency of the suit, the husband sold the property.
Later on, a charge was created in favour of the wife over the property. It was held by the Privy
council that the suit was collusive in nature and was, therefore, outside the scope of lis pendens.
Accordingly, the Court held that the purchaser was not bound by the Charge on the property.
46
5. Property is transferred or otherwise dealt with:-During pendency of suit, the property must
be transferred or otherwise dealt with by any of the parties to suit. Transfer includes sale,
exchange, lease and mortgage.
The expression otherwise dealt with has been interpreted to mean those transactions in which
although there is transfer of some interest in the property. A Contract of sale has been regarded as a
transfer within the meaning of „otherwise dealt with‟, therefore, entering into contract of sale of the
disputed property during litigation shall attract the provision of this section.
6. INVOLUNTARY TRANSFERS:-Involuntary transfers:- transfer of property may either be
by act of parties or by operation of law. Transfers by operation of law are known as involuntary
transfers e.g., Court sale or transfer made by order of Court. Section 52 is applicable to both the
kinds of transfers pendent lite. And in Samarendra nath sinha v/s. Krishna Kumar nag AIR
(1967) S.C.1440 the Supreme Court has also held that it is true that Section 52 strictly speaking
does not apply to involuntary alienations such as Court sales but, it is well established that the
principle of lis pendens applies to such transfers. Therefore, the doctrine of lis pendens applies
where the sale is made by order of the Court.
7. Transfer with permission of the Court:- When a transfer is made during pendency of suit with
the permission of Court, the principle of lis pendens is not applicable.

8. Transfer by any party to suit:- Transfer made during pendency of suit is not enough to attract
the provisions of this. It is necessary that transfer of disputed property is made by any party to suit.
In the Case: Maqbool Alam Khan vs/ mst. Khoderija, (AIR (1966)S.C.1194) where a party to
suit whose name is struck off as a contesting party by consent is not bound by the decree because
lis pendens shall not apply to him.

9. Transfer affects the rights of any other party:-The transfer during pendency must affect the
rights of any other party to suit. The principle of lis pendent is intended to safeguard the parties to
litigation against transfers by their opponents. It means any other party between whom and the party
who transfers; there is an issue for decision which might be prejudiced by alienation.

FRAUDULENT TRANSFERS

Sec. 53 of the Act says that the transfer must be made with a bona fide intention.

Ex: With the intention of defeating the interest of creditor or interest of any subsequent transferee.
Where the transfer is made with fraudulent intention, the object of the transfer would be bad in the
eyes of equity and justice though it is valid in law. Equity does not allow a person to alienate his
own property when such alienation tends to delay or defeat the interes6t of creditor or any
subsequent transferee.
Essentials of fraudulent transfers:
1. transfer of an immovable property
2. made with intent to defeat or delay the creditors of the transferor
3. Shall be violable at the option of the creditor so defeated or delayed
Exceptions:
1. The rights of a subsequent transferee in good faith, for consideration
2. Any law for the time being in force relating to insolvency.

47
Essential conditions of fraudulent transfers
1. Transfer of immovable property:- Sec. 53(1) of the act says that there is a transfer of
property and such transfer is valid and enforceable so that property vests in the transferee. Where
the transaction is a transfer of property relinquishment is not transfer of property, relinquishment of
share by one co-parceners in favour of the other is not a transfer of property.
2. Fraudulent transfer to defeat or delay creditor:-The transfer is made with the sole object of
defeating or delaying the interest of creditors rather than to give the property to transferee honestly.
Intent to defeat or delay means a transfer made with intent of either defeating or delaying the
interest of creditor is a fraudulent transfer. The only interest of a creditor in the debtor‟s property is
that he can recover his money from that property in case the debtor fails to repay it personally.
Presumption as to transfer was fraudulent:

1. that the transfer was made secretly and in haste

2. That the transfer was made soon after the decree was passed against the judgment-debtor.
3. That the transferor who was indebted has alienated subsequently the whole property.
Ex; gift of all properties before the attachment.
4. The consideration was very small amount in comparison of the property transferred.
5. There is evidence that there was actual payment of consideration as shown in the sale-deed.
TRANSFER BY UNAUTHORISED PERSON:- Sec. 43 0f the Act provides that if a person
having no authority, professes to transfer an immovable property, he estopped from denying the
transfer when he subsequently acquires such authority.

There are two principles

1) The common law doctrine of estoppel by deed.

2) The equitable principle that if a person promises more than he can perform, then he
must fulfill the promise when he gets ability to do so.
Where a person has no right to transfer a property, he should not agree or profess to transfer any
interest therein.

Important points
If a person professes to transfer an immovable property by fraudulently or, erroneously representing
that he has authority to do so the transfer is for consideration such transferor acquires the authority
subsequently, then the transferee may compel the transferor to passes the property to him.

Essential conditions
1. The transferor is an unauthorized person:- A person having no title or interest in an
immovable property at the date of transfer is not entitled to transfer that property. If he transfers
the property without authority, the transfer is by an unauthorized person; such person cannot
pass on any legal title or interest in respect of the property transferred by him.

The transfer by an unauthorized person would mean that there is a contract for the creation of an
interest in future. Subsequently, for some reason on the other, when he obtains title or interest in
that property, he is authorized to make the transfer.
2. Fraudulent or erroneous representation:--There must be erroneous or fraudulent
representation by the transferor regarding his authority to transfer the property. The false
48
 statement may be made fraudulently or innocently. If the transferor misrepresents his capacity
such as age or state of mind.
Ex: If a minor makes false representation that he is adult, this section shall not apply.
Where there is neither any representation regarding the authority to transfer nor the transferee has
acted upon such representation, the transferee cannot claim the benefit to this section.

SRI NARAYANA CHANDRA SAHA V/ DILALI MUKERJEE-In this case, there was no
evidence that son of the owner of property made any representation that he was owner or landlord
of the suit property. The transferee also knew that he could not be power during the life of his
father. Subsequently when son of the owner became one of the co-owners upon death of his father,
the transferee claimed protection under Sec. 43.
But finally court held that since the transferee had knowledge that son was not entitled to transfer,
the transferee cannot claim protection under Sec. 43, because he cannot be said to have been misled
about son‟s authority to transfer.

3. Transfer is for consideration:-Sec. 43 does not apply to a gratuitous transfer. Where the transfer
is without consideration. For ex: Gift, the transferee cannot get the benefit of this section.
The section is applicable only to transfers for value. It may be applied to sale, exchange, lease,
mortgage because these transfer are supported with consideration.

4. Subsequent acquisition of authority by transfer:-The transferor must subsequently acquire

title or interest in the property which he had professed to transfer earlier. Transferor may acquire
authority for the transfer by any legal method. He may obtain the property by purchase, gift or
exchange etc. He may also obtain the property through inheritance or under a will. Where the
transfer had lesser interest than he had transferred.
PART-PERFORMANCE

Sec. 53-A of the Act provides that Doctrine of part-performance. If a person has taken possession of
an immovable property on the basis of a contract of sale and has either performed or, is willing to
perform his part of contract then, he would not be ejected from the property on the ground that the
sale was unregistered and legal title had not been transferred to him.

Ex: There is a contract of sale of a piece of land between A and B. the contract is in writing,
stamped, attested and duly executed but not registered by A who is the seller. B, who is the
purchaser, has performed or is willing to perform his part of contract. Therefore has paid the price
or is willing to pay the same. On the basis of such contract B takes possession of land. Now, A sells
the land to C through a registered deed. C having legal title of the land, attempts to eject B. At this
stage, since B has no legal title, law may not protect his possession but, equity shall help him from
being dispossessed.

The doctrine of part-performance is, therefore, based on the maxim “Equity looks on that as done
which ought to have been done”, which means equity treats the subject matter of a contract as to its
effects in the same manner as if the act contemplated in the contract had been fully executed, from
the moment the agreement has been made, though all the legal formalities of contract have not been
yet completed.

49
Essential elements of part-performance
1. where a person contracts to transfer an immovable property for consideration
2. Acting in furtherance of this contract, the transferee has taken possession over a part or
whole property.
3. Such transferee has either performed his part of contract or is willing to perform it.
Essential conditions of part-performance
1. Contract for transfer of immovable property:-
The first condition is that there must be a contract and the contract must be transfer of immovable
property for value.
Written contract:
This section is not applicable if the contract for transfer is oral. Where a tenant wanted to defend his
possession on the ground that there was an oral agreement of sale with his landlord, the court held
that plea of part performance is not available to him because written contract is must for
applicability of section 53-A.
Writing alone is not sufficient. It should be signed by the transferor or by any other person on his
behalf. The person who signs on his behalf must be a person who is authorized by him to sign the
document. It is necessary that the contract is either actually signed by the transferor or is signed by
a person who has specifically been authorized to sign on behalf of the transferor and whose
signature can bind the transferor. If the doctrine is ambiguous or confusing, this section cannot be
made applicable.

The agreement must also be perfect and genuine in all respects.

Ex: The signature of the executants must also be fully established to be authentic. Where the
executants in the agreement of sale dented her thumb impression and the handwriting expert also
gave his option in her favour, it was held that part performance was not applicable.
Transfer for consideration:
The written contract must be for the transfer of an immovable property for consideration. It is
necessary that the transfer of property has been referred to in the contract.

2. Possession in furtherance of contract:

The transfer has taken possession or continues possession in part-performance of the contract or,
has done some act in furtherance of the contract. The transferee has taken possession of the
immovable property on the basis of the contract or incomplete deed of transfer. Where the plaintiff
had entrusted his property to the defendant for management by executing power of attorney and it
could not be proved that defendant obtained possession and in furtherance of contact of sale, it was
held that the defendant cannot claim benefit of section 53-A.

Possession must be taken in furtherance of such contract, or it, must be taken in part performance of
the contract. The contract or incomplete deed of sale is a contract which would transfer the
property.
The transferee has taken possession in furtherance of or in part-performance of contract. If the
transferee has once taken possession of the property, the fact that subsequently he lost that
possession cannot deprive him of his rights under Section 53-A.

3. Transferee is willing to perform his part of contract:

50
This is based on the principles of equity. Equity says that one who seeks equity must do equity.
Where a person claims protection of his possession over a land, his own contract must be equitable
just. The transferee must be willing to perform his part of contract. Equity of part performance
which is incorporated in this section cannot favour a transferee who is not ready and willing to do
what is required from him.

Willing to perform the part ascribed to a party must not be conditional. If the willingness is situated
with a condition, it is in fact no more than an offer and cannot be termed as willingness.
The transferee should plead his willingness in each and every case. Such willingness may be
inferred from his conduct. Readiness to pay the consideration is not the only conduct which shows
willingness of the transferee to perform the contract.
Nature of transferee‟s rights:
a) No title or interest in property:
When conditions laid down in it are fulfilled, the transferor or any other person cannot evict the
transferee. In the event of being evicted he can raise the defense of equity of part performance and
this section would protect his right to continue the possession. Except the right to continue his
possession, no other interest or title is created in favour of the transferee. The transferee can get
title of the property under the contract of sale only after its registration. Sec. 53-A entitles the
transferee, merely to protect his possession, for getting title under the contract of sale. Its
registration is necessary.

b) Passive equity; no right of action:

Where a transferee takes possession of an immovable property, he can raise the defence of part
performance in case he is evicted by transferor or any other person. He is not entitled to restrain the
transferor from transferring the property to any other person. The equity of part performance is a
passive equity: it can be used only as shied not as a sword.

PRABODH KUMAR DAS V/S DANTAMARA TEA CO. LTD:-In this case, Gillanders and Co.
agreed to sell a Tea Estate to one S. N. Roy. The agreement was not registered. But, S. N. Roy paid
the first installment of the consideration and took possession of the Tea Estate. Later on the
Gillandrers and Co. sold Tea Estate to Dantamara Tea Co. through a registered sale-deed on the
ground that S. N. Roy failed to give the remaining installments of consideration. Dantamara Tea
Co. as owners of the Tea Estate, obtained also the export-licence. Subsequently prabodh kumar Das
possession of rights under the contract of sale from S.N. Roy and acquired also the same position as
that of S.N. Roy. Probodh Kumar Das then filed a suit for a declaration that the Dantamara Tea Co.
was not under the export-license given to it. Probodh Kumar Das prayed also for an injunction.

The court held that6 the equity of part performance as incorporated in Sec. 53-A of the T.P Act, was
not an active equity. It does not give any right of action to the transferee who is in possession of
property under an unregistered contract of sale.

c) Transferee as plaintiff or defendant:- The transferee only the right to defend his possession
when he is being evicted by a person having better title. But how he may defend his possession,
is not clear. The transferee may also be plaintiff if it is needed to protect his possession and
transferee has to protect his possession only as defendant.

Rights of subsequent transferee for value:- The interests of a subsequent transferee for value
without notice of previous transferee‟s rights of part performance, this section does not affect the
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rights of a transferee for consideration who has no notice of the contract of sale or of part
performance.
Ex: A who is owner of a land contracts to sell it to B. The contract is unregistered and in part
performance of this contract B takes possession of the said land. Under this section, the transferor or
any other person cannot dispossess B from the land. But, if A sells the land to C through a duly
executed and registered sale-deed and C has not the least knowledge of B‟s rights of part
performance then, Section 53A shall not apply. And B, cannot resist C from evicting B and taking
possession of the land.

Difference between English and Indian law on doctrine of part performance:- Section-53-A:
incorporates the provision of English equitable doctrine of part-performance. But this section is not
total importation of English law. It is modified form of English law; the importation is therefore
partial. Indian law of part performance may be distinguished from the English law as under:
a) Under English law, the doctrine of part-performance is applicable to written as well as oral
agreements whereas, Section 53-A is applicable only where the agreement of transfer is written.
b) in England the guilty of part-performance is active as well as passive. That is to say, under
English law, the transferee is entitled to defend his possession and is also entitled to enforce his
right in an independent suit. E.g., a suit for specific performance or, for an injunction to restrain
disposition. In India, Section 53-A, does not give any right of action to the transferee, part-
performance is only passive here.
TRANSFER OF IMMOVABLE PROPERTY
LIMITED POWER OF TRANSFER:- Section 38 deals with the transfers where transferor has
limited power of transfer in respect of an immovable property. His power of transfer is limited in
the sense that his authority depends on the existence of only specific circumstances; he cannot
transfer expect under those circumstances. For example, the guardian of minor‟s property, the
manager (karta) of joint Hindu family and widow under old Hindu Law are persons who have
limited authority of transfer.

For validity of the transfer, actual existence of such a circumstance is not necessary. It is sufficient
that the transferee has acted in good faith and exercised reasonable care in ascertaining that such
circumstance existed. The transferee should have no collusion with the transferor and his intention
must not be mala fide regarding the transfer when it is being made.
A, a Hindu widow held the property of her husband as widow‟s limited estate, under old Hindu
law, she was entitled to transfer the property only in legal necessity which included also he own
maintenance. A sold the property to B alleging that income of the property was in sufficient for her
maintenance. B satisfied himself by reasonable enquiry that income of the property was not
sufficient for A‟s maintenance and the sale was necessary. Acting in good faith B purchased the
property. As between B on one part and A and her collateral heirs on the other part. A necessity
for the sale deemed to have existed and the transfer by A to B is valid. Collateral heirs of the
husband are those persons who were entitled to inherit the property held by the widow A.
RIGHT TO MAINTENANCE ETC:- When an immovable property is transferred there is transfer
not only incidental benefits but also of its liabilities. Section 39 provides that where a third person is
entitled to receive maintenance or provision for advancement or marriage out of the income of an

52
immovable property and such property is transferred, the third person can enforce his rights against
the transferee subject to the following condition :

(i) The transfer is for value i.e. with consideration and transferee has notice of such right ; or
(ii) The transfer is gratuitous i.e. without consideration whether or not the transferee has notice
of the right of the third person
Right to receive maintenance are referred in this section is not the right of getting such maintenance
only in the first instance; it includes the right to receive enhanced maintenance in future depending
on the changed circumstances. Right of maintenance from the income of an immovable property is
the right of mother, wife, widow, son, and unmarried daughters. A wife is entitled to receive
maintenance from her husband and she can enforce her claim against husband‟s property. In
Ramankutty purushothaman v. Aminikutty. Pending wife‟s application for her maintenance.
The husband transferred his properties to his brothers and thereby attempted to defeat her right. The
Kerala High Court held that cannot be said to be bona fide purchasers. A wife is entitled to get
maintenance not only from the property of her husband but also from sons who are members of
Joint Hindu Family. Partition of such property does not affect mother‟s right to receive maintenance
from the income of such property. Similarly, provision for legitimate expenses for the marriage of
the members of a Joint Hindu Family may be made from the income of the property.

53
 UNIT –III
MORTGAGES
Meaning and definition mortgages:-Sec. 58 (a) of the Act defines mortgage. It means mortgage is
the transfer of an interest in specific immovable property for the purchase of securing payments of
money advance 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.
It is not transfer of all the interests but only of some interest in the property. The purpose of this
transfer of interest is to give security for repayment of loan. Where a person mortgages his
property, the legal effect is that there is a transfer of an „interest‟ of that property in consideration of
money advanced to him by the money-lender. The loan may either be present or might have been
taken in the past.

Essential Elements of Mortgage:

Following essential elements are necessary in mortgage:
1. There must be transfer of an interest.
2. The interest transferred must be of some specific immovable property.
3. The purpose of transfer of interest must be secure payment of any debt or, performance of
an engagement which may give rise to a pecuniary liability.

(1) Transfer of Interest: -

In a mortgage there is transfer of only an interest of the immovable property. There is no-transfer
of absolute interest or ownership. The interest is transferred in favour of the mortgagee who
advances the money as loan. It is the interest of property which gives him the right to recover his
money from mortgagor‟s property. An agreement to mortgage does not create any interest in favour
of the mortgagee. Such agreement creates only a personal obligation to repay the loan; there is no
transfer of any interest in any property. Transfer of interest means transfer of property.

(2) Specific immovable property:-

The property which is being mortgaged must be specific immovable property. It must be mentioned
in a reasonable certain manner so that it can be identified as to which property have been
mortgaged. Where the property has been described in a manner that it can be ascertained without
any doubt, the property is specific even though no particular details are given in the deed.
(3) The purpose of mortgage: Consideration of mortgage:-
The last essential element of mortgage is its purpose. The purpose of mortgage must be to secure a
debt. Mortgage is a transfer of property supported with some consideration; the consideration of
mortgage is to secure a debt.
The loan may be in the form of:

a) Money advanced or to be advance.

b) An existing or future debt.
c) The performance of any engagement giving rise to a pecuniary liability.
a) Mortgage may be executed for a sum of money advanced or to be advanced on a future date.
Where the mortgagee has already given some money, the mortgagor may execute a deed of
mortgage as security for its payment. This is a mortgage for the money advanced. The
mortgagor may also execute the deed of mortgage before he gets full amount from the
mortgagee.

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b) Existing debt means a debt the claim of which exists at present e.g. a debt which is not barred
by limitation. Such debt may be secured by way of mortgage. Mortgage may be affected to
secure also a future debt. Future debt is a sum of money which the mortgagee is entitled to get
from mortgagor on a future date.
c) Consideration in the mortgage may also be an „engagement‟ which gives pecuniary liability
against the mortgagor a contract within the meaning of Sec. 2 of the Indian Contract Act. Just
as a breach of contract results into pecuniary liability.

KINDS OF MORTGAGE

Section 58 provides following kinds of mortgage:

a) Simple mortgage.
b) Mortgage by conditional Sale.
c) Usufructuary mortgage.
d) English mortgage.
e) Mortgage by deposit of title-deeds.
f) Anomalous mortgage.
The classification is also called as various form of mortgage. A brief account of each kind of
mortgage is given below:

a) Simple Mortgage:-
Sec.58 (b) provides that where the mortgagor promises to pay the mortgage-money without
delivering possession of the mortgage-property and agrees expressly or impliedly that in case of
non-payment of loan, the mortgagee shall have the right to cause the mortgage-property to be sold,
the mortgage is a simple mortgage.
The characteristics of a simple mortgage are as under:
(i) The mortgagor takes a personal undertaking to pay the loan.
(ii) The possession of the mortgage-property is not given to the mortgagee.
(iii) In the case of non-payment of loan the mortgagee has right to have the mortgage-
property sold.

Mortgagor‟s personal obligation:

a) The first essential feature of a simple mortgage is that mortgagor binds himself personally for
the repayment of loan. Such personal liability may either be express of implied. It is express if
the mortgagor, in clear words, takes personal undertaking that he shall repay the money to the
mortgagee. It is simple where such undertaking by the mortgagor is inferred from the terms of
contract.
(I) No delivery of possession:-
Another essential element of a simple mortgage is that possession of the mortgage-property is not
given to the mortgagee. The mortgagee is not entitled to get possession of property. If possession
is given to the mortgagee, the transaction would become a simple mortgage.
(II) Right to have property sold:- In a simple mortgage, it is necessary that mortgagee is given the
right to cause sale of the mortgage-property in default of payment. If mortgagor fails to return back
the loan, the mortgagee must be entitled to recover his money by causing the sale of the property.
Registration: Simple mortgage can be made only through a registered document.

55
b) Mortgage by Conditional Sale: Sec. 58 (c):-Mortgage by conditional sale is an apparent sale
with a condition that upon repayment of the consideration amount, the purchaser shall retransfer
the property to the seller.

Essential element of Mortgage by conditional sale:-

According to Sec. 58(c) the mortgage by conditional sale has following essential elements:
1) There is an ostensible sale of an immovable property.
2) The sale is subject to any of the following conditions:
a) On non-payment of mortgage-money the sale would become absolute,
b) On payment of mortgage money the sale shall become void or the buyer shall retransfer
the said property to the seller,
3) The condition must be embodied in the same document.

(1) Ostensible Sale:- Ostensible sale means a sale which apparently looks like a sale but in reality
there is no sale. There is a sale of an immovable property but in reality is intended to secure a debt.
The seller would sell his property on a certain sum of money. But, seller and buyer both know and
intend that seller is taking loan from the buyer.

Existence of Debt: The intention of the parties is to treat it as security for debt, therefore there must
exist a relation of debtor and creditor between seller and buyer. The existence of debt is necessary.
Where no exists between seller and buyer, the sale is not mortgage.

2) Conditions:- The condition may be that when seller repays the price the sale shall be void or the
buyer would execute reconveyance of the property in favour of seller. The condition may be that if
the seller does not repay the price on a certain date the sale would become absolute that is the
property shall vest in the buyer.

(3) Condition in the same document:- It is necessary that any of the conditions mentioned above,
must be incorporated in the same document which has been executed as a sale deed. If the
condition for re-purchase is not embodied in the document which effects or purports to affect the
sale, the transaction cannot be regarded as mortgage.

C) Usufructuary Mortgage: Sec. 58 (d):- Mortgage is usufructuary where the mortgagor gives
possession of the property to mortgagee. Since possession is with mortgagee, he gets the usufruct
that is produce, benefits, rents or profits of the mortgage-property. In a usufructuary mortgage, the
mortgage is entitled to enjoy the benefits of mortgage property in lieu of interest on the principal
money.

The essential elements of Usufructuary mortgage are as under:- Delivery of possession of the
mortgage property or, an express or implied undertaking by mortgagor to deliver such possession.

1. Enjoyment or use of the property by mortgagee until his dues is paid off.
2. No personal liability of the mortgagor.
3. Mortgagee cannot foreclose or sue for sale of mortgage-property.

1. Delivery of possession:- The characteristic feature of usufructuary mortgage is the transfer of

possession of mortgage-property to mortgagee. Right of the mortgagee to retain possession of

56
property is „security‟ for payment of his money. Where the mortgagee is entitled under the
mortgage-deed to continue possession of property until payment of mortgage money, the
transaction is usufructuary mortgage.

A. Enjoyment of rents and profits:- The mortgagee has right to „use‟ the property until the debt is
fully paid. The mortgagee adjusts the interest from out of the rents and profits of mortgage-
property.

B. No personal liability:-There is no personal liability of the Mortgagor. Mortgagee cannot sue the
mortgagor personally for payment of his debt. He is entitled only to retain the possession of
mortgage property till his debt is fully paid.

C. No foreclosure or sale:-The mortgagee is entitled to continue possession and enjoy the usufruct
until the debt is fully paid off. He can neither sue the mortgagor personally nor can exercise his
right of foreclosure under Sec. 67 of this Act. It is significant to note that in this form of mortgage
no time limit is fixed for the payment.

D. English Mortgage: Sec.58(e):

In English Mortgage there is absolute transfer of property to mortgagee with a condition that when
the debt is paid off on a certain date, he shall re-transfer the property to mortgagor.

Essential elements of English mortgage are as under:

(i) The mortgagor binds himself to repay the mortgage-money on a certain date.
(ii) The mortgage-property is transferred absolutely to mortgagee.
(iii) The absolute transfer is subject to a proviso that mortgagee will re-transfer the
property to mortgagor on payment of mortgage-money on the said date.

English Mortgage and Mortgage by Conditional Sale:

These two forms of mortgages may be distinguished as under:

(a) In an English mortgage, the mortgagor generally binds him personally for the payment of debt.
In a mortgage by conditional sale, the mortgagor does not necessarily bind himself personally and
has his remedy only against the mortgage-property.

(b) In an English mortgage the property is transferred absolutely which is divested by payment of
the debt on due date. In a mortgage by conditional sale, there is transfer of qualifies or conditional
ownership which subsequently becomes absolute on non-payment of the debt.

C. Mortgage by Deposit of Title Deeds: Sec. 58 (f): Mortgage by deposit of title deeds is a
peculiar kind of mortgage. Execution of mortgage deed by mortgagor is not necessary. Mere
deposit of title deeds of an immovable property by mortgagor to mortgagee is sufficient.

Essential elements of mortgage by deposit of title- deeds:-The essential elements of a mortgage

by deposit of title deeds are:
(i) Existence of a debt,
(ii) Deposit of title-deeds,
(iii) Intention to create security,
(iv) Territorial Restriction; application of this form of mortgage only in specified towns.
57
1.Existence of debt:-The title-deeds must be delivered only for securing a debt. Debt may either be
an existing debt or a future debt. He may deposit the deeds also as security for money to be given
to him in future in the event of his urgent need. Title-deeds may also be deposited with banks to
secure an overdraft account.

2.Deposit of title-deeds:-When some documents showing some title of the debtor in an immovable
property are deposited with the creditor. Possession of these title deeds by the mortgagee or his
agent is the only security for repayment of money. If the documents deposited do not show a title to
the property but they are not deposited then, an equitable mortgage is not created.

3.Intention to create security:-The title deeds must be deposited by the debtor with the intention of
creating security for a debt. There must be a bona fide intention that position of title deeds with the
creditor is by way of security for the money advance by him. There is no equitable mortgage unless
there is a connecting link between the debt and the possession of title deeds suggesting a definite
intention on the part of the debtor that deeds are in possession of creditor as security for the debt.

4.Territorial restrictions:-Mortgage by deposit of title deeds is applicable only in certain specified

towns of this country. The mortgage by deposit of title deeds may be made only in Calcutta,
Bombay and Madras and in such other town which the State Government may by notification
specify in the official Gazette.

5. Anomalous Mortgage:-Sec. 58 (g), a mortgage is anomalous mortgage if it is not a simple

mortgage, a mortgage by conditional sale, and usufructuary mortgage, an English mortgage or, a
mortgage by deposit of title-deeds. There is existence of debt and security of an immovable
property for re-payment of that debt but the agreement between the debtors is of such nature that it
cannot be included in any specific category of mortgage, the transaction is anomalous mortgage.

Instances of anomalous mortgage:

(1) . Simple mortgage usufructuary:- Where terms of mortgage are mixture of a simple mortgage
and an usufructuary mortgage, the transaction is simple mortgage usufructuary. Where there is
a personal covenant with an express or implied right of sale and the mortgagee is given also
possession of the property so that he may adjust his loan from the rents and profits of the
property or the interest thereof, the mortgage is neither a simple mortgage nor ussufructuary
mortgage. It is a combination of the two.

(2) Mortgage usufructuary by conditional sale:- The mortgagee is first entitled to take possession
and enjoyment of property but there is also a condition that in default of repayment within a
specified period, the mortgagee shall have the right to cause the sale of property. Thus, where
the mortgage is usufructuary mortgage for a fixed term and there is also a condition that on
expiry of the due date, it shall operate as mortgage and mortgage by conditional sale.

(3) Customary forms of anomalous mortgage:- Customary mortgages are mortgages to which
special incidents are attached by local usage certain peculiar mortgages are in practice in the
form of local customs. They have the essential features of a mortgage but their terms and
conditions are governed by local customary practices.

RIGHTS AND LIABILITIES OF MORTGAGOR & MORTGAGEE

Following rights are exercised by the mortgagor:
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1. Right of redemption:-
Sec. 60 of the Act provides right of redemption is the right to recover something by making certain
payments. Mortgagor‟s right of redemption means mortgagor‟s right to recover or get back the
property after making payment of loan. Mortgage is a transfer of an interest in immovable property
for securing the loan. If the loan has been paid, the interest so transferred must revert back to the
mortgagor. The mortgagee cannot retain any interest in the mortgage-property if debt does not exist.
Mortgagor‟s right to redeem the mortgage-property after repayment of loan is a right which rests in
him by virtue of his residuary ownership in the property. If mortgagor could not repay the loan on a
fixed date and there is some delay, the law must extend his right of redemption up-to a reasonable
time.

Equity of redemption: - Mortgagor‟s right to redeem the mortgage by making payments even after
the due date is known as equity of redemption. Mortgage was transfer of legal estate subject to a
condition. The condition was non-payment if debt on the fixed date. The result was that if this
condition there fore non-payment of loan up-to fixed date was fulfilled, the mortgage-property
belonged absolutely to mortgagee.

The money-lender should not be given any legal right to hold on the property absolutely if
mortgagor was ready to play within reasonable time after expiry of the due date. The right which
was denied by common law was given to mortgagor be equity. And, this right of mortgagor to
redeem even after he was in default was known as „equity of redemption‟. Even after the expiry of
the date fixed for repayment, the mortgagor shall have the right to redeem the mortgage at any time
before foreclosure or sale by the mortgagee.
Once a mortgage always a mortgage:-Equity of redemption was give relief to those mortgagors
who could not repay the loan within stipulated time. The main purpose of developing the doctrine
of redemption was to protect the interests of mortgagors who in default of repayment of loan had to
lose all rights in their properties. The equity declaring that: once a mortgage, always a mortgage and
nothing but a mortgage. The maxim once a mortgage always a mortgage simply means that a
transaction which at one time is mortgage could not cease to be so by having any stipulation in the
mortgage-deed calculated to prevent the right of redemption.

The maxim “once a mortgage, always a mortgage” may be applied to explain following two
situations:
1. Where a transaction is intended by the parties to be a borrowing transaction under a
mortgage, though it is carried out in the form of a sale, equity will not allow the mortgagor
to be deprived of his right of redemption.
2. Equity does not permit any clog on redemption. A clog on redemption means any stipulation
or provision in the mortgage-deed which restricts the mortgagor‟s right of redemption.
Clog on redemption:-Clog on redemption means condition or stipulation which prevents the
mortgagor from redeeming the mortgage-property on payment of the loan. Right of redemption in
England is known as mortgagor‟s equity of redemption. A clog on equity of redemption is void in
India too; a clog on mortgagor‟s right of redemption is void because no condition or stipulation can
prevail against the statutory right given by the T. P. Act.

59
A clog on redemption is void, only in the following situations:
1. The condition or stipulation has been imposed only by the mortgagee, not by any other
person who is stranger to transaction.
2. The condition or stipulation must be incorporated in the mortgage-deed itself. Parties are
free to stipulate otherwise by any independent contract outside the mortgage-deed.
3. The condition or stipulation included in the deed must be unreasonable, against public
policy and with mala fide intention.
4. The condition or stipulation puts either absolute restraint on mortgagor‟s right of redemption
or prevents him from redeeming the mortgage for unreasonably long period.
Instances of clog on redemption:
1. Condition of sale in default:-A condition which makes mortgage a sale in default is clog on
redemption. Stipulation entered into at the time of mortgage and included in the deed that in
default of repayment of loan within the fixed date, the mortgagee shall be deemed to be
purchaser of the mortgage property is a clog on redemption.

2. Postponement of redemption for long term:-The postponement of right of redemption for a

long period is not necessarily a clog on redemption. This is so because in certain cases
postponement of the right of redemption for a long term may be convenient for both the parties.
If a long term is unreasonable it is clog; if it is not so it is not a clog. The postponement is
unreasonable if the bargain is oppressive or unconscionable.

3. Condition postponement redemption in default on a certain date:-The condition or

stipulation postpones the mortgagor‟s right of redemption in case of default in payment on a
certain date, is regarded as a clog on redemption. Stipulation postponing further the mortgagor‟s
right of redemption is a clog because it bears or restricts the redemption.

4. Restraint on alienation:-A condition which restraints the mortgagor from transferring

mortgage-property, is a clog. In mortgage, the mortgagor transfers only an interest of the
mortgage-property. After transferring this interest he still has the residuary ownership of that
property.

5. Collateral benefits to mortgagee:-Collateral benefits to mortgagee are not necessarily clog on

redemption. Under a mortgage, the mortgagee is entitled to get back his money together with
interest at usual rate.

In an unfructuary mortgage, the mortgagee has right of possession and taking rents and benefits
of the property which he adjusts against interest. These benefits are inherent benefits of a
mortgagee. Such benefits are not collateral benefits.

6. Penalty in case of default:-An agreement which amounts to penalty in case of non-payment of

debt is a clog on redemption. Such agreement cannot be given effect. Accordingly, any
stipulation which any be oppressive or by way of punishment to mortgagor if he fails to pay the
loan on due date, is invalid as being clog on equity of redemption.

Exercise of right of redemption:- Mortgagor may exercise his right of redemption in any of the
following manner:
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1. payment or tender of mortgage-money:- The mortgage-money may be paid directly to
mortgagee. Payment may be made also to his authorized agent. Unless the mortgagor makes
payment or tenders to take payment of the debt, he cannot redeem the mortgage.
To whom payment is made?:- The mortgagor may pay the money to mortgagee or to his
authorized agent. Payment made to an agent who disclaims authority to receive the mortgage-
money on behalf of mortgagee, is not regarded as payment of debt.
Where there are two or more joint-mortgagees, the payment must be made to all of them jointly. In
such cases payment of mortgage-money made to only one mortgagee does not discharge the debt
against the remaining mortgagees.
Mode of payment:- Payment must be made in the coins or currency notes of the country. Normally
a tender of the payment of debt is to be made with actual production of the amount in the current
coins or currency notes. If the debtor sends a cheque without any authority or request by the creditor
that the amount should be remitted in that manner, the creditor is not bound to accept it in payment.
Payment at proper time and place:- Sec, 60 of the Act says the mortgagor has a right to redeem
the mortgage at any time after the principal money has become due. The proper time for making
payment or tender is any time after the principal money has become due.
2. Deposit of mortgage-money:- The second mode of redemption is deposit of mortgage-money
in the court. Mortgage-money means capital money plus interest on the capital money
calculated till the date of deposit. Unless the whole of mortgage-money is deposited in the court,
there is no valid discharge.
3. Suit for redemption:- The mortgagor has a right to redeem the mortgage either by making
payment to mortgagee or by depositing the money in court. If he does not want to redeem the
mortgage by any of these two methods, the third mode available to him is to file a suit for
redemption in a court of law.
Effect of redemption:- The effect of mortgagor‟s right of redemption is that mortgagor becomes
entitled to following rights:
a) Mortgagor is entitled to get back the mortgage-deed and all documents relating to mortgage is
they are in possession of mortgagee.
b) Mortgagor is entitled to get back the possession of the property. In usufructuary mortgage, the
mortgagor delivers the possession of the mortgaged property to mortgagee.
c) Mortgagor is entitled to compel the mortgagee to re-transfer the mortgaged property.
Extinguishment of right of redemption:- Sec. 60 of the Act provides for only modes of
termination of the right of redemption:

a) By act of parties:-
By act of parties the right of redemption is extinguished when the parties themselves stipulate for it
under a separate agreement after execution of the mortgage-deed. Such extinction of right is
possible only where it is outside the transaction of mortgage. By act of parties redemption may be
terminated only if such termination is not included in the mortgage-deed.
Right of redemption may be extinguished in the following manner:-
1. Redemption of mortgage by mortgagor.
2. Foreclosure of mortgage by mortgagee.
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 3. Sale by mortgagee.
4. Lapse of time, the exercise of right is barred by limitation.

b) By decree of court:

The right of redemption may be extinguished also by decree of a court. Such decree must be final
decree. It may be noted that in the suit on mortgages, two decrees are passed by the court. One is
preliminary decree and the other is the final decree. Such final decree is passed by court either in
the mortgagor‟s suit for redemption.

2. MORTGAGOR‟S RIGHTS OF INSPECTION OF DOCUMENTS IN POSSESSION OF

MORTGAGEE:-
In a mortgage the mortgagor may have to handover the title-deeds or other documents relating to
mortgaged property to the mortgagee. During subsistence of the mortgage, such documents are to
remain with mortgagee. The documents are in the custody or possession of mortgagee, the
mortgagor has right to ask mortgagee to produce the documents for his inspection. The mortgagor is
entitled, at reasonable time and at his own cost, to require the mortgagee to produce the documents
in his possession and to have copies or abstracts of such documents.
3. RIGHT TO REDEEM SEPARATELY OR SIMULTANEOUSLY:-
Sec. 61 of the Act provides that, a mortgagor who has executed two or more separate mortgages in
favour of the same mortgagee has right to redeem any one mortgage separately or any two or more
mortgages together.
A mortgagor also to redeem any one mortgage where two or more mortgages were executed
independently to the same mortgagee. Where several independent mortgages are executed in favour
of one mortgagee the mortgagee cannot require mortgagor to redeem the mortgage of his choice by
combining all mortgages.
Doctrine of consolidation:- Doctrine of consolidation was an equitable doctrine under English law.
Under this doctrine, where two or more mortgages were executed in favour of the same mortgagee,
the mortgagee could require the mortgagor to redeem all mortgages in a consolidated form.

4. RIGHT OF USUFRUCTUARY MORTGAGOR TO RECOVER POSSESSSION:

Sec. 60 of the act provides for mortgagor‟s right of redemption irrespective of the kind of mortgage.
The mortgagor‟s right to recover the possession of property on redemption of usufructuary
mortgage. The mortgagor delivers the possession of property to mortgagee who is entitled to
receive the rents and profits of the mortgaged property. It is necessary that some special provisions
are made for a usufructuary mortgagor for the return of his property while redeeming the mortgage.

Usufructuary mortgagor is entitled to recover the possession of mortgaged property together with
mortgage-deed in the following circumstances:

a) Upon payment of the principal money where the mortgagee was to adjust interest from the rents
and profits of the property.
b) Upon expiry of the term prescribed for payment of mortgage-money and mortgagor either pays
or tenders to pay the balance, if any or, deposits it in court.

5. RIGHT TO RECEIVE ANY ACCESSION TO MORTGAGED PROPERTY:

Sec. 63 of the Act says that in the absence of any contract to the contrary, the mortgagor is entitled
to accessions, if any, to the mortgaged property while redeeming the mortgage. The accessions to
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 the mortgaged property in possession of the mortgagee are treated as part of the property which
mortgagor is entitled to recover together with property when he redeems the mortgagee.

Accessions to property:- Accession means any kind of addition in the property which increases its
value so that property more advantageous. Such additional or improvements may be made in the
property either through natural process or by mortgagee.

Kinds of Accessions:
1. Natural accession:
Natural accession are those accessions which are not made by parties to mortgage. They may arise
as accretions by the course of nature.
Ex: Where the area of mortgaged property is increased by the change of course of river which
marks its boundary the accession is natural.
2. Acquired accessions:
Acquired accessions are those accessions or additions to the property which are made by the
mortgagee during the period of mortgage. The mortgagee may raise some structure or do some such
or make things on the property for its more beneficial enjoyment which increases its value.
a) Separable acquired accessions:- Where the acquired accession is separable from the mortgaged
property, the mortgagee would remove them when mortgagor redeems the mortgage. The
mortgagor is not entitled to take them together with the mortgaged property. If mortgagor insists
upon taking also the accessions together with mortgaged property, he must pay the mortgagee the
cost of such acquisitions.
b) Inseparable acquired accession:-Accessions which are of permanent nature become part and
parcel of the mortgaged property. Such accessions cannot be separated from the property.
Therefore, on redemption, the mortgagor has no option but to take these acquisitions together with
mortgaged-property .Accession only in the following two cases:
1. Where the accessions are necessary to preserve the property from destruction, forfeiture or sale.
2. Where accessions were made with mortgagor‟s consent.

6. IMPROVEMENTS TO MORTGAGED PROPERTY:

Sec. 63-A of the Act provides that the mortgagor is liable to pay the cost of improvements made
by mortgagee in the following circumstances:
1. Where the improvements made by mortgagee were necessary to preserve the property from
destruction or deterioration.
2. Where such improvements was necessary to prevent the security from becoming insufficient
3. Where the improvement was made in compliance with the lawful order of any public servant
or public authority.
7. RIGHT OF RENEWAL OF MORTGAGED LEASE:- Sec. 64 of the Act provides that if
mortgaged property is a lease hold property and during the continuance of mortgagee gets that
lease renewed then, on redemption the mortgagor shall be entitled to have the benefit of the new
lease.

The rule that where mortgagee himself gets the lease renewed, the mortgagor while redeeming
the mortgage would be entitled to get back the lease-hold mortgaged property together with its
renewed lease.

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 8. MORTGAGOR‟S RIGHT TO LEASE:- Sec. 65-A of the Act provides that mortgagor had
power to grant lease provided it did not affect the security of the mortgagee. A mortgagor, who
had possession, could lease out the property in the ordinary course of management but he had
no right to lease the property on unusual terms or giving lessee a different mode of enjoyment.

Conditions for lease of mortgaged property

1. The lease should be made in such a way as it is made in ordinary course of management of
property and according to the local laws and customs.
2. No rent shall be paid in advance and that no premium shall be promised or paid by the
lessee.
3. The lease should not contain any provision for its renewal
4. The lease should made to take effect from a date not later than six months from the date on
which it was executed.
5. Where mortgaged property is a building, the term of the lease cannot be more than three
years.

RIGHTS OF MORTGAGEE
1. Right of foreclosure:-
Sec. 67 of the Act gives to the mortgagee a right of foreclosure or sale, the statutory right on
mortgagee to foreclose the mortgage. Foreclosure means closing or withdrawing the mortgagor‟s
right of redemption. Foreclosure is a legal term which means that equitable relief given to
mortgagor against forfeiture of the security is withdrawn. In the transaction of mortgage,
mortgagor‟s interest is to get back his property after payment of the money whereas; mortgagee‟s
interest is to get back his money if it is not paid by mortgagor.
Modes of foreclosure:
Sec. 67 of the Act provides the following two remedies to a mortgagee:
a) Foreclosure
b) Sale
The specific remedy available to mortgagee is dealt with separately, those are:

1. Simple mortgage:
In a simple mortgage the mortgagee has to file a suit for sale of mortgaged property. He can not
foreclose. The remedies open to a simple mortgagee are, therefore, two fold:
a) He may sue the mortgagor personally and get a simple money decree
b) He may file a suit for the sale of mortgaged property so as to recover the money from
proceeds of the sale
2. Usufructuary mortgage:
In usufructuary mortgage the possession of the mortgaged property is already with mortgagee. The
usufructuary mortgagee can neither sue for sale nor foreclose the mortgage. He is entitled to
continue the possession and continue to take the rents and profits of the property till all the debts are
recovered.
3. Mortgage by conditional sale:
In a mortgage by conditional sale, the condition of the mortgage itself provides that in default of
payment on the stipulated date the mortgage shall become sale in favour of mortgagee.

4. English mortgage:
An English mortgagee can file a suit for sale of the mortgaged property.
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 5. Mortgage by deposit of title-deeds:
Sec. 96 of the Act puts mortgage by deposit of title-deeds on the same footing as a simple mortgage.
In a mortgage by deposit of title deeds which is also called equitable mortgage, the mortgagee‟s
remedy is a suit for the sale of property.

6. Anomalous mortgages:
Anomalous mortgage is a combination of two or more forms of mortgages; remedy for the
mortgagee in an anomalous mortgage is to be laid down in the deed itself. Where it is a simple
mortgage usufructuary, the remedy is a suit for sale. If it is usufructuary mortgage by conditional
sale, the mortgagee is entitled to being a suit for foreclosure.
2. MORTGAGEE‟S RIGHT TO SUE FOR MORTGAGE-MONEY:
Sec .67 and 68 of the Act provides remedy against the mortgagor. Sec 68 a mortgagee has right to
sue mortgagor personally for repayment of the mortgaged- money. A mortgagee has also a right to
sue mortgagor personally for the mortgage-money.
According to Sec. 68 a mortgagee has right to sue for the mortgage-money in the following cases:-
a) Personal covenant to pay:-This section gives to the mortgagee a right to sue for mortgage-money
if there is personal covenant by mortgagor to repay the same. In a mortgage, if mortgagor binds
himself to repay the debt personally, it is said that there is a personal covenant by him for his
repayment.

b) Where security is destroyed:-Mortgagee has a right to sue from the mortgage-money when the
security is destroyed or is rendered insufficient due to accidental events. Such accidental events are
not to any wrongful act or omission of the mortgagor or mortgagee. The mortgagee gets a right to
sue for the mortgage-money. Mortgagee has right to sue:
1. Even if there is no personal covenant
2. Even if the repayment of mortgage-money has not become due.
c) Mortgagee deprived of security due to wrongful act or default of mortgagor:- The mortgagee is
entitled to sue for mortgage-money also when the property is lost wholly or partially due to
wrongful act or omission of the mortgagor. The loss or damage caused to the property by mortgagor
amounts to loss of mortgagee‟s security. But, if the mortgagee is deprived of the security due to his
own fault, he is not entitled to sue under this clause.
d) Mortgagor‟s failure to deliver possession:- In a usufructuary mortgage the mortgagee is entitled
to take possession of the mortgaged-property and is also entitled to enjoy its benefits. The
mortgagor must deliver the possession to him. Where, mortgagor fails to deliver the possession of
property to mortgagee as required under the deed, the mortgagee under this clause has a right to sue
for mortgage-money.

3. POWER OF SALE WITHOUT INTERVENTION OF THE COURT:

Sec. 69 of the Act provides for sale of mortgaged property by mortgagee without intervention of the
court. The mortgagee has a right to realize the mortgage-money by causing sale of the mortgaged
property.

The mortgagee may exercise the power of mortgaged-property privately, without court‟s
intervention in any of the following cases:

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 a) Where the mortgage is an English mortgage and neither of the parties is a Hindu, Muslim or
Buddhist or a member of any other race, sect, tribe or class to be specified from time to time by
the state government. It is to be noted that power of sale in this case is always deemed to be
implied. It is necessary that such power be expressly given in the deed.

b) Where the mortgagee is government and power of sale without court has expressly been
conferred on the mortgagee.
c) Where the mortgaged-property or any part thereof situated within the towns of Calcutta,
madras, Bombay or any other area which the state government may by notification specify and
the power of sale is expressly given in deed.
Conditions for the exercise of power of sale:

1. The power of sale can be exercised only when default in payment of mortgage-money is made.
When no due date for payment is fixed, there is no default until demand for payment has been
made. The default in payment may be in respect of principal money or of interest or of both.
2. Where default is made in respect of payment of interest, the poser of sale can exercised only if
the amount is at least Rs. 500/- and it remains unpaid for at least three months.
4. APPOINTMENT OF RECEIVER OF THE INCOME:
Sec. 69-A of the Act says that the mortgagee has right to recover his money from this security in
case of default. But, since the mortgaged property primarily belongs to mortgagor, he has every
right to see that his property is dealt with by mortgagee in an impartial way. When the mortgaged
property is in possession of mortgagee or when the mortgagee sells the property, the mortgagor may
appoint a receiver to look after the conduct of the mortgagee. The receiver is appointed especially to
look the income of the mortgaged-property when sold by mortgagee.
Appointment of receiver:
A receiver may be appointed in any of the following manner:
a) The receiver may appointed by the mortgagor himself by nominating a person to act as receiver.
b) Receiver may be appointed also mortgagee if:_
1. All persons nominated by mortgagor are dead
2. All persons nominated by mortgagor have refused to act as receiver.

c) The receiver may be appointed by court if it could not be appointed by the mortgagor or
mortgagee. If mortgagor does not agree on the name given by mortgagee, he may apply to the
court for nominating a suitable receiver.
Position of receiver:-Receiver‟s acts as an agent of the mortgagor, the mortgagor is liable for all
the acts or omissions of the receiver. Although a receiver acts as an agent of the mortgagor, he is
accountable not to mortgagor but to mortgagee.

Duty of the receiver:

1. In discharge of all rents, taxes, land revenue and other outgoings affecting the mortgaged
property.
2. In keeping down all annual sums or other payments and the interest on all principal sums having
propriety to the mortgage for which he has been appointed receiver.
3. In payment of his commission or remuneration and of premiums on fire, life or other insurance,
if any.
4. In payment of the interest falling due under the mortgage.

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 5. In or towards discharge of the principal money, if so directed by the mortgagee in writing.
6. If any residue remains after making above mentioned payments, the receiver has to pay it to
such person who would have been entitled to receive the income had receiver not been in
possession of the property.
Remuneration of receiver:- The remuneration or commission of the receiver if specified in the
mortgage-deed, but, if it is not so fixed in the deed, the receiver may retain five percent of the gross
income for himself as his remuneration. Where a receiver finds that the rate of five percent is less as
compared to his duties, he may apply to the court for enhancement of his remuneration.

5. MORTGAGEE‟S RIGHT TO ACCESSION:

Sec. 70 of the T. P. Act provides the accessions to the mortgaged property become part of the
security. The mortgagee is entitled to it in addition to the original security.
Ex: A mortgages to B a field situated on the bank of a river. The river changes its course on the
other side and leaves behind some land. As a result of it, there is an addition or increase in the area
of the field, technically, this increase in the area is called alluvion.
Section 63 which entitled a mortgagor to redeem the mortgaged property together with accessions,
if any.

6. MORTGAGEE‟S RIGHT TO RENEWED MORTGAGED-LEASE:

Sec. 71 of the Act provides the mortgaged property may be a lease hold property; the mortgagor has
taken the property on lease. He can mortgage this leasehold property. Leases are for fixed term and
for extension they require its renewal. Such renewal is generally made by the lessee. Where the
mortgaged property is a lease and mortgagor renews that lease, the mortgagee shall be entitled to
get the benefit of this renewed lease.
The renewals of a lease hold mortgaged property is regarded as an accession to the property because
it increases the value of mortgagee‟s security.

7. MORTGAGEE‟S RIGHT TO SPEND MONEY:

Se. 72 of the Act provides the mortgagee may spend money for keeping the property safe so that it
may not be destroyed or devalued. The circumstances, under which a mortgagee is entitled to spend
money on the mortgaged property, are given in this section. In case the mortgagor fails to repay the
loan, the mortgagee ultimately recovers his money from this property.
Where a mortgagee spends some money in protecting or otherwise keeping his security safe, he is
entitled to add the expenses in the mortgage debt. But, the mortgagee cannot spend more than what
is required or without any necessity for the same.
Circumstances where expenditure is allowed:
1. Preservation of mortgaged-property:
A mortgagee to spend money for preservation of the mortgaged property. Property must be
preserved because it is security for repayment of the loan. It is the duty of mortgagor to preserve
and protect his property.
2. Defending mortgagor‟s title:
It is the mortgagor‟s duty to defend his titled in the property whether it is in his possession or not.
But if mortgagor is negligent and does not defend his title in property the mortgagee has right to
defend mortgagor‟s title against any one challenging the same.
3. Defence of mortgagee‟s title against mortgagor:
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 Where a mortgagee is challenged or opposed by mortgagor as being mortgagee, the mortgagee has
an obvious right to defend himself.

4. Renewal of leases:
Where the mortgaged property is a renewable lease, the cost incurred by mortgagee in renewal of
that lease may be incurred by mortgagee.

5. Premium for insurance:

The mortgaged property is an insurable property and the mortgagor has not insured the property, the
mortgagee is entitled to get it insured against loss or damage by fire.

8. MORTGAGEE‟S RIGHT TO GET PROCEEDS OF REVENUE SALE ETC:

Sec. 73(1) of the Act provides that if the mortgaged property is sold due to non-payment of
government dues, the mortgagee is entitled to claim the amount of his mortgage-money from the
proceeds of such sale. The mortgaged property belongs to mortgagor who is liable to pay all the
outgoings such as revenue, rent and taxes or other charges of the public nature.
After payment of government‟s dues, there may still remain the surplus of the price on which
property was sold. The mortgagee has right to claim his mortgage-debt from out of this surplus
amount.
9. RIGHTS TO COMPENSATION ON ACQUISITION:Sec. 73(2) of the Act provides that where
the mortgaged-property is acquired under Land Acquisition Act, or any other enactment and
compensation is paid; the mortgagee can claim his debt from such compensation.

LIABILITIES OF MORTGAGEE
1. Duty to manage the property:- While in possession of mortgaged property, the mortgagee is liable
to manage the property in the same manner as is expected from a reasonable prudent man. He
would take care of the property in the ordinary course as a normal man dose in respect of his own
property.
He has his own right of managing the property. He is not dependent on mortgagor‟s consent or of
his directions regarding the rents and profits of the land in his possession. Where the mortgaged
property is an agricultural land, the mortgagor is bound to cultivate only such crops which the land
is capable of yielding. He may cultivate any particular crop giving unusual yields so as to help the
mortgagor to pay off his debt earlier.

2. Duty to collect rents and profits:- The mortgagee in possession has duty to take efforts for
collecting the rents and profits of the mortgaged property. He is required to give an account of the
rents and profits which he receives from time to time. It is immaterial whether the property was
leased out before or, after execution of the mortgage. Even if the lease on the property was granted
before execution of mortgage, the mortgagee has a duty to maintain a proper account of the rents
from the date on which he takes possession.

3. Duty to pay rents, revenue and public charges:-A mortgagee in possession must pay the rents,
revenues and other public charges on the property. Where mortgaged property is leasehold, the
mortgagee has duty to pay its rents. He is liable to pay other public charges such as revenue, taxes
or other outgoings.
4. Duty to make necessary repairs:-The mortgagee in possession is bound to make necessary repairs
in the property. The duty to make repairs arises only when the mortgagee is actually in possession
of property. If the property is in possession of a lessee, the mortgagee has no duty to make repairs.
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 The necessary repairs in the property are to be made out of the surplus of the rents and profits of
property.
5. Duty not to commit and destructive act:-The mortgagee has a duty not to commit any act which
is destructive or permanently injurious to the mortgaged property. The mortgagee must not commit
any waste on the property so as to reduce the value of his own security and also the property of
mortgagor.
6. Duty towards insurance money:-Where the mortgaged property has been insured against loss by
fire, it is the duty of mortgagee to apply the insurance money in restoring the property. Sec. 72 of
the Act says if the property is by its nature insurable, it is the duty of mortgagor to get it insured
against loss by fire.
7. Duty to keep accounts:-The mortgagee must keep accurate accounts of all the sums received and
spent by him in respect of the property in his possession. He is bound to keep full account of all the
income and expenses on the mortgaged property.

Where the mortgage-deed is silent about the arrangement of rents and profits, the mortgagee has to
utilize the usufruct for several purposes.

Ex: Repairs etc. in such cases, it is obligatory on the mortgagee to keep full accounts.

8. Duty to accounts for grass receipts after tender or deposit:-

Sec. 76 imposes duty on mortgagee after the mortgagor tenders him the mortgage-money or
deposits it in the court. When the mortgagor tenders the mortgage-money to mortgagee or deposits
it in the court, the transaction of mortgage terminates in essence. But the mortgagee may still
continue the possession till he actually receives the money.

MARSHALLING:
Sec. 81 of the Act says marshalling means arranging things. Right of marshalling securities is a
right of puise mortgagee. Sec. 81 incorporates the right of a subsequent mortgagee to make such an
arrangement that as far as possible the prior mortgage-debt is satisfied out of properties not
mortgaged to him. A situation where a mortgagor mortgages two or more properties first to a
mortgagee and thereafter, mortgages some of these properties to a different person. Therefore
subsequent properties.

Ex: 1. A mortgages properties X, Y and Z for securing a loan of Rs. 10,000.

2. A then mortgages property Z to C for securing another loan of Rs. 5,000 taken from C.
Here, B is a first mortgagee on properties X, Y and Z which are securities for a debt of Rs.10,000/-.
Out of these three properties which already constitute security for an earlier debt, property Z is
mortgaged to C as a security for another debt of Rs.5,000/-. B is prior mortgagee and C is
subsequent mortgagee. This right entitles him to say that the debt of Rs.10,000/- should be satisfied
out of sale-proceeds of properties X and Y only and not from Z which has been mortgaged to him.
In case X and Y could be sold for less than Rs. 10,000/- property Z may be sold to complete the
amount. In this manner, although C is a subsequent mortgagee and his claim is not prior to that of B
but, he has right of marshalling or arranging the securities in his favour as far as possible.
Accordingly, the right given to the subsequent mortgagee under this section called right of
marshalling securities.

Conditions:
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 1. The mortgagee may be or two or more persons but the mortgagor must be the same.
2. The right cannot be exercised to the prejudice of prior mortgagee.
3. The right cannot be exercised also to the prejudice of any other person having claim over the
property.
Common Mortgagor:
It is necessary that mortgagor is the same person who mortgages his different properties to different
persons. Marshalling implies two or more sets of properties one which is common to two or more
mortgagees.
No prejudice to prior mortgagee:
A subsequent mortgagee to protect his own interest, as far as possible, without affecting the interest
of prior mortgagee. Where two properties X and Y are mortgaged to B and thereafter property Y is
mortgaged to C, the subsequent mortgagee c cannot say that property Y should not be affected even
if B‟s debt recover his money out of the sale of X only, he cannot be prevented by C from selling Y
and compelling the balance of his debt.
No prejudice to third parties:
The right of marshalling cannot be exercised also against any third party or a transferee for value.
The right of marshalling is exercised by a subsequent mortgagee only when prior mortgagee seeks
to realize the mortgaged debt. But, it is possible that at the time when prior mortgagee attempts to
recover his debt, there is already a person who had acquired an interest in the mortgaged property
for valuable consideration.
Notice:-The right of marshalling is not subject to notice of a prior mortgage or encumbrance even if
he had notice of a prior mortgage.
CONTRIBUTION OF CHARAGES:-Contribution means providing money for a common fund.
If mortgaged property belongs to two or more persons having different shares then each of such
sharer is liable to contribute to the dent according to his respective share. The mortgagors are liable
to contribute to the whole debt in proportion of their respective share in the property.
NATURE AND SCOPE:-The rule of contribution is based on the principles of equity, justice and
good conscience. Equity does not permit that in case of a common debt, any one of the debtor
should be compelled to bear the burden of the whole debt, and each debtor must be liable to
contribute to such common debt retabled therefore in proportion of his respective share in the
property.
Rule of contribution:- Sec. 82 incorporates following rules of contribution:
Rule 1 :- When mortgaged property belongs to two are more persons:- If several mortgagors take a
common loan by mortgaging their properties than they shall contribute rateably to its discharge.
Since the mortgage executed by several persons for a common debt is treated as single mortgage,
the mortgagee can recover the debt from any of the several properties.
No personal obligation:- Where at the time of mortgage the property is one but later on the co-
sharers partitions it and become owners of their respective shares. When a co-owned property is
subsequently divided into several properties, the debt still continues to be common.
Rule 2:- When one property is mortgaged first and then again mortgaged with another
property:- Where out of two properties one is mortgaged to secure a debt and later on both
properties are mortgaged to secure another debt, the payment or prior encumbrances to be made

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from property mortgaged first and the amount of this encumbrance is to be deducted from the value
of that property in ascertaining the rateable contribution.

Rule 3:- Marshalling supersedes contribution:- If there is any conflict between the right of
marshalling and contribution, the right of marshalling prevails over that of contribution.
Ex: 1. Properties X and Y are owned by one person.
Property X is mortgaged to A.
Property X and Y both are mortgaged to B.
Property y is mortgaged to C.
Exercising the right of marshalling C can insist that B should recover his debt first from property X.
Under section 82, properties X and Y are liable to contribute to B‟s mortgage in proportion of their
values after deducting from X the amount of A‟s mortgage. But, C‟s right of marshalling will
prevail over contribution. Accordingly, C can require B to first recover as much of debt from X as
he could from this property.
CHARGES
Definition of charges: - Where immovable property of a person is made security for the payment
of money to another and the transaction is not a mortgage there is creation of charge.
Sec. 100 of the Act says where immovable property of one person is, by act of parties or by
operation of law, made security for the payment of money to another and the transaction does not
amount to mortgage, the later person is said to have a charge on the property.

Charge on an immovable property is created to secure payment of money. If payment is not made
by the person who is liable for such payment, it is made out of the property charged for this
purpose. Charge is created for securing the recovery of some money.
Ex: Maintenance allowance, from the person whose property is so charged.

When a property is charged, there is no transfer of any interest in favour of the charge-holder. The
person in whose favour a charge is created is called a charge-holder.
The transaction does not amount to mortgage, this, means that charge is almost like a mortgage but,
in essence it is not mortgage. In every mortgage there is a charge, but every charge is not a
mortgage.
KINDS OF CHARGES:
1. Charge created by act of parties:-
A charge is created by act of parties when it takes place between two living persons. A charge by
act of parties is constituted by an agreement between two or more persons. But where the agreement
creating charge is in writing, it must be registered if the change is valued Rs. 100 or upwards.
The document shows an intention to make the property as security for payment of the money
mentioned therein. But, the document must create the charge immediately on its execution without
operating as a chare at same future date. Charge must not be created on a future contingency.
2. Charge arising by operation of law:
Where a charge is created without reference to any agreement or stipulation between the parties, the
charge is said to be created by law. Charge by operation of law results due to some legal obligation.

Ex: Charge is created by operation of law under Section 55(b) of this Act in the case of unpaid
vendor.
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 UNIT- IV

SALE OF IMMOVABLE PROPERTY

Definition of sale:-Sec. 54 of the T.P. Act says sale of a transfer of ownership in exchange for a
price paid or promised to be paid. Following elements which are necessary to constitute a sale are as
under,
1. Transfer of ownership:-Sale is a transfer of ownership. Ownership is absolute interest in the
property. In a sale there is transfer of all the rights in the property sold, no rights in respect of
property are left with the transferor. Ownership is transferred; there is transfer of all the rights in
property. So, when ownership is transferred, there is transfer of all the rights in property by
transferor to transferee.
2. Money consideration:-The transferor must receive some money from the transferee in return of the
transfer of ownership of his property. The money in exchange of ownership is called „price‟. For a
valid sale the amount of money is an irrelevant factor.
Where ownership is transferred in exchange of ownership of some other property, the transaction is
exchange. When ownership is transferred without any consideration, the transaction is called „gift‟.
And, when ownership is transferred for money consideration, the transaction is called „sale‟.
Essentials of a valid sale:
1. The parties: seller and buyer:-There are two parties in a sale. The transferor is called seller and
the transferee is called purchaser. Seller and purchaser are also known as vendor and vendee.
Seller and purchaser both must be competent on the date when the sale is being made. The seller
must competent to contract. Therefore must be of sound mind and must have attained the age of
majority.
Competency alone is not sufficient. The seller must also have the right to sell the property. Since
only ownership may be transferred in a sale, therefore, the seller must be owner of property at the
time of effecting the sale.
2. The subject matter: immovable property:-T. P. Act deals with sale of only immovable property.
The subject matter of sale under section 54 is, therefore immovable property. An immovable
property is either tangible or intangible. The immovable property which may be subject matter of
sale means lands, benefit arising out of the land and the things attached to earth. Things attached to
earth include things embedded to earth, things attached to what is so embedded to earth and the
things rooted in the earth. But, standing timber, growing crops and grass are movable properties.
Except the standing timber, growing crops and grass, the land and all the beneficial interests in
lands are included in the term immovable property.
3. Money consideration, the price:-The money consideration which is called „price‟ is an essential
element of a sale. The price must be fixed or referred in the sale-deed. Its payment is not necessary
for completion of the transfer but its reference is necessary. The price may be paid at the time of
execution of the sale-deed. It may be paid in advance or after execution of the deed.
In all sales it is evident that price is an essential ingredient, and that where it is neither ascertained
nor rendered ascertainable, the contract of sale is void for incompleteness and incapable of
enforcement. If the ownership is transferred in exchange of any other kind of consideration, the
transfer is not sale. The money consideration may include any form of money.
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 Ex: Currency notes, coins, cheques or bank draft.

Where, under family settlement a party agreed to give up his share in property and agreed to sell
that property to another party, this agreement of settlement was regarded as consideration for sale.
The inadequacy of consideration is not any relevant factor for validity of a sale. Even where the
price is found to be less than the market value of the property, the sale is valid.

4. Conveyance, Mode of transfer:-Sale is transfer of ownership of an immovable property. Property

therefore must be transferred from seller to purchaser.
Mode of transfer of property:
a) Delivery of possession:-Where the property is tangible immovable property of a value less than
rupees one hundred the sale may be made by delivery of possession. Writing and registration is not
essential. In case of tangible immovable property valuing less than rupees one hundred, registration
is not compulsory; it is optional.
Oral sale of immovable property, which is possible only when the market-value is less than Rs. 100,
is completed merely by delivery of possession.
b) Registration of sale-deed:-Except in the sale of tangible immovable property valuing less than Rs.
100, in all cases of sale of immovable property, registration is compulsory. Registration is necessary
to complete the sale in following cases:

1. Where tangible property is of the value Rs. 100 or more.

2. Where the property is tangible immovable property of any valuation.
Duties of seller:
1. Seller‟s Duties before the sale:
Before the sale is completed, the seller‟s duties are as under:
a) Disclosure of material defects:Sec. 55(1) (a) says that before completion of sale, the seller is bound
to disclose to the buyer any latent material defect in the property or any defect in his own title.
The seller is bound to disclose is a defect which is known to the seller but the purchaser is not aware
of it. The buyer would be unaware of the defect if he is unable to know it because it is not apparent
or visible. Where the defect is of such a nature which is apparent and buyer or any person can
discover it with ordinary carefulness, the defect is patent.
Defect is material where it is of such nature that if it was known to the buyer, he would have either
not purchased the property or would have agreed to take it at lesser price.
Defect in the title or ownership rights of the seller is a latent defect which must be informed by the
seller to buyer. A right of easement would restrict the full enjoyment of the land, easements are
regarded as latent material defect in the title and seller is bound to give full information to the
buyer.

Where a seller does not disclose to the buyer any latent material defect in the property, the buyer
has a right to repudiate the contract of sale on the ground of misrepresentation. The buyer is also
entitled to claim damages for the loss incurred by him due to such rescission of contract.
b) Production of title-deeds:-Sec. 55(1) (b) of the Act provides that the next duty of the seller is to
produce the title-deeds of the property for inspection if buyer demands i5t for his satisfaction. There

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 is no duty to produce the title-deeds unless it has been demanded by the purchaser. But, if
demanded, the seller must produce it within reasonable time even if the agreement requires them to
be produced forthwith.

Seller‟s duty to produce the title-deeds for inspections arises only when the buyer request him for
the same. If buyer does not deemed, the seller has no such duty.
c) Answer relevant questions as to title:-Sec. 55(1) (c) says that since a buyer has to get ownership
of the property it is in his interest that he must be fully satisfied with the ownership rights of the
seller and his authority to effect the sale. the seller‟s duty is to answer all questions put by the buyer
which are relevant for passing of the title. The questions regarding title may be regarding identity of
the property, due execution of the sale-deed by competent persons or the validity of the attestation
of the deed.

d) Duty to execute conveyance:-The seller‟s duty is to execute the conveyance. He has to effect the
transfer of ownership. This is done by signing or affixing thumb impression on the sale-deed by the
seller. Where the seller does not sign or affix his mark on the sale-deed, there is no execution of the
sale-deed. This clause imposes a duty on the seller to execute proper conveyance but the buyer must
also tender the consideration amount due to the seller. This section provides that execution and
payment of price is to be made at a proper time and place. But such a proper time and place has not
been specified. The place and time both may be stipulated otherwise by the parties. In case there is
no stipulation fixing the time of execution and, the seller makes unreasonable delay in so doing, the
proper course is to give notice making time of the essence of the contract of sale.
e) Care of property and title-deeds:-Sec. 55(1) (e) of the Act says that after execution of the
conveyance, the next duty of the seller is to take care of the property and the documents of title. In
between the date of contract of sale and the delivery of property, although the seller continues to be
its owner yet, he has to keep the property intact so that it can be delivered to the buyer after the sale.

This duty continues up to the time when possession of property and title-deeds are given to the
buyer. If the seller neglects this obligation, the buyer is entitled to compensation. And this
compensation may be deducted from the price and if the conveyance has been completed, he is
entitled to recover damages.
f) Payment of the outgoings:-Sec. 55(1) (g) of the Act provides that before completion of sale, the
seller continues to be owner of the property. His duty before completion of sale is to pay all the
outgoings. Outgoings of a property are government dues or public charges such as revenue, taxes or
rents etc. due on the property.
Before completion of the sale, all the public charges or taxes due on the property must be paid by
the seller himself. Where the seller does not pay the outgoings or does not discharge the
encumbrances, and subsequently buyer has to pay it then, buyer is entitled to be reimbursement by
the seller. The buyer has a right to require the seller to produce evidence that property is free from
all encumbrances.
Ex: Where the vendor produces release of the mortgage, he must show that the release was signed
by the mortgagee or any person authorized by such mortgagee.

2. Seller‟s duties after sale:- Seller‟s duties after the completion of the sale are given below:

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a) Giving possession of property:-Sec. 55(1) (f) of the Act explains about the seller has a duty to give
possession of the property to buyer or to such person as he directs. There is an implied contract to
give the possession of the property to buyer.
The seller has to do it; he shall not leave the buyer to get the possession himself. In the case of
tangible immovable property, the possession is symbolic. Where the land was in possession of the
tenants and this fact was known to vendee, it was held that vendor was not bound to deliver vacant
possession and the vendee was entitled to only symbolic possession.
b) covenant for title:-Sec. 55(2) of the Act provides that sale is a transfer of ownership or absolute
interest. When a person contracts to sell his property, it is implied that he must be owner of that
property otherwise he would not have attempted to sell it. In every sale the seller impliedly
undertakes a guarantee that the interest which he is transferring subsists and he has authority to
transfer the same.
In every conveyance the seller is deemed to have contracted with the buyer that the interest being
transferred by him is owned by him and he has power to transfer it. The object of making statutory
duty of vendors is to prevent them from practicing fraud upon negligent purchases by selling
properties which they have no right to sell or selling interests larger than the buyer.
The buyer is given opportunity to inquire about the title and authority of the seller by imposing a
duty upon the seller to produce deeds of title on his demand. Where the seller effects the transfer in
some fiduciary capacity.
Ex: where the seller is guardian of minor‟s property or where he is a trustee of the property sold.
The seller is deemed to have only covenanted that he has done no act whereby the property is
encumbered or whereby he is hindered from transferring it.

The implied covenant for title shall be annexed to the property; it shall run with land. The benefit of
this section is available not only to the buyer but to every subsequent transferee and may be
enforced by anyone in whom that interest is vested for the while or any part thereto.
c) Delivery of the title-deeds: Sec. 55(3) of the Act provides that after completion of the sale when
buyer becomes owner of the property, he must also get the title-deeds which are the legal
documents relating to property sold. These documents are of no use to buyer. After sale, the title-
deeds are to pass on to the buyer as a natural consequences of the transfer of ownership. where such
documents or their certified copies are to be obtained from government-offices, the seller is liable to
bear the expenses in obtaining them.
Sec. 55(3) of the Act lays down the followings:
 Where the seller retains that part of property with him which is of greatest value and, such
property is included in the documents, the seller is entitled to retain all the documents with
him.
 where the whole of such property is sold to several buyers the person who purchases largest
part of property would be entitled to retain all the documents
RIGHTS AND LIABILITIES OF SELLER AND BUYER BEFORE AND AFTER
COMPLETION OF SALE.
1. Seller‟s rights before sale:-
Sec. 55 (4) (a) of the Act says that before completion of sale, the seller is entitled to all the rents,
profits or other beneficial interests of the property and sale is completed only upon the transfer of
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 ownership. Until ownership is transferred, the seller continues to be owner and as such he has every
right to enjoy the profits of the property.
Where the buyer takes possession of the property before completion of sale, the seller has right to
realize interest on unpaid purchase money. the fact that before transfer of ownership, the buyer
though not legally entitled to get any profit out of property, is presumed to have been getting the
benefit while in possession.
2. Seller‟s right after sale:-
Sec. 55 (4) (b) of the Act provides that after completion of sale, if the price or any of it remains
unpaid, the seller acquires a lien or charge on the property. When the sale is competed, the
ownership is transferred from seller to buyer. In such situation if price remains unpaid, the seller
can neither refuse delivery of possession nor can claim back the possession if already given to
buyer.

Seller‟s lien or charge:

In a charge, there is creation of a right of payment out of the property specified. Charge may be
created either by act of parties or by operation of law. The charge is statutory charge therefore, by
operation of law and the property specified for securing the payment of is the sale property.
Buyer‟s Duties:- a). Before completion of sale, the duties or liabilities of the buyer are as
under:
1. Duty of disclosure: Sec. 55 (5) (a) of the Act says that before completion of sale, the buyer is liable
to disclose to the seller the facts which materially increases the value of property.

Ex: Where the seller is an aged lady or an illiterate person, it may happen that seller is ignorant
about his own rights in property. Taking benefit of this lack of knowledge the buyer may persuade
the seller to sell the property at much lesser cost.
Under sec.55 (1) (a) of the Act provides that the seller has a duty to disclose to buyer latent material
defect which includes disclosure of also defect in his title if any. His non-disclosure amounts to
fraud.

The buyer too has been made liable to disclose to the seller his better rights or interests which is
unknown to him but buyer has the knowledge. So, when seller is expected to have good faith, the
buyer too is expected similar good faith in all that he says or does in respect of contract of sale.
2. Payment of price:-Sec. 55(5) (b) of the Act says that the execution of sale deed and payment of
price take place simultaneously. Therefore, for the completion of sale in favour of buyer, the seller
has the duty of execution of deed and buyer has corresponding duty of payment of price. But the
buyer is not bound to pay the full amount before transfer of ownership.

Where the property is encumbered but has been sold free from encumbrances without being
discharged by the vendor, the buyer is entitled to discharge the in cumbrances out of the purchase
money.
b) Buyer‟s duties after sale:
3. To bear the loss to property:-Sec. 55 (5) (C) of the Act says that after completion of sale, the
ownership is transferred from seller to buyer, after the sale, the buyer becomes owner of property
sold to him. If there is any loss to property subsequent to sale, it is the buyer who shall suffer that

76
 loss as owner of property. If after completion of sale, the value of property is reduced because of its
deterioration or destruction, the buyer is bound to suffer the loss.

Where the seller had insured the property against fire and after completion of sale the property is
destroyed or damaged by fire the buyer may require the seller to apply the insurance money for
restoring or repairing the property.
4. To pay the outgoings:-Sec. 55 (5) (d) of the Act provides that after completion of sale, since buyer
becomes owner of the property, he is liable to pay the outgoings.
Ex: Government dues, rents, revenue or taxes.
After the sale, together with ownership this liability is also transferred to buyer. It may be noted
that this liability is in between the seller and the buyer. Before transfer of ownership it is the
liability of seller and after it, this liability becomes that of the buyer.
Buyer‟s rights:
1. Buyer‟s rights before sale:-Sec. 55 (6) (b) of the Act says that before completion of sale, buyer has
a charge on the property for any sum of money which he had paid towards price or as an advance.
Where the sale does not take effect due to default of the seller or where the seller refuses to execute
the conveyance, the buyer has a right to recover all the sums paid together with interest.
After the contract of sale is constituted, the seller has to execute conveyance whereby ownership is
transferred. The buyer may pay a sum of money either as an advance or as part of the price. The
charge is enforceable not only against the seller but also against all persons claiming under him.
The buyer‟s charge for price paid in anticipation of sale exists even when the property has been
compulsory purchased by a competent authority.
2. Buyer‟s rights after sale:-Sec. 55 (6) (a) of the Act explains about the rights of buyer. After
completion of sale, the buyer becomes owner of the property. Therefore he is entitled to get all the
benefits arising out of that property with effect from the date of transfer of, ownership. The buyer is
entitled to get the rents, profits or produce or any other beneficial interest which are legal incidents
of that property.

CONTRACT OF SALE AGREEMENT TO SELL.

1. General term and includes both actual sale and agent to Ownership in the goods passes subsequent
sell ownership in the goods passes to the buyer to the contract.
immediately when the contract is made.
2. As ownership has passed to the buyer, the loss to the The seller is still the owner of the goods
goods has to be borne by the buyer. the loss has to be borne by him.
3. When the goods are passed to the buyer, if he neglects The seller is still the owner of goods, can
or refuses to pay according to the terms of contract, the dispose and may sue him for damages if
seller may sue for the price of the goods. the buyer wrongfully neglects or refuses to
accept and pay for goods.
4. If the seller breaks to deliver the goods or sells to a A buyer has also a right to claim
third party, the buyer may sue the seller not only for the compensation in rem (general)
breach of contract but also may sue him for the torts of
conversion and detinue.
5. If there is a breach of agreement to sell by the seller,
then the buyer has only a right in personam i.e, only a
personal remedy against the seller.
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Leases of immovable property
Definition of lease:
Sec. 150 of the Act defines the term lease. It is a transfer of right of enjoyment of an immovable
property made for a certain period, in consideration of a price paid or promise to be paid or, money,
share of crops, service or any other thing of value to be given periodically or an specified occasions
to the transferor by transferee.

Essential elements of lease:-The parties: lessor and lessee or transferor and transferee.
Lessor means, who transfers the right of enjoyment of his property must be a person competent to
contract and must also have right to transfer the possession of property.
Qualifications of lessor:-He must have attained the age of majority
He must have posses a sound mind at the time of granting the lease.
Minor cannot grant lease; lease executed by minor is void. Minor‟s guardian of property is
authorized to grant lease without court‟s permission for a term not exceeding five years or ensuring
for more than one year after minor‟s attaining majority.
Lesee:- Lessee must be competent tom contract at the date of execution. Lesee must be of the age
of majority and must be of sound mind. Lesee may be a juristic person.

Ex:- a company or a registered firm. But an unregistered firm is not juristic person. Therefore it
cannot be a competent lessee.
The demise: right to enjoy immovable property:-Lease is a transfer of right of enjoyment in an
immovable property. It is not a transfer of ownership; it is transfer of partial interest. In a lease too
partial or limited interest namely, the right of enjoyment of immovable property, is transferred,
lease is transfer of limited estate. This limited estate which is right of enjoyment of property, is
called demise.

In a lease, the property must be immovable. Immovable property here means not only land but
everything included in this term as defined in section 3 of this Act.
The term: Duration of lease:-The right of enjoyment must be given to the lessee for a certain
period of time. The period for which the right to use the property is transferred is called term of
lease. The term may be any period of time, longer or shorter, even for perpetuity. But it must be
specified in the deed. The time from which the right of enjoyment begins and the time when it ends
must be fixed and ascertainable.

All that is required is that duration of lease is ascertainable; it should not be uncertain or ambiguous.
The extent of the period during which a lease may remain effective may be perpetuity. Such leases
are termed as leases in perpetuity or, prominent leases.

Leases in perpetuity:-Leases in perpetuity are also called as permanent leases. Term is a necessary
element of every lease. Therefore, where the term of a lease is neither fixed nor ascertainable by
any other method, the lease may be valid only if it is a permanent lease.

Consideration: Premium or rent:- The contract of lease must be supported with some
consideration. Consideration in a lease may be premium or rent. Where the whole amount to be
recovered as consideration from the lessee is paid by him in lump sum, the consideration is called
premium.
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Consideration paid periodically is called rent of the lease. Rent may be paid in the form of services
rendered by lessee to the lessor. Rent may be paid also in the form of a share of crops.
Creation of lease:-Sec. 107 of the Act provides a lease which can be made only by registration.

Leases from year to year:-Where the lessor has no right to determine a lease at the end of a year
without giving notice, the lease if from year to year.

Leases for a term exceeding one year:-Where the term of a lease has been fixed exceeding one
year, registration is compulsory. A lease of fishery therefore, right to catch fish is a lease of an
immovable property; therefore if such lease is made for a term exceeding one year, it must be
registered.
Leases reserving an yearly rent:-Where the rent of a lease is reserved for the whole year, there is a
presumption that it is from year to year lease.

Permanent leases:-Permanent leases too are compulsorily registerable. Whether a lease is

permanent or not, depends on terms laid down in the deed and the object and the circumstances
under which the lease was created.

Presumption of permanent lease:-That no term is fixed in the lease That the instrument of lease
contains a provision for exercise of certain rights by legal heirs of lessor and lessee after death.
Liabilities of lessor:- Sec. 108 of the Act says liabilities of lessor:
1. Duty to disclose latent material defect:-Defect in the property is latent if it is not apparently
visible but the lessor has knowledge of it. Such defect is material if it is of substantial nature. It
must be of such nature that if lessee would have known it, he would either have not accepted the
lease or would have taken it no different terms and conditions.

The lessor is bound to inform only latent material defect in the property which may affect the
intended use or enjoyment of the property by lessee.

2. Duty to give possession:- Lease is transfer of the right to enjoy or use an immovable property.
Without possession, enjoyment of property is snot possible. Lessor is liable to deliver the
possession of property to lessee so that he may use or enjoy it.

Where a lessor fails to put the lessee in possession of property, the lessee can sue the lessor for
obtaining possession. And he may sue also for rent already paid and also claim damages from the
lessor. Where the lessee could get possession of only a part of the property he may repudiate the
whole lease.

Covenant for quiet enjoyment:- Lease being transfer of the right of enjoyment in an
immovable property, it is implied duty of lessor to ensure the lessee a peaceful enjoyment of this
right. The lessor is deemed to have contracted that during the term of lease if lessee continues to
pay the rent, he is entitled to possess the property without any interference. Quiet enjoyment means
no interference or objection in the lessee‟s possession of immovable property during the period of
lease.
Lessor duty to covenant for quiet enjoyment by lessee is indirectly connected with this duty to
covenant for perfect title in the property.

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Rights of lessee:
1. Right to accretions:- Accretions mean additions made to the property either by human being or
by operation of nature forces. If during the continuance of lease some ascertain is made to the
property, it is presumed to be a part of the property. Where the accretions are made by operation of
natural forces.

Ex: Accretions by alluvion, the lessee can enjoy it during the subsistence of the lease.

2. Right to avoid lease on destruction of property:- Where the property is rendered substantially
and permanently unfit for use due to fire, flood violence, mob or other uncontrollable reasons, the
lessee has a right to get the lease terminated before expiry to the term. If it becomes impossible due
to injury caused to property which makes it unfit for its use, the lessee must be given the right avoid
the lease.
The main point is that tenanted use by the tenanted property cannot be used for the purpose for
which the lease was made. Where the property destroyed by earthquake or cyclone could be made
fit for use by repairs, the lessee as no right to avoid the lease.
3. Right to deduct cost of repairs:-The lessor has no obligation to repair the property. But, under
an express agreement, the lessor may undertake the obligation of making necessary repairs in the
tenanted property.

Lessor‟s duty to repair the property may arise also under some local law or custom. Where the
lessor fails to repair the tenanted property despite express covenant or in violation of local law or
custom, the lessee has right to repair the property and deduct its cost from the rents. Lessee has right
to deduct the cost of repair only if lessor is bound to repair the property under an express covenant
or local law or custom.
4. Right to deduct outgoings:- It is the duty of lessor to pay the outgoings.

Ex: municipal taxes revenue and other public charges. But, since the lessee is interested in holding
the possession of property, he is entitled to pay such public charges to avoid its sale in default of
payment of these public charges. Where a lessee makes payment of the public charge in respect of
tenanted property, he has right to deduct the amount from the rents.
5. Right to remove fixtures:-After termination of lease, the lessee has right to remove the fixtures
made by him during continuance of the lease. Fixtures means all the things fixed or attached to
earth by him in the tenanted premises and includes trees, buildings and machinery.
6. Right to remove crops:- After termination of lease, the lessee is entitled to remove the crops
sown by him during subsistence of the lease. For removing and collecting all the crops growing on
the land, the lessee or his representatives are entitled to enter into the property after determination
of the lease.
7. Right to assign his interest:- A lessee has right to assign or transfer his right of enjoyment in the
property. Right of enjoyment of an immovable property is a property owned by lessee. He can
transfer it to any other person provided there is no prohibition imposed by lessor. A lessee‟s right to
assign his demise cannot extend beyond the term of his own lease.

Where a lessee transfers the leased property to a third person, it is a sub-lease. The lessee is entitled
to transfer his interest also by way of mortgage. the transferee of the lessee too gets the same

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interest which the original lessee had. But the original lessee continues to be subject to liabilities
attached to the lease.

Liabilities of the lessee:- Sec. 108 of the Act lays down the liabilities of the lessee.
1. Duty to disclose facts:-The lessee too is bound to disclose to the lessor any fact known to him
which increases the value of the property. In the tenanted land if lessee finds that there is a gold
mine, the lessee must inform this fact to lessor because it materially increases the value of property.
But breach of this duty by lessee does not amount to fraud and lessor cannot terminate the lease
upon such failure, the lessor may sue the lessee for damages.
2. Duty to pay rent:- The lessee is bound to pay the rent or premium as stipulated in the lease-
deed. It is obligatory on the tenant to pay or render the rent at proper time and place. But, the
tenants liability to pay rent begins from the date on which he takes possession and not from the date
on which the landlord signs the deed.

Where the property is leased to more than one lessee jointly, rent paid by any one is sufficient,
where the property leased is a joint property, rent paid to one lessor is deemed to be a valid payment
of rent to all the lessors.
3. Duty to maintain the property:- The lessee is bound to keep and maintain the property in the
same condition in which it was given to him. He has, to take reasonable care in keeping the property
in good condition. The degree of care expected from him is whether he has kept the property in the
same condition in which it was given to him.

The duty involves repairs to the property which becomes necessary due to his use or enjoinment.
The lessee is not liable for any change in the property due to his use or the result of his use of
property.
4. Duty to give notice of encroachment:-If the lessee comes to know that enforcement has been
made on the property in his possession, it is his duty to inform the lessor so that he may take proper
action.

Where a lessee becomes aware of any encroachment or interference of any suit or proceeding in
respect of the leased property, the lesee is bound to give notice of this fact to lessor so that lessor
may protect his interest.
5. Duty to use the property reasonably:- The lessee has a duty to use and enjoy the tenanted
property as a person of ordinary prudence would use his own property. The ordinary rights of a
lessee in the absence of any special agreement regarding use of the property, reasonable use of
property means that lessee must not do following acts: he must not use or allow others to use the
property for purpose other than for which it was leased to him.
He must not cut down the trees or timber on the land and sell it. He must not pull down or damage
the lessor‟s buildings. He must not work mines or quarries on the land leased to him if such work
was not started at the time when the land was given to him. He must not do any such act which is
destructive or permanently injurious thereto.

6. Duty not to erect permanent structure:- The lessee cannot erect any permanent structure on the
leased property without the consent of lessor.

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If a lessee makes permanent constructions without lessor‟s consent, he is entitled to remove them
without causing damage to the tenanted property. If the permanent structures on the leased property
are not removed by lessee, then on the expiry of lease they belong to the landlord.

7. Duty to restore possession:- Lease is a transfer of right of enjoyment in immovable property to

lessee for specific period and during the subsistence of the lease. Accordingly, upon the expiry of
the term or determination of lease before its expiry the lessee must re-transfer the possession to the
lessor. It is the duty of the lessee to vacate the possession and restore it to the lessor after expiry of
the term.

If the lessee continues the possession after expiry of the term, his occupation is unauthorized
possession. Where the tenant did not vacate the tenanted premises after notice of termination of
tenancy by efflux of time.
The lessee was liable to pay damages and also mesne profits to lessor. And the damages can be
awarded at market rate for use and occupation of property after tenancy coming to an end, but such
damages should not be penal and unconscionable.

DETERMINATION OF LEASE:
Sec. 111 of the Contract Act deals with the various situations in which a lease is determined.
1. By lapse of time:-Lease is transfer of demise for a certain period. After expiry of the period
specified in the lease, the lease is automatically determined, if there is a stipulation for its renewal,
the lease continues even after expiry of the fixed period.

When the lease for a fixed term is determined after the lapse of time, it comes to an end
automatically and no notice is necessary for determination of lease.

2. By happening of specified event:-The term of a lease may be made subject to certain condition
such as happening of some specified event. If the term is limited conditionally on the happening of
a future event, the lease determines upon the happening of that event.

Ex: where a lease is made for a term of thirty years or upon the death of lessee whichever is earlier,
then lease shall come to an end if lessee dies before expiry of thirty years. A lease for the life of
tenant determines upon the death of the tenant. A lease for the period of war comes to an end upon
declaration of peace.
3. Termination of lessor‟s interest:- Where the lessor‟s own interest in immovable property is
limited, the lease comes to an end upon the termination of lessor‟s interest. Where a lessee sub-
lets the property, the sub-lease comes to end upon the death of lessee. Where a person is given
an authority to make lease, the lease made by him determines when that authority is taken away.
4. By merger:- Merger means meeting of one interest with another interest. When a limited
interest becomes absolute interest, there is merger because smaller interest merges with larger
interest.
“Nemo potest esse tenens et deminus” means nobody can be both, landlord and tenant at the same
property. Where the interest of co-owners is acquired by lessee before expiry of the term, the lease
is determined and lessee becomes owner of the promises.
5. By express surrender:- Surrender is opposite of merger. In a merger, a larger interest is
merged with smaller interest whereas in surrender the smaller interest unites with larger one.

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 But, in both, the lease is determined because two interests unit. Where a lessee vacates the
premises before expiry of the term, lessee‟s smaller interest reverts back to lessor‟s reversion.
6. By implied surrender:-Surrender is implied if it takes place by operation of law. By operation
of law, there is surrender (i) by creation of a new lease or (ii )By relinquishment of possession.
When a lessee accepts from the lessor a new lease of the same property which is already leased
to him, there is implied surrender of the earlier lease. The former lease is thereby impliedly
determined. When a lessee accepts an office inconsistent with lease, there is implied surrender.

Ex: Where lessee accepts the lease by remaining in possession as a servant of lessor there is
implied surrender because any possession by servant of lessor there is implies surrender because
any possession by servant is treated as possession by master. But, there is no implied surrender if
the former and the new leases are in respect of different rights in the immovable property.

7. By forfeiture:-A lease is determined by forfeiture on following grounds:

Breach of express condition by lessee:- When the lessor imposes upon the lessee any express
condition and lessee fails to perform that condition there is breach of condition by lessee. The
lessee‟s right under the lease is lost upon breach of such condition.

Express condition laid down by lessor:-The lessor‟s right to resume possession upon breach of
condition.
Denial of landlord‟s title:-Lesse has only a limited right in respect of the tenanted property; he is
not owner. When the lessee claims to be owner of the tenanted property he denies the status of
landlord. But, by so doing he also denies his own status of tenant. A tenant incurring for forfeiture
of tenancy by denying title of landlord is not entitled to protection sufficient, it must be a direct
repudiation of the landlord. But, by so doing he also denies his own status of tenant. A tenant
incurring for forfeiture of tenancy by denying title of landlord is not entitled to protection. In order
to make a disclaimer sufficient, it must be a direct repudiation of the relation of the landlord and
tenant. Such disclaimer may be verbal or written. But, disclaimer or repudiation by lessee must be
clearly made in the express words and prior to the notice to quit.

Insolvency of lessee:- Insolvency of the lessee by itself does not forfeit the lease. There must be a
stipulation between the parties the lessee‟s right shall be lost in case of his insolvency and lesser
would be entitled to resume possession.

When the lessee commits any lapse on his part, the lessor gets right to forfeit the lease before expiry
of the term. But, for determination of lease, written notice by lessor must be given to the lessee.
8. By expiry of notice to quit:- Sec. 160 if the Act provides that for termination of periodical
lease.
Ex: Lease from year to year or month to month, notice is necessary. Where the term fixed, no
notice is required because such leases determine by expiry of the term.
Where notice is necessary to terminate the lease, the lease is determined after expiry of the notice to
quit. In year to year leases the notice expires after six months and in month to month leases, the
notice expires after fifteen days.
HOLDING OVER
Tenant-at-sufferance:-After determination of lease, the lessee has no right to continue possession.
Where the lessee continues possession of the property after determination of lease, his possession is
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legal. The legal position of such lessee is that he is having a possession without any right. A lessee
who continues possession after determination of lease is technically called as Tenant-At-Sufferance.
Tenant by holding over:- After determination of lease if the lessee continues to hold possession
with consent of lesser, the lessee is called a tenant by holding over. A tenant-at-sufferance continues
to hold over the possession after determination of lease without consent of the landlord whereas; a
tenant holding over continues such possession with the consent of landlord.

EFFECT OF HOLDING OVER:-Sec. 116 of the Act says: If a lessee or under lessee of property
remains in possession thereof after the determination of the lease granted to the lessee, and the
lessor or his legal representative accepts rent from the lessee or under-lessee, or otherwise assents to
his continuing in possession the lease is, in the absence of an agreement to the contrary, renewed
from year to year, or from month to month, according to the purpose for which the property is
leased, as specified in Section 106.
Ex:-A lets a farm to B for the life of C. C dies, but B continues in possession with A‟s assent. B‟s
lease is renewed from year to year.

Conditions:- The tenant must be in possession of the property after determination of lease. The
lessor or his representative must accept rent or otherwise give his express or implied consent to
lessee‟s possession.
Sec. 116 of the Act provides only where the original lease was fixed for year to year or month to
month. It does not apply where the original lease was a lease for life of lessee.
The consent, express or implied, of the lessor is necessary. Acceptance of rents by the lessor implies
his assent for lessee‟s possession of property after determination of lease. Whether a tenancy has
been created by holding over or not, is a question of fact. And, from acceptance of rent from lessee
or under-lessee after expiry of lease, it can be fairly inferred that lessor has agreed to the holding
over.
Ex: A lets a house to B for five year. B under-lets the house to C at a monthly rent of Rs.100. After
expiry of five years, C‟s lease is renewed under section 166 of the Act.

The acceptance of increased rent by the landlord, his assent to tenant continuing in possession after
expiry of the lease can easily be inferred. There is creation of tenancy from month to month; the
tenant bank is entitled to get protection from being evicted on expiry of the stipulated period of
lease. A tenant who continues possession without landlord‟s consent or acquiescence, is not a tenant
holding over, but a tenant at sufferance. If the landlord received rents from tenant who continues
possession after expiry of the term and is protected by the Rent Acts. While the statutory tenancy
continues, acceptance of rent by landlord by itself will not afford ground for holding that he
assented to new tenancy.
He is entitled to sublet the holding. With the assent of the lessor, a tenant by holding over can affect
a valid mortgage of the property in his possession even after the expiry of the original lease.

EXCHANGE
Definition of exchange:- Sec. 118 of the T. P. Act defines when two 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.
Essential features of exchange:-

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Transfer of ownership:- Exchange is a transfer of ownership in some existing property. The
ownership of one party must be exclusive of the ownership of the other, when partition is effected it
is not an exchange. But, where A and B are co-owners of a property X and B in consideration of B
transferring Y to A, transfer is exchange.
Properties need not be immovable:- Ownership in immovable property may be transferred in
return of ownership in movable property. Transfer of immovable with another immovable plus
some movable, is also an exchange. Where property is transferred for consideration of another
property and some money is also paid for bringing out equality of valuation, the transaction is
exchange.
Exchange includes barter:- Transfer of ownership in some movable property in consideration of
transfer of ownership in another movable property is technically called barter.
Mode of transfer:- The transfer by way of exchange must be completed with the same formalities
as are required for completion of sale. Where both properties are movable, exchange may be
effected by delivery of possession; registration is not compulsory. If properties are immovable and
are of the value exceeding Rs. 100, registration of the document is compulsory.

Where immovable properties are valued less than Rs. 100, registration is optional; it is not
compulsory and the delivery of possession is sufficient to complete the transfer. An unregistered
deed of exchange would not confer a legal title to the lands exchanged yet, a party to the exchange
acquires full title to the property by continuous possession for over twelve years openly and
adversely to the other party to exchange.

Sec. 119 of the Act deals with the rights of party who is deprived of lawful title in the property
received by him in exchange. Exchange is mutual transfer of ownership between two persons.

Where a party to exchange is deprived of the property due to defect in its title, he has following two
remedies, those are:

He may claim return of the property transferred by him to other party provided the property is till in
the possession of that party.

He may claim compensation from the other party for the loss incurred due to such defective title.

Each party warrants his title to the things which he had transferred by way of exchange. The rights
available to the aggrieved party are either return of the property or, if such return is not possible, to
claim compensation. Equity would suggest that if one of the parties is unable to get the possession
of property which he is entitled to receive in exchange, he has right to claim the return of his own
property transferred by him.
The right to sue the other party or any person claiming under him is available so long as they are in
possession of the same.

Ex: A exchanged certain properties from B but A is deprived of a portion of property which he got
from B because it has passed into the possession of a trespasser. Here A‟s remedy is to claim
compensation from B not from the trespasser.

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Rights and liabilities of parties:- Sec. 120 provides for the rights and liabilities of the parties to
exchange. Under this section the rights and duties of the parties to an exchange of immovable
property are the same as that of seller and buyer given in section 55 of the Act.
ACTIONABLE CLAIMS:- Sec. 3 of the T. P. Act defines actionable claims; it includes
a).unsecured debt b).beneficial interest in movables not in possession of the claimant. Movables
were classified into two categories. Movables which are Those in possession are tangible movable
properties.

Ex:- Table, Television, Car etc.

Movables which were „chose in action‟ are intangible movable properties.
Ex:- Claim of money or, claim of movables that is beneficial interest in the movable properties.

Sec. 130 says that actionable claims are transferable properties. Any kind of transfer, for Ex: Sale,
gift, exchange or mortgage of an actionable claim is possible.
Mode of assignment:- According to Section 130, transfer of actionable claims, whether with or
without consideration, must be made by an instrument in writing. The instrument must be signed by
the transferor or by his duly authorized agent. There cannot be oral assignment of any actionable
claim. If there is an endorsement transferring the right under a promissory note, the actionable claim
is deemed to be transferred and the transferee is in position to recover money due under the
promissory note without obtaining a decree on the debt itself.

Effect of assignment:- Transfer of actionable claims takes effect after execution of the instrument.
The execution is complete when the transferor puts his signature or thumb impression. After
execution, all the rights and remedies of the transferor pass on to the transferee. The assignee
himself becomes entitled to recover the claims and sue on his own name.

Notice of Assignment:- Notice of the assignment of actionable claim to debtor is not necessary for
completing the transfer. But, until the debtor gets notice of the fact that the claim has been assigned
to a third person, his dealings with original creditor shall be protected under the law.
Marine or, fire policies are exempted from the provisions of this section, Insurance Act 1938.

Notice to be in writing, signed:- Section 130-A says, Notice is not necessary to perfect the title of
the assignment of a debt. But until the debtor receives notice of the assignment in accordance with
law, his dealings with the original creditor will be protected. In the absence of notice, the transferee
shall lose his claim which is paid to the transferor. Following two requirements for a valid notice.
The notice must be in writing and state the name and address of the transferee. It must be signed by
the transferor or his duly authorized agent or, where transferor refuses to sign, it must be signed by
the transferee or his agent.
Liability of transferee of actionable claim:- Section 132 of the Act provides that, after execution
of the instrument assigning actionable claim, all the rights and liabilities in respect of the claim pass
on from transferor to the transferee. The liabilities and equities, to which the transferor was subject
to at the date of transfer, become the liabilities and equities of the transferee. Transferor can get no
better title than the transferor. The assignee is bound by the liabilities of the assignor in respect of
the claim being transferred even if the assignee had no notice of such liabilities.

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 Who cannot be assignees of actionable claims:- Section 136 enacts that certain persons, specified
therein, cannot be assignees of actionable claims. Transfer of actionable claims is a transfer of
property. As such, transferor and transferee both must be competent persons and the property must
also be transferable within the meaning of Section 6 of his Act. Section 136 specifies the person
who are legally disqualified to be transferee for the transfer of actionable claims. According to this
section no Judge, legal practitioner or officer connected with any court of justice shall buy or traffic
in or, stipulate for or agree to receive any share or interest in any actionable claim.
GIFTS
SCOPE –MEANING -Definition of Gift

Section 122 defines gift as under, „Gift is the transfer of certain existing movable or immovable
property made voluntarily and without consideration, by one person called the donor, to another,
called the donee, and accepted by or on behalf of the donee.
Gift is gratuitous transfer of ownership in some existing property made voluntarily. It includes gift
of both movable as well as immovable property. The transferor is called donor and the transferee is
called done.

DONOR:- Donor must be a competent to person. For competency, the donor must have capacity as
well as right to make the gift. If the donor has capacity to contract he is deemed to have the capacity
to make the gift. Thus, at the time of gift, the donor must be of the age of majority and must have a
sound mind.
DONEE:- Donee need not be competent to contract. Donee may be any person in existence at the
date of making of gift. A gift made to minor or insane person or even in favor of a child in mother‟s
womb is valid provided it is lawfully accepted by a competent person on his or her behalf.

ESSENTIAL ELEMENTS OF GIFT

(1) There must be transfer of ownership.
(2) The property must be existing property.
(3) Transfer is without consideration.
(4) The transfer is made voluntarily i.e. with free consent.
(5) Gift must be accepted by transferee.
1. TRANFER OF OWNERSHIP:- Gift is transfer of ownership I.e. absolute interest. The transferor
(donor) must divest himself of the absolute interest in the property and vest in the transferee (donee).
The donor must intend to pass on all the rights and liabilities in respect of property to donee. Nothing
less than ownership may be transferred by way of gift.

2. EXISTING PROPERTY:- The property, which is the subject matter of gift, may either be movable or
immovable. It may be tangible or intangible. Actionable claims or montages are intangible properties
and may be gifted. Property may be of any kind but two conditions are necessary. (i)The property must
be in existence at the date of making of the gift. (ii)The property must be transferable within the
meaning of Section 5 of this Act. Gift of spes-successions or mere chance of inheriting property or mere
right to sue, is void.
3. NO COSIDERATION:- An essential feature of a gift is that it must be gratuitous. Ownership must be
transferred without any consideration. The value of consideration is immaterial. Even a negligible
property or, very small sum or money given by transferee in consideration of a transfer of ownership in a
big property would make the transaction either a sale or exchange.
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 4 VOLUNTARILY:- The donor must make the gift voluntarily. „Voluntarily‟ here means that donor has
made the gift in exercise of his own free will and his consent is a free consent. His consent is free when
he has complete freedom of making the gift without any force, fraud, coercion or undue influence. The
donor must have an independent and free will in executing the deed of gift.
5. ACCEPTANCE OF GIFT:- Gift must be accepted by donee. Property cannot be given to a person
even in gift against his consent. The donee may refuse the gift. For Ex: when it is non-beneficial
property or onerous gift.
Transfer how effected:- Sec.123 provides that for the purposes of making a gift of immovable property,
the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested
by at least two witnesses.
For the purpose of making a gift of movable property, the transfer may be effected either by a registered
instrument signed as aforesaid or by delivery. Such delivery may be made in the same way as goods sold
may be delivered.

Modes of making gift:- Sec.123 lays down two modes for effecting a gift depending on the nature of the
property.
1. Immovable properties: A gift of immovable property must be made only through a registered
document. Gift of a price of land valuing less than rupees one hundred must also be registered.
Registration of a document including gift-deed implies that the transaction is in writing, signed by the
executants, attested by two competent persons and duly stamped before the registration formalities are
officially complete.

Without due compliance of these formalities, the gifted-property cannot be said to have been transferred
to the donee.
Requirement of Registration of gift:
1. Although registration of gift of immovable property is must but, the gift is not suspended
till registration. A gift may be registered and made enforce at law even after the death of
the donor provided the essential conditions are fulfilled.
2. `Where the essential conditions for a valid gift are not fulfilled, registration shall not
validate the gift.
2. Movable properties:- Gift of movable properties may be completed by delivery of possession.
Registration is optional; is not compulsory. The mode of delivering the property to donee depends upon
the nature of property. All that is necessary is that donee gets title as well as possession of the gifted
property.
3. Actionable claims:- Actionable claims are unsecured money debts or right to claim movables not in
possession of the claimant. Actionable claims may be transferred by an instrument in writing signed by
transferor or his authorized agent. Registration and delivery of possession is not necessary.

Revocation or suspension of gift:- Sec.126 provides that a gift may be suspended or revoked. It lays down
two modes of revocation of gift 1. Revocation by mutual agreement of donor and done; 2. Revocation
by rescission in case of contracts.
1. Revocation by mutual agreement: - donor and donee may agree that the gift shall be
suspended or revoked upon the happening of an event not dependent on the will of the donor.
The condition revoking the gift must be express.
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 2. Revocation by rescission in case of contracts:- gift is gratuitous transfer of ownership made
voluntarily. If it could be proved that the gift was not made voluntarily i.e., the consent of the
donor was not free the gift must be rovoked.
Disqualified donee
Where an onerous gift is made to a disqualified donee.

Ex: Minor and such donee accepts the gift, he has a right to repudiate the gift on attaining the age of
majority. An onerous gift made to a minor donee and accepted by him does not become binding on him
unless on attaining majority he ratifies the acceptance. On attaining majority he may accept or reject the
whole gift.

Universal Gifts
Sec. 128 of the Act says universal donee is a person who gets all the properties, movable or immovable, of
the donor under a gift. Where donor makes gift of his whole property without retaining anything for
himself, the donee is called an universal donee.

Where a gift consists of donor‟s whole property, the donee is personally liable for all the debts and
liabilities of the donor due at the time of the gift. His liability is only to the extent of the property
comprised in the gift.

Important points:-
1. The donee is an universal donee. If some property, movable or immovable is excluded from gift,
the donee is not universal donee.

2. Universal donee‟s liabilities are limited to the extent of the property receive by him in gift. If the
liabilities or debts exceed the market value of the whole property, the universal donee is not liable
for the excess part of it.

4. Onerous Gifts:-Sec. 127 of the Act says onerous means burdened. Onerous gift is a gift of such
property which is burdened with liabilities. It is a gift of non-beneficial property. Where a single gift
consists of several properties some of which are onerous and the other are beneficial, the donee must accept
the whole gift, he cannot be allowed to accept beneficial part of gift and reject the onerous one. This rule is
based on the maxim “quisensit commodum debet et sentire onus” which means that one who accepts the
benefit of a transaction must also accept the burden of it.

Ex: A has shares in X which is a prosperous company and also shares in Y which is a company running in
loss. A makes a gift to B of all his shares in both the companies. B refuses to accept the shares in company.
B cannot take the gift of shares in X.

Onerous and beneficial properties are transferred by way of a single gift. If a gift is made in the form of two
more independent gifts to the same person, the donee is at liberty to accept the beneficial and refuse the
onerous property. Since the gifts are independent of each other that is do not form part of the same
transaction, the donee in such cases is not bound to accept both the gifts.

Ex: A having a lease for a term of years of a house at a rent which is more than the house can be let for. He
gives the lease to B and as a separate and independent transaction gives to B also a sum of money. B
refuses to accept the lease because it is not beneficial to him. But he does not forfeit his claim to money; he
would get the money.
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 UNIT – V

LAW OF TRUSTS WITH FIDUCIARY RELATIONS

Definition of Trust:- Sec. 3 of the Indian Trust Act says trust is an obligation annexed to the
ownership of property and arising out of a confidence reposed in and accepted by the owner, or
declared and accepted by him, for the benefit of another, or of another and the owner.

The person who reposes or declares the confidence is called the" author of the trust": the person
who accepts the confidence is called the" trustee": the person for whose benefit the confidence is
accepted is called the" beneficiary": the subject- matter of the trust is called" trust- property" or"
trust- money": the" beneficial interest" or" interest" of the beneficiary is his right against the trustee
as owner of the trust- property.

A trust can be created for any lawful purpose. A trust can be created by deed, will or even word of
mouth. However, trust of immovable property can be created only by non-testamentary instrument
signed by author of trust and is registered, or by will of author is not required to be registered, even
if it pertains to immovable property.

DUTIES OF TRUSTEE

3. Trustee is not bound to accept the trust once accepted, he cannot renounce it except permission
of civil court or beneficiary or by virtue of special power in the instrument of trust.
4. Once trustee accepts trust, he is bound to fulfill the purpose of trust and to obey directions
given at the time of creation of the trust. It can be modified with consent of beneficiary.
5. His duties are inform himself of state of trust property Protect title to trust property not to set up
title adverse to beneficiary.
6. Take care of property as a man of ordinary prudence would deal with such property as own
property.
7. To prevent waste Keep proper accounts and information and Invest trust-money in prescribed
securities and not others Trustee is liable for breach of trust. „Breach of trust‟ means a breach of
duty imposed on a trustee, as such, by any law for the time being in force.

RIGHTS OF TRUSTEE

Trustee has following powers

1. Rights to title deed

2. Right to reimbursement of expenses
3. Right to indemnify from gainer by breach of trust
4. Right to apply to court for opinion on management of trust property
5. Right to settlement of accounts
6. Power to convey property when he is authorized to sell
7. Power to vary investments (from one security to another
8. Power to apply property of minors for their maintenance
9. Power to give receipts
10. Power to compound or compromise

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RIGHTS OF BENEFICIARY

The beneficiary has the following rights:-

1. Rights to rent and profits Right to specific execution of intention of author of trust
2. Right to inspect and take copies of instrument of trust, accounts etc.
3. Right to transfer beneficial interest
4. Right to sue for execution of trust

Liabilities of Beneficiary:- Beneficiary is one who perform only one duty that is, follow trust
property into hands of third person and into which it has been converted. A beneficiary is liable if
he joins in breach of trust.

REVOCATION OF TRUST

A trust created by will can be revoked at the pleasure of testator. A trust created otherwise by will
can be revoked.

(a) By consent of all beneficiaries if they are competent to contract.

(b) In exercise of power of revocation expressly reserved by author of trust, if the trust has been
declared by a non-testatory instrument or by word of mouth.

(c) At pleasure of author of trust, if the trust is for payment of debts and the author of trust has not
communicated to the creditors.

Kinds of Trusts:-Trusts fall into two basic categories: testamentary and inter vivos.

A testamentary trust is one created by your will, and it does not come into existence until you die.
In contrast, an inter vivos trust starts during your lifetime. You create it now and it exists during
your life.

There are two kinds of inter vivos trusts: revocable and irrevocable.

1. Revocable Trusts:- Revocable trusts are often referred to as "living" trusts. With a
revocable trust, the person who created the trust, called the "grantor" or "donor," maintains
complete control over the trust and may amend, revoke or terminate the trust at any time.
This means that you, the donor, can take back the funds you put in the trust or change the
trust's terms. Thus, the donor is able to reap the benefits of the trust arrangement while
maintaining the ability to change the trust at any time prior to death.
Revocable trusts are generally used for the following purposes:
i. Asset management. They permit the named trustee to administer and invest the trust
property for the benefit of one or more beneficiaries.

ii. Probate avoidance. At the death of the trust grantor, the trust property passes to whoever is
named in the trust. It does not come under the jurisdiction of the probate court and its
distribution need not be held up by the probate process. However, the property of a revocable
trust will be included in the grantor's estate for tax purposes.

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iii. Tax planning. While the assets of a revocable trust will be included in the grantor's taxable
estate, the trust can be drafted so that the assets will not be included in the estates of the
beneficiaries, thus avoiding taxes when the beneficiaries die.
2. Irrevocable Trusts:- An irrevocable trust cannot be changed or amended by the grantor.
Any property placed into the trust may only be distributed by the trustee as provided for in
the trust document itself. For instance, the grantor may set up a trust under which he or she
will receive income earned on the trust property, but that bars access to the trust principal.
This type of irrevocable trust is a popular tool for Medicaid planning.
Testamentary Trusts:- As noted above, a testamentary trust is a trust created by a will. Such a
trust has no power or effect until the will of the grantor is probated. Although a testamentary trust
will not avoid the need for probate and will become a public document as it is a part of the will, it
can be useful in accomplishing other estate planning goals. For instance, the testamentary trust can
be used to reduce estate taxes on the death of a spouse or to provide for the care of a disabled child.
Supplemental Needs Trusts:- The purpose of a supplemental needs trust is to enable the donor to
provide for the continuing care of a disabled spouse, child, relative or friend. The beneficiary of a
well-drafted supplemental needs trust will have access to the trust assets for purposes other than
those provided by public benefits programs. In this way, the beneficiary will not lose eligibility for
benefits such as Supplemental Security Income, Medicaid and low-income housing. A supplemental
needs trust can be created by the grantor during life or be part of a will.

THE CREATION OF TRUSTS:- A trust may be created for any lawful purpose. The purpose of a
trust is lawful unless it is

(a) forbidden by law, or (b) is of such a nature that, if permitted, it would defeat the provisions of
any law, or (c) is fraudulent, or (d) involves or implies injury to the person or property of another,
or (e) the court regards it as immoral or opposed to public policy. Every trust of which the purpose
is unlawful is void. And where a trust is created for two purposes, of which one is lawful and the
other unlawful, and the two purposes, cannot be separated, the whole trust is void.

Explanation: In this section, the expression "law" includes, where the trust property is immovable
and situate in a foreign country, the law of such country.

Illustrations:- (a) A conveys property to B in trust to apply the profits to the nurture of female
foundlings to be trained up as prostitutes. The trust is void.

(b) A bequeaths property to B in trust to employ it in carrying on a smuggling business, and out of
the profits thereof to support A's children. The trust is void.

Trust of immovable property:- No trust in relation to immovable property is valid unless declared
by a non-testamentary instrument in writing signed by the author of the trust or the trustee and
registered or by the will of the author of the trust or of the trustee.

Trust, of movable property: No trust in relation to movable property is valid unless declared as
aforesaid, or unless the ownership of the property is transferred to the trustee. These rules do not
apply where they would operate so as to effectuate a fraud.

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Creation of trust/appointment of trustee:- Subject to the provisions of section 5, a trust is created
when the author of the trust indicates with reasonable certainty by any words or acts (a) an intention
on his part to create thereby a trust, (b) the purpose of the trust, (c) the beneficiary, and (d) the trust
property, and (unless the trust is declared by will or the author of the trust is himself to be the
trustee) transferred the trust-property to the trustee.

Illustrations: (a) A bequeaths certain property to B, "having the fullest confidence that he will
dispose of it for the benefit of C". This creates a trust so far as regards A and C.

(b) A bequeaths certain property to B, "hoping he will continue it in the family". This does not
create a trust, as the beneficiary is not indicated with reasonable certainty.

Who may create trusts?: - A trust may be created (a) By every person competent to contract, and
(b) With the permission of a principal civil court of original jurisdiction, by or on behalf of a minor,
but subject in each case to the law for the time being in force as to the circumstances and extent in
and to which the author of the trust may dispose of the trust property.

Subject matter of trust: The subject-matter of a trust must be property transferable to the
beneficiary. It must not be merely beneficial interest under a subsisting trust.

Who may be beneficiary? :- Every person capable of holding property may be a beneficiary.

Disclaimer by beneficiary:- A proposed beneficiary may renounce his interest under the trust by
disclaimer addressed to the trustee, or by setting up, with notice of the trust, a claim inconsistent
therewith. Who may be trustee, every person capable of holding property may be a trustee; but,
where the trust involves the exercise of discretion, he cannot execute it unless he is competent to
contract.

No one bound to accept trust:- No one is bound to accept a trust. Acceptance of trust: A trust is
accepted by any words or acts of the trustee indicating with reasonable certainty such acceptance.
Disclaimer of trust Instead of accepting a trust, the intended trustee may, within a reasonable period,
disclaim it, and such disclaimer shall prevent the trust-property from vesting in him. A disclaimer
by one of two or more co-trustees vests the trust-property in the other or others, and makes him or
them sole trustee or trustees from the date of the creation of the trust.

Illustrations: (a) A bequeaths certain property to B and C, his executors, as trustees for D. B and C
prove A's will. This is in itself an acceptance of the trust, and B and C hold the property in trust for
D.

(b) A transfers certain property to B in trust to sell it and to pay out of the proceeds A‟s debts. B
accepts the trust and sells the property. So far as regards B, a trust of the proceeds is created for A's
creditors.

DUTIES AND LIABILITIES OF TRUSTEES: Trustee to execute trust:- The trustee is bound
to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the
time of its creation, except as modified by the consent of all the beneficiaries being competent to
contract. Where the beneficiary is incompetent to contract, his consent may, for the purposes of this
section, be given by a principal civil court of original jurisdiction. Nothing in this section shall be
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deemed to require a trustee to obey any direction when to do so would be impracticable, illegal or
manifestly injurious to the beneficiaries.

Illustrations:- (a) A, a trustee, is simply authorised to sell certain land by public auction. He cannot
sell the land by private contract.

(b) A, a trustee of certain land for X, Y and Z, is authorized to sell the land to B for a specified sum.
X, Y and Z, being competent to contract, consent that A may sell the land to C for a less sum. A
may sell the land accordingly.

(c) A, a trustee for B and her children, is directed by the author of the trust to lend, on B's request,
trust-property to B's husband C, on the security of his bond. C becomes insolvent and B requests A
to make the loan. A may refuse to make it. Trustee to inform himself of state of trust-property A
trustee is bound to acquaint himself, as soon as possible, with the nature and circumstances of the
trust-property; to obtain, where necessary, a transfer of the trust property to himself; and (subject to
the provisions of the instrument of trust) to get in trust-moneys invested on insufficient or
hazardous security.

Illustrations:- (a) The trust-property is a debt outstanding on personal security. The instrument of
trust gives the trustee no discretionary power to leave the debt so outstanding. The trustee's duty is
to recover the debt without unnecessary delay.

(b) The trust-property is money in the hands of one of two co-trustees. No discretionary power is
given by the instrument of trust. The other co-trustee must not allow the former to retain the money
for a longer period than the circumstances of the case required.

Trustee to protect title to trust-property:- A trustee is bound to maintain and defend all such
suits, and (subject to the provisions of the instrument of trust) to take such other steps as, regard
being had to the nature and amount or value of the trust-property, may be reasonably requisite for
the preservation of the trust-property and the assertion or protection of the title thereto.

Illustration:- The trust-property is immovable property which has been given to the author of the
trust by an unregistered instrument. Subject to the provisions of the Indian Registration Act, 1877 (3
of 1877), the trustee's duty is to cause the instrument to be registered.

Trustee not to set up title adverse to beneficiary:-The trustee must not for himself or another set
up or aid any title to the trust-property adverse to the interest of the beneficiary.

Care required from trustee:-A trustee is bound to deal with the trust-property as carefully as a
man of ordinary prudence would deal with such property if it were his own; and, in the absence of
a contract to the contrary, a trustee so dealing is not responsible for the loss, destruction or
deterioration of the trust-property.

Illustrations:- (a) A, living in Calcutta, is a trustee for B, living in Bombay. A remits trust funds to
B by bills drawn by a person of undoubted credit in favour of the trustee as such, and payable at
Bombay. The bills are dishonoured. A is not bound to make good the loss.

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(b) A, trustee of leasehold property, directs the tenant to pay the rents on account of the trust to a
banker, B, then in credit. The rents are accordingly paid to B, and A leaves the money with B only
till wanted. Before the money is drawn out, B becomes insolvent. A, having had no reason to
believe that B was in insolvent circumstances, is not bound to make good the loss.(c) A, a trustee of
two debts for B, releases one and compounds the other, in good faith, and reasonably believing that
it is for B's interest to do so. A is not bound to make good any loss caused thereby to B.

Conversion of perishable property:- Where the trust is created for the benefit of several persons
in succession, and the trust property is of a wasting nature or a future or reversionary interest, the
trustee is bound, unless an intention to the contrary may be inferred from the instrument of trust, to
convert the property into property of a permanent and immediately profitable character.

Illustrations:- (a) A bequeaths to B all his property in trust for C during his life, and on his death
for D, and on D's death for E. A's property consists of three leasehold houses, and there is nothing
in A's will to show that he intended the houses to be enjoyed in specie. B should sell the houses, and
invest the proceeds in accordance with section 20.

(b) A bequeaths to B his three leasehold houses in Calcutta and all the furniture therein in trust for
C during his life, and on his death for D, and on D's death for E. Here an intention that the houses
and furniture should be enjoyed in specie appears clearly, and B should not sell them.

Trustee to be impartial:- Where there are more beneficiaries than one, the trustee is bound to be
impartial, and must not execute the trust for the advantage of one at the expense of another.Where
the trustee has a discretionary power, nothing in this section shall be deemed to authorize the court
to control the exercise reasonably and in good faith of such discretion.

Illustration:- A, a trustee for B, C and D, is empowered to choose between several specified modes
of investing the trust-property. A in good faith chooses one of these modes. The court will not
interfere, although the result of the choice may be to vary the relative rights of B, C and D.

Trustee to prevent waste:- Where the trust is created for the benefit of several persons in
succession and one of them is in possession of the trust-property, if he commits, or threatens to
commit, any act which is destructive or permanently injurious thereto, the trustee is bound to take
measures to prevent such act.

Accounts and information:- A trustee is bound (a) to keep clear and accurate accounts of the trust-
property, and (b) at all reasonable times, at the request of the beneficiary, to furnish him with full
and accurate information as to the amount and state of the trust-property.

Investment of trust-money:- Where the trust-property consists of money and cannot be applied
immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any
direction contained in the instrument of trust) to invest the money on the following securities, and
on no others.

Sale by trustee directed to sell within specified time:- Where a trustee directed to sell within a
specified time extends such time, the burden of proving, as between himself and the beneficiary,
that the latter is not prejudiced by the extension lies upon the trustee, unless the extension has been
authorised by a principal civil court of original jurisdiction.
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Illustration:- A bequeaths property to B, directing him with all convenient speed and within five
years to sell it, and apply the proceeds for the benefit of C. In the exercise of reasonable discretion,
B postpones the sale for six years. The sale is not thereby rendered invalid, but C, alleging that he
has been injured by the postponement, institutes a suit against B to obtain compensation. In such
suit the burden of proving that C has not been injured lies on B.

Liability for breach of trust:- Where the trustee commits a breach of trust, he is liable to make
good the loss which the trust-property or the beneficiary has thereby sustained, unless the
beneficiary has by fraud induced the trustee to commit the breach, or the beneficiary, being
competent to contract, has himself, without coercion or undue influence having been brought to
bear on him, concurred in the breach, or subsequently acquiesced therein, with full knowledge of
the facts of the case and of his rights as against the trustee.A trustee committing a breach of trust is
not liable to pay interest except in the following cases :-

(a) Where he has actually received interest;

(b) Where the breach consists in unreasonable delay in paying trust-money to the beneficiary;

(c) Where the trustee ought to have received interest, but has not done so;

(d) where he may be fairly presumed to have received interest. He is liable, in case (a), to account
for the interest actually received, and, in case (b), (c) and (d), to account for simple interest at the
rate of six per cent per annum, unless the court otherwise directs;

(e) Where the breach consists in failure to invest trust-money and to accumulate the interest or
dividends thereon, he is liable to account for compound interest (with halfyearly rests) at the same
rate;

(f) Where the breach consists in the employment of trust-property or the proceeds thereof in trade or
business he is liable to account, at the option of the beneficiary, either for compound interest (with
half-yearly rests) at the same rate, or for the net profits made by such employment.

Illustrations:- (a) A trustee improperly leaves trust-property outstanding, and it is consequently

lost; he is liable to make good the property lost, but he is not liable to pay interest thereon.

No set-off allowed to trustee:- A trustee who is liable for a loss occasioned by a breach of trust in
respect of one portion of the trust-Property cannot set-off against his liability a gain which has
accrued to another portion of the trust property through another and distinct breach of trust.

Non-liability for predecessor's default:- Where a trustee succeeds another, he is not, as such,
liable for the acts or defaults of his predecessor.

Non-liability for co-trustee's default:- Subject to the provisions of sections 13 and 15, one trustee
is not, as such, liable for a breach of trust committed by his co-trustee:

PROVIDED that, in, the absence of an express declaration to the contrary in the instrument of trust,
a trustee is so liable-(a) where he has delivered trust-property to his co-trustee without seeing to its
proper application;(b) where he allows his co-trustee to receive trust-property and fails to make due

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enquiry as to the co-trustee's dealings therewith, or allows him to retain it longer than the
circumstances of the case reasonably require;(c) where he becomes aware of a breach of trust
committed or intended by his co-trustee, and either actively conceals it or does not within a
reasonable time take proper steps to protect the beneficiary's interest.

Joining in receipt for conformity:- A co-trustee who joins in signing a receipt for trust-property
and proves that he has not received the same is not answerable, by reason of such signature only, for
loss or misapplication of the property by his co-trustee.

Illustration:- A bequeaths certain property to B and C, and directs them to sell it and invest the
proceeds for the benefit of D. B and C accordingly sell the property, and the purchase money is
received by B and retained in his hands. C pays no attention to the matter for two years and then
calls on B to make the investment. B is unable to do so, becomes insolvent, and the purchase-money
is lost. C may be compelled to make good the amount.

Several liabilities of co-trustees:- Where co-trustees jointly commit a breach of trust, or where one
of them by his neglect enables the other to commit a breach of trust, each is liable to the beneficiary
for the whole of the loss occasioned by such breach.

Contribution as between co-trustees:- But as between the trustees themselves, if one be less
guilty than another and has had to refund the loss, the former may compel the latter, or his legal
representative to the extent of the assets he has received, to make good such loss; and if all be
equally guilty, any one or more of the trustees who has had to refund the loss may compel the others
to contribute. Nothing in this section shall be deemed to authorize a trustee who has been guilty of
fraud to institute a suit to compel contribution. Non-liability of trustee paying without notice of
transfer by beneficiary When any beneficiary's interest becomes vested in another person, and the
trustee, not having notice of the vesting, pays or delivers trust-property to the person who would
have been entitled thereto in the absence of such vesting, the trustee is not liable for the property so
paid or delivered. Liability of trustee where beneficiary's interest is forfeited to the government
When the beneficiary's interest is forfeited or awarded by legal adjudication to the government, the
trustee is bound to hold the trust-property to the extent of such interest for the benefit of such person
in such manner as the State Government may direct in this behalf.

Indemnity of trustees:- Subject to the provisions of the instrument of trust and of sections 23 and
26, trustees shall be respectively chargeable only for such moneys, stocks, funds and securities as
they respectively actually receive, and shall not be answerable the one for the other of them, nor for
any banker, broker or other person in whose hands any trust-property may be placed, nor for the
insufficiency or deficiency of any stocks, funds or securities, nor otherwise for involuntary losses.

RIGHTS AND POWERS OF TRUSTEES:- A trustee is entitled to have in his possession the
instrument of trust and all the documents of title (if any) relating solely to the trust-property.

Right to title deed:- Every trustee may reimburse himself, or pay or discharge out of the trust-
property, all expenses properly incurred in or about the execution of the trust, or the realization,
preservation or benefit of the trust-property, or the protection or support of the beneficiary.

If he pays such expenses out of his own pocket he has a first charge upon the trust property for such
expenses and interest thereon; but such charge (unless the expenses have been incurred with the
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sanction of a principal civil court of original jurisdiction) shall be enforced only by prohibiting any
disposition of the trust-property without previous payment of such expenses and interest. If the trust
property fails, the trustee is entitled to recover from the beneficiary personally on whose behalf he
acted, and at whose request, expressed or implied, he made the payment, the amount of such
expenses.

Right to reimbursement of expenses:- Where a trustee has by mistake made an over-payment to

the beneficiary, he may reimburse the trust-property out of the beneficiary's interest. If such interest
fails, the trustee is entitled to recover from the beneficiary personally the amount of such
overpayment.

Right to be recouped for erroneous over-payment:- A person other than a trustee who has gained
an advantage from a breach of trust must indemnify the trustee to the extent of the amount actually
received by such person under the breach; and where he is a beneficiary the trustee has a charge on
his interest for such amount.

Right to indemnity from gainer by breach of trust:-nothing in this section shall be deemed to
entitle a trustee to be indemnified who has, in committing the breach of trust, been guilty of fraud.
Any trustee may, without instituting a suit, apply by petition to a principal civil court of original
jurisdiction for its opinion, advice or direction on any present questions respecting the management
or administration of the trust-property other than questions of detail, difficulty or importance, not
proper in the opinion of the court for summary disposal.

Right to apply to court for opinion in management of trust-property:- A copy of such petition
shall be served upon, and the hearing thereof may be attended by, such of the persons interested in
the application as the court thinks fit. The trustee stating in good faith the facts in such petition, and
acting upon the opinion, advice or direction given by the court shall be deemed, so far as regards his
own responsibility, to have discharged his duty as such trustee in the subject-matter of the
application. The costs of every application under this section shall be in the discretion of the court
to which it is made. When the duties of a trustee, as such, are completed, he is entitled to have the
accounts of his administration of the trust-property examined and settled; and, where nothing is due
to the beneficiary under the trust, to an acknowledgement in writing to that effect.

Right to settlement of accounts:- In addition to the powers expressly conferred by this Act and by
the instrument of trust, and subject to the restriction, if any, contained in such instrument, and to the
provisions of section 17, a trustee may do all acts which are reasonable and proper for the
realization, protection or benefit of the trust-property, and for the protection or support of a
beneficiary who is not competent to contract. Except with the permission of a principal civil court
of original jurisdiction, no trustee shall lease trust-property for a term exceeding twenty-one years
from the date of executing the lease, nor without reserving the best yearly rent than can be
reasonably obtained.

General authority of trustee:-Where the trustee is empowered to sell any trust-property, he may
sell the same subject to prior charges or not, and either together or in lots, by public auction or
private contract, and either at one time or at several times, unless the instrument of trust otherwise
directs.

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Power to sell in lots and either by public auction or private contract:- The trustee making any
such sale may insert such reasonable stipulations either as to title or evidence of title, or otherwise,
in any conditions of sale or contract for sale, as he thinks fit; and may also buy-in the property or
any part thereof at any sale by auction, and rescind or vary any contract for sale, and re-sell the
property so bought in, or as to which the contract is so rescinded, without being responsible to the
beneficiary for any loss occasioned thereby.

Power to sell under special conditions-Power to buy-in and re-sell:- Where a trustee is directed
to sell trust-property or to invest trust-money in the purchase of property, he may exercise a
reasonable discretion as to the time of effecting the sale or purchase. Power to convey A trustee
may, at his discretion, call in any trust-property invested in any security and invest the same on any
of the securities mentioned or referred to in section 20, and from time to time vary any such
investments for others of the same nature:

Power to vary investments:- PROVIDED that, where there is a person competent to contract and
entitled at the time to receive the income of the trust property for his life, or for any greater estate,
no such change of investment shall be made without his consent in writing. Power to apply property
of minors, etc. for their maintenance, etc. Where any property is held by a trustee in trust for a
minor, such trustee may, at his discretion, pay to the guardians (if any) of such minor, or otherwise
apply for or towards his maintenance or education or advancement in life, or the reasonable
expenses of his religious worship, marriage or funeral, the whole or any part of the income to which
he may be entitled in respect of such property; and such trustee shall accumulate all the residue of
such income by way of compound interest, by investing the same and the resulting income thereof
from time to time in any of the securities mentioned or referred to in section 20, for the benefit of
the person who shall ultimately become entitled to the property from which such accumulations
have arisen. PROVIDED that such trustee may, at any time, if he thinks fit, apply the whole or any
part of such accumulations as if the same were part of the income arising in the then current year.
Where the income of the trust-property is insufficient for the minor's maintenance or education or
advancement in life, or the reasonable expenses of his religious worship, marriage or funeral, the
trustee may, with the permission of a principal civil court of original jurisdiction, but not otherwise,
apply the whole or any part of such property for or towards such maintenance, education,
advancement or expenses.

Power to give receipts application:- thereof, or being accountable for any loss or misapplication.
Two or more trustees acting together may; if and as they think fit,-(a) accept any composition or
any security for any debt or for any property claimed;

(b) Allow any time for payment of any debt;

(c) Compromise, compound, abandon, submit to arbitration or otherwise settle any debt, account,
claim or thing whatever relating to the trust; and

(d) for any of those purposes, enter into, give, execute and do such agreements, instruments of
composition or arrangement, releases and other things as to them seem expedient, without being
responsible for any loss occasioned by any act or thing so done by them in good faith. This section
applies only if and as far as a contrary intention is not expressed in the instrument of trust, if any,
and shall have effect subject to the terms of that instrument.

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Suspension of trustee's powers by decree :Where a decree has been made in a suit for the
execution of a trust, the trustee must not exercise any of his powers except in conformity with such
decree, or with the sanction of the court by which the decree has been made, or, where an appeal
against the decree is pending, of the appellate court.

DISABILITIES OF TRUSTEES:- A trustee who has accepted the trust cannot afterwards
renounce it except (a) with the permission of a principal civil court of original jurisdiction, or (b) if
the beneficiary is competent to contract, with his consent, or (c) by virtue of a special power in the
instrument of trust. A trustee cannot delegate his office or any of his duties either to a co-trustee or
to a stranger, unless (a) the instrument of trust so provides, or (b) the delegation is in the regular
course of business, or (c) the delegation is necessary, or (d) the beneficiary, being competent to
contract, consents to the delegation.

Explanation: The appointment of an attorney or proxy to do an act merely ministerial and

involving no independent discretion is not a delegation within the meaning of this section.

Trustee cannot delegate for example:- (a) A is a trustee of certain property with power to sell the
same. A may employ an auctioneer to effect the sale.

(b) A bequeaths certain property to B and C on certain trusts to be executed by them or the survivor
of them or the assigns of such survivor. B dies. C may bequeath the trust property to D and E upon
the trusts of A's will.(c) A bequeaths to B fifty houses let at monthly rents in trust to collect the
rents and pay them to C. B may employ a proper person to collect these rents. When there are more
trustees than one, all must join in the execution of the trust, except where the instrument of trust
otherwise provides.

Co-trustees cannot act singly:-Where a discretionary power conferred on a trustee is not exercised
reasonably and in good faith, such power may be controlled by a principal civil court of original
jurisdiction.

Control of discretionary power:- In the absence of express directions to the contrary contained in
the instrument of trust or of a contract to the contrary entered into with the beneficiary or the court
at the time of accepting the trust, a trustee has no right to remuneration for his trouble, skill and loss
of time in executing the trust. Nothing in this section applies to any Official Trustee, Administrator
General, Public Curator, or person holding a certificate of administration. Sec,50. Trustee may not
charge for services A trustee may not use or deal with the trust-property for his own profit or for
any other purpose unconnected with the trust. Trustee may not use trust property for his own profit
No trustee whose duty it is to sell trust-property, and no agent employed by such trustee for the
purpose of the sale, may, directly or indirectly, buy the same or any interest therein, on his own
account or as agent for a third person.

Trustee for sale or his agent may not buy, no trustee, and no person who has recently ceased to be a
trustee, may, without the permission of a principal civil court of original jurisdiction, buy or become
mortgagee or lessee of the trust-property or any part thereof; and such permission shall not be given
unless the proposed purchase, mortgage or lease is manifestly for the advantage of the beneficiary.

Trustee may not buy beneficiary's interest without permission And no trustee whose duty it is to
buy or to obtain a mortgage or lease of particular property for the beneficiary may buy it, or any
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part thereof, or obtain a mortgage or lease of it, or any part thereof, for himself. Trustee for
purchase A trustee or co-trustee whose duty it is to invest trust-money on mortgage or personal
security must not invest it on a mortgage by, or on the personal security of, himself or one of his
co-trustees.

RIGHTS AND LIABILITIES OF THE BENEFICIARY:- The beneficiary has, subject to the
provisions of the instrument of trust, a right to the rents and profits of the trust property.

Rights to rents and profits:- The beneficiary is entitled to have the intention of the author of the
trust specifically executed to the extent of the beneficiary's interest;

Right to specific execution where there is only one beneficiary and he is competent to contract, or
where there are several beneficiaries and they are competent to contract and all of one mind, he or
they may require the trustee to transfer the trust-property to him or them, or to such person as he or
they may direct. When property has been transferred or bequeathed for the benefit of a married
woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in the
second clause of this section applies to such property during her marriage.

Right to transfer of possession for example:- (a) Certain government securities are given to
trustees upon trust to accumulate the interest until A attains the age of 24, and then to transfer the
gross amount to him. A on attaining majority may, as the person exclusively interested in the trust-
property, require the trustees to transfer it immediately to him.

(b) A bequeaths Rs. 10,000 to trustees upon trust to purchase an annuity for B, who has attained his
majority and is otherwise competent to contract, B may claim the Rs. 10,000.

Right to inspect and take copies of instrument of trust, accounts, etc. The beneficiary, if
competent to contract, may transfer his interest, but subject to the law for the time being in force as
to the circumstances.

Right to transfer beneficial interest dispose of such interest: PROVIDED that when property is
transferred or bequeathed for the benefit of a married woman, so that she shall not have power to
deprive herself of her beneficial interest, nothing in this section shall authorize her to transfer such
interest during her marriage.Where no trustees are appointed or all the trustees die, disclaim, or are
discharged, or where for any other reason, the execution of a trust by the trustee is or becomes
impracticable, the beneficiary may institute a suit for the execution of the trust, and the trust shall,
so far as may be possible, be executed by the court until the appointment of a trustee or new trustee.

Right to sue for execution of trust:- The beneficiary has a right (subject to the provisions of the
instrument of trust) that the trust-property shall be properly protected and held and administered by
proper persons and by a proper number of such persons.

Right to proper trustees:- Explanation I: The following are not proper persons within the
meaning of this section. A person domiciled abroad an alien enemy, a person having an interest
inconsistent with that of the beneficiary, a person in insolvent circumstances; and, unless the
personal law of the beneficiary allows otherwise, a married woman and a minor.

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Explanation II: When the administration of the trust involves the receipt and custody of money, the
number of trustees should be two at least.

Illustrations:- (a) A, one of several beneficiaries, proves that B, the trustee, has improperly
disposed of part of trust-property, or that the property is in danger from B's being in insolvent
circumstances, or that he is incapacitated from acting as trustee. A may obtain a receiver of the
trust-property

Following trust property into the hands of third persons:- Where the trustee has disposed of
trust-property and the money or other property which he has received there for can be traced in his
hands, or the hands of his legal representative or legatee, the beneficiary has, in respect thereof,
rights as nearly as may be the same as his rights in respect of the original trust-property into that
into which it has been converted Where trust-property comes into the hands of a third person
inconsistently with the trust, the beneficiary may require him to admit formally, or may institute a
suit for a declaration, that the property is comprised in the trust.

Illustrations:- A, a trustee for B of Rs. 10,000, wrongfully invests the Rs. 10,000 in the purchase of
certain land. B is entitled to the land, money, partly with money subject to a trust for B. B is entitled
to a charge on the land for the amount of the trust-money so misemployed.

Acquisition by trustee of trust-property wrongfully converted:- Where the trustee wrongfully

mingles the trust-property with his own, the beneficiary is entitled to a charge on the whole fund for
the amount due to him.

Right in case of blended property:- Wrongful employment by partner-trustee of trust-property for

partnership purposes If a partner, being a trustee, wrongfully employs trust-property in the business
or on the account of the partnership, no other partner is liable there for in his personal capacity to
the beneficiaries, unless he had notice of the breach of trust. The partners having such notice are
jointly and severally liable for the breach of trust.

Illustrations:- (a) A and B are partners. A dies, having bequeathed all his property to B in trust for
Z, and appointed B his sole executor. B, instead of winding up the affairs of the partnership, retains
all the assets in the business. Z may compel him, as partner, to account for so much of the profits as
are derived from A's share of the capital. B is also answerable to Z.

VACATING THE OFFICE OF TRUSTEE:- The office of a trustee is vacated by his death or by
his discharge from his office.

Office how vacated/Discharge of trustee:- The trustee may be discharged from his office only as
follows:-

(a) By the extinction of the trust;

(b) By the completion of his duties under the trust;
(c) By such means as may be prescribed by the instrument of trust;
(d) By appointment under this Act of a new trustee in his place;
(e) By consent of himself and the beneficiary, or, where there are more beneficiaries than one, all
the beneficiaries being competent to contract; or
(f) By the court to which a petition for his discharge is presented under this Act.
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Notwithstanding the provisions of section 11, every trustee may apply by petition to a principal civil
court of original jurisdiction to be discharged from his office; and if the court finds that there is
sufficient reason for such discharge, it may discharge him accordingly, and direct his costs to be
paid out of the trust-property. But where there is no such reason, the court shall not discharge him,
unless a proper person can be found.

Appointment of new trustees on death, etc:- Whenever any person appointed a trustee disclaims,
or any trustee, either original or substituted, dies, or is for a continuous period of six months absent
from India, or leaves India for the purpose of residing abroad, or is declared an insolvent, or desires
to be discharged from the trust, or refuses or becomes, in the opinion of a principal civil court of
original jurisdiction, unfit or personally incapable to act in the trust, or accepts an inconsistent trust,
a new trustee may be appointed in his place by-

(a) The person nominated for that purpose by the instrument of trust (if any), or

(b) if there be no such person, or no such person able and willing to act, the author of the trust if he
be alive and competent to contract, or the surviving or continuing trustees or trustee for the time
being, or legal representative of the last surviving and continuing trustee, or (with the consent of the
court) the retiring trustees, if they all retire simultaneously, or (with the like consent) the last
retiring trustee. Every such appointment shall be by writing under the hands of the person making it.
On an appointment of a new trustee the number of trustees may be increased. The Official Trustee
may, with his consent and by the order of the court, be appointed under this section, in any case in
which only one trustee is to be appointed and such trustee is to be the sole trustee.

The provisions of this section relative to a trustee who is dead include the case of a person
nominated trustee in a will but dying before the testator, and those relative to a continuing trustee
include a refusing or retiring trustee if willing to act in the execution of the power. Whenever any
such vacancy or is qualification occurs and it is found impracticable to appoint a new trustee under
section 73, the beneficiary may, without instituting a suit, apply by petition to a principal civil court
of original jurisdiction for the appointment of a trustee or a new trustee, and the court may appoint a
trustee or a new trustee accordingly.

Rule for selecting new trustees: In appointing new trustees, the court shall have regard; (a) to the
wishes of the author of the trust as expressed in or to be inferred from the instrument of trust; (b) to
the wishes of the person, if any, empowered to appoint new trustees; (c) to the question whether the
appointment will promote or impede the execution of the trust; and (d) where there are more
beneficiaries than one, to the interests of all such beneficiaries.

Appointment by court:- Whenever any new trustee is appointed under section 73 or section 74, all
the trust property for the time being vested in the surviving or continuing trustees or trustee, or in
the legal representative of any trustee, shall become vested in such new trustee, either

Vesting of trust-property in new trustees solely or jointly with the surviving or continuing trustees
or trustee, as the case may require.

Powers of new trustees: Every new trustee so appointed, and every trustee appointed by a court
either before or after the passing of this Act, shall have the same powers, authorities and discretions,

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and shall in all respects act, as if he had been originally nominated a trustee by the author of the
trust.

Survival of trust:- On the death or discharge of one of several co-trustees, the trust survives and
the trust property passes to the others, unless the instrument of trust expressly declares otherwise.

EXTINCTION OF TRUSTS:- Trust how extinguished:-

(a) When its purpose is completely fulfilled; or

(b) When its purpose becomes unlawful; or
(c) When the fulfillment of its purpose becomes impossible by destruction of the trust property or
otherwise; or
(d) When the trust, being revocable, is expressly revoked. A trust created by will may be revoked at
the pleasure of the testator.

Revocation of trust: A trust otherwise created can be revoked only:-

(a) Where all the beneficiaries are competent to contract-by their consent;

(b) Where the trust has been declared by a non-testamentary instrument or by word of mouth-in
exercise of a power of revocation expressly reserved to the author of the trust; or

(c) Where the trust is for the payment of the debts of the author of the trust, and has not been
communicated to the creditors at the pleasure of the author of the trust.

Illustration:- A conveys property to B in trust to sell the same and pay out of the proceeds the
claims of A's creditors. A reserves no power of revocation. If no communication has been made to
the creditors, A may revoke the trust. But if the creditors are parties to the arrangement, the trust
cannot be revoked without their consent. No trust can be revoked by the author of the trust so as to
defeat or prejudice what the trustees may have duly done in execution of the trust. Bought in, or as
to which the contract is so rescinded, without being responsible to the beneficiary for any loss
occasioned thereby.

Illustrations:- (a) A bequeaths property to B, directing him to sell it with all convenient speed and
pay the proceeds to C. This does not render an immediate sale imperative.

(b) A bequeaths property to B, directing him to sell it at such time and in such manner as he shall
think fit and invest the proceeds for the benefit of C. This does not authorize B, as between him and
C, to postpone the sale to an indefinite period.

Sec.39. Power to convey:- For the purpose of completing any such sale, the trustee shall have
power to convey or otherwise dispose of the property sold in such manner as may be necessary.

Sec.40. Power to vary investments:-A trustee may, at his discretion, call in any trust-property
invested in any security and invest the same on any of the securities mentioned or referred to in
section 20, and from time to time vary any such investments for others of the same nature.
Provided that, where there is a person competent to contract and entitled at the time to receive the

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income of the trust-property for his life, or for any greater estate, no such change of investment
shall be made without his consent in writing.

Sec.41. Power to apply property of minors, etc.:- for their maintenance, etc.-Where any property
is held by a trustee in trust for a minor, such trustee may, at his discretion, pay to the guardians (if
any) of such minor, or otherwise apply for or towards his maintenance or education or advancement
in life, or the reasonable expenses of his religious worship, marriage or funeral, the whole or any
part of the income to which he may be entitled in respect of such property ; and such trustee shall
accumulate all the residue of such income by way of compound interest by investing the same and
the resulting income thereof from time to time in any of the securities mentioned or referred to in
section 20, for the benefit of the person who shall ultimately become entitled to the property from
which such accumulations have arisen : Provided that such trustee may, at any time, if he thinks fit,
apply the whole or any part of such accumulations as if the same were part of the income arising in
the then current year. Where the income of the trust-property is insufficient for the minor's
maintenance or education or advancement in life, or the reasonable expenses of his religious
worship, marriage or funeral, the trustee may, with the permission of a principal Civil Court of
original jurisdiction, but not otherwise, apply the whole or any part of such property for or towards
such maintenance, education, advancement or expenses.

Nothing in this section shall be deemed to affect the provisions of any local law for the time being
in force relating to the persons and property of minors.

Sec.42. Power to give receipts:- Any trustees or trustee may give a receipt in writing for any
money, securities or other moveable property payable, transferable or deliverable to them or him by
reason, or in the exercise, of any trust or power.

Sec43. Power to compound, etc:-Two or more trustees acting together may, if and as they think
fit,-

(a) Accept any composition or any security for any debt or for any property claimed ;
(b) Allow any time for payment of any debt;
(c) Compromise, compound, abandon, submit to arbitration or otherwise settle any debt, account,
claim or thing whatever relating to the trust; and,
(d) For any of those purposes, enter into, give, execute and do such agreements, instruments of
composition or arrangement, releases and other things as to them seem expedient, without being
responsible for any loss occasioned by any act or thing so done by them in good faith.

The powers conferred by this section on two or more trustees acting together may be exercised by a
sole acting trustee when by the instrument of trust, if any; a sole trustee is authorized to execute the
trusts and powers thereof.

This section applies only if and as far as a contrary intention is not expressed in the instrument of
trust, if any, and shall have effect subject to the terms of that instrument and to the provisions
therein contained. This section applies only to trusts created after this Act comes into force.

Sec.44. Power to several trustees of whom one disclaims or dies:- When an authority to deal with
the trust-property is given to several trustees and one of them disclaims or dies, the authority may
be exercised by the continuing trustees, unless from the terms of the instrument of trust it is
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apparent that the authority is to be exercised by a number in excess of the number of the remaining
trustees.

Sec.45. Suspension of trustee's powers by decree:- Where a decree has been made in a suit for the
execution of a trust, the trustee must not exercise any of his powers except in conformity with such
decree, or with the sanction of the Court by which the decree has been made, or, where an appeal
against the decree is pending, of the Appellate Court.

DISABILITIES OF TRUSTEES:- Sec.46 to 54 deals with disabilities of trustees:-

Sec.46. Trustee cannot renounce after acceptance:- A trustee who has accepted the trust cannot
afterwards renounce it except (a) with the permission of a principal Civil Court of original
jurisdiction, or (b) Collected by the All India Christian Council, www.christiancouncil.in Page 19 of
32 if the beneficiary is competent to contract, with his consent, or (c) by virtue of a special power in
the instrument of trust.

Sec.47. Trustee cannot delegate:- A trustee cannot delegate his office or any of his duties either to
a co-trustee or to a stranger, unless (a) the instrument of trust so provides, or (b) the delegation is in
the regular course of business, or (c) the delegation is necessary, or (d) the beneficiary, being
competent to contract, consents to the delegation.

Explanation:- The appointment of an attorney or proxy to do an act merely ministerial and

involving no independent discretion is not a delegation within the meaning of this section.

Illustrations:- (a) A bequeaths certain property to B and C on certain trusts to be executed by

them or the survivor of them or the assigns of such survivor. B dies. C may bequeath the trust-
property to D and E upon the trusts of A's will.

(b) A is a trustee of certain property with power to sell the same. A may employ an auctioneer to
effect the sale.

(c) A bequeaths to B fifty houses let at monthly rents in trust to collect the rents and pay them to C.
B may employ a proper person to collect these rents.

Sec.48:- Co-trustees cannot act singly:--When there are more trustees than one, all must join in
the execution of the trust, except where the instrument of trust otherwise provides.

Sec.49. Control of discretionary power:- Where a discretionary power conferred on a trustee is

not exercised reasonably and in good faith, such power may be controlled by a principal Civil Court
of original jurisdiction.

Sec.50. Trustee may not charge for services:- In the absence of express directions to the contrary
contained in the instrument of trust or of a contract to the contrary entered into with the beneficiary
or the Court at the time of accepting the trust, a trustee has no right to remuneration for his trouble,
skill and loss of time in executing the trust.

Nothing in this section applies to any Official Trustee, Administrator General, Public Curator, or
person holding a certificate of administration.

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Sec. 51. Trustee may not use trust-property for his own profit:- A trustee may not use or deal
with the trust-property for his own profit or for any other purpose unconnected with the trust.

Sec.52. Trustee for sale or his agent may not buy:- No trustee whose duty it is to sell trust-
property, and no agent employed by such trustee for the purpose of the sale, may, directly or
indirectly, buy Collected by the All India Christian Council, www.christiancouncil.in Page 20 of 32
the same or any interest therein, on his own account or as agent for a third person.

Sec.53. Trustee may not buy beneficiary's interest without permission:- No trustee, and no
person who has recently ceased to be a trustee, may, without the permission of a principal Civil
Court of original jurisdiction, buy or become mortgagee or lessee of the trust- property or any part
thereof ; and such permission shall not be given unless the proposed purchase, mortgage or lease is
manifestly for the advantage of the beneficiary.

Trustee for purchase.-And no trustee whose duty it is to buy or to obtain a mortgage or lease of
particular property for the beneficiary may buy it, or any part thereof, or obtain a mortgage or lease
of it, or any part thereof, for himself.

54. Co-trustees may not lend to one of themselves:- A trustee or co-trustee whose duty it is to
invest trust-money on mortgage or personal security must not invest it on a mortgage by, or on the
personal security of, himself or one of his co-trustees.

RIGHTS AND LIABILITIES OF THE BENEFICIARY(Sec.55 to 69):-

Sec.55. Rights to rents and profits.-The beneficiary has, subject to the provisions of the
instrument of trust, a right to the rents and profits of the trust-property.

Sec.56. Right to specific execution:- The beneficiary is entitled to have the intention of the author
of the trust specifically executed to the extent of the beneficiary's interest;

Right to transfer of possession:- Right to transfer of possession.-and, where there is only one
beneficiary and he is competent to contract, or where there are several beneficiaries and they are
competent to contract and all of one mind, he or they may require the trustee to transfer the trust-
property to him or them, or to such person as he or they may direct.

When property has been transferred or bequeathed for the benefit of a married woman, so that she
shall not have power to deprive herself of her beneficial interest, nothing in the second clause of this
section applies to such property during her marriage.

Illustrations: - (a) Certain Government securities are given to trustees upon trust to accumulate the
interest until A attains the age of 24, and then to transfer the gross amount to him. A on attaining
majority may, as the person exclusively interested in the trust-property.

(b) A bequeaths Rs. 10,000 to trustees upon trust to purchase an annuity for B, who has attained his
majority and is otherwise competent to contract. B may claim the Rs. 10,000.

(c) A transfers certain property to B and directs him to sell or invest it for the benefit of C, who is
competent to contract. C may elect to take the property in its original character.

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Sec.57. Right to inspect and take copies of instrument of trust, accounts, etc.:- The beneficiary
has a right, as against the trustee and all persons claiming under him with notice of the trust, to
inspect and take copies of the instrument of trust, the documents of title relating solely to the trust-
property, the accounts of the trust- property and the vouchers (if any) by which they are supported,
and the cases submitted and opinions taken by the trustee for his guidance in the discharge of his
duty.

Sec. 58. Right to transfer beneficial interest:-The beneficiary, if competent to contract, may
transfer his interest, but subject to the law for the time being in force as to the circumstances and
extent in and to which he may dispose of such interest. Provided that when property is transferred
or bequeathed for the benefit of a married woman, so that she shall not have power to deprive
herself of her beneficial interest, nothing in this section shall authorize her to transfer such interest
during her marriage.

Sec.59. Right to sue for execution of trust:- Where no trustees are appointed or all the trustees die,
disclaim, or are discharged, or where for any other reason the execution of a trust by the trustee is or
becomes impracticable, the beneficiary may institute a suit for the execution of the trust, and the
trust shall, so far as may be possible, be executed by the Court until the appointment of a trustee or
new trustee.

Sec.60. Right to proper trustees:- The beneficiary has a right (subject to the provisions of the
instrument of trust) that the trust- property shall be properly protected and held and administered by
proper persons and by a proper number of such persons.

Explanation I:-The following are not proper persons within the meaning of this section:-

A person domiciled abroad: an alien enemy: a person having an interest inconsistent with that of the
beneficiary: a person in insolvent circumstances; and, unless the personal law of the beneficiary
allows otherwise, a married woman and a minor.

Explanation II:- When the administration of the trust involves the receipt and custody of money,
the number of trustees should be two at least.

Illustrations:- (a) A, one of several beneficiaries, proves that B, the trustee, or that the property is
in danger from B's being in insolvent circumstances, or that he is incapacitated from acting as
trustee. A may obtain a receiver of the trust-property.

(b) A bequeaths certain jewels to B in trust for C. B dies during A's lifetime; then A dies. C is
entitled to have the property conveyed to a trustee for him.

(c) A conveys certain property to four trustees in trust for B. Three of the trustees die. B may
institute a suit to have three new trustees appointed in the place of the deceased trustees.

(d) A conveys certain property to three trustees in trust for B. All the trustees disclaim. B may
institute a suit to have three trustees appointed in place of the trustees so disclaiming.

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 (e) A, a trustee for B, refuses to act, or goes to reside permanently out of [India] or is declared an
insolvent, or compounds with his creditors, or suffers a co-trustee to commit a breach of trust. B
may institute a suit to have A removed and a new trustee appointed in his room.

Sec.61. Right to compel to any act of duty:- The beneficiary has a right that his trustee shall be
compelled to perform any particular act of his duty as such, and restrained from committing any
contemplated or probable breach of trust.

Illustrations:- (a) A contracts with B to pay him monthly Rs. 100 for the benefit of C. B writes and
signs a letter declaring that he will hold in trust for C the money so to be paid. A fails to pay the
money in accordance with his contract. C may compel B on a proper indemnity to allow C to sue on
the contract in B's name.

(b) A is trustee of certain land, with a power to sell the same and pay the proceeds to B and C
equally. A is about to make an improvident sale of the land. B may sue on behalf of himself and C
for an injunction to restrain A from making the sale.

Sec.62. Wrongful purchase by trustee:- Where a trustee has wrongfully bought trust-property, the
beneficiary has a right to have the property declared subject to the trust or retransferred by the
trustee, if it remains in his hands unsold, or, if it has been bought from him by any person with
notice of the trust, by such person. But in such case the beneficiary must repay the purchase-money
paid by the trustee, with interest, and such other expenses (if any) as he has properly incurred in the
preservation of the property; and the trustee or purchaser must (a) account for the net profits of the
property, (b) be charged with an occupation-rent, if he has been in actual possession of the property,
and (c) allow the beneficiary to deduct a proportionate part of the purchase-money if the property
has been deteriorated by the acts or omissions of the trustee or purchaser.

Sec.63. Following trust property:- Where trust-property comes into the hands of a third person
inconsistently with the trust, the beneficiary may require him to admit formally, or may institute a
suit for a declaration, that the property is comprised in the trust. Where the trustee has disposed of
trust-property and the money or other property which he has received therefore can be traced in his
hands, or the hands of his legal representative or legatee, the beneficiary has, in respect thereof,
rights as nearly as may be the same as his rights in respect of the original trust-property.

Illustrations:- (a) A, a trustee for B of Rs. 10,000, wrongfully invests the Rs. 10,000 in the
purchase of certain land. B is entitled to the land. (b) A, a trustee, wrongfully purchases land in his
own name, partly with his own money, partly with money subject to a trust for B. B is entitled to a
charge on the land for the amount of the trust- money so misemployed.

Sec.64. Saving of rights of certain transferees:- Nothing in section 63 entitles the beneficiary to
any right in respect of property in the hands of--

(a) a transferee in good faith for consideration without having notice of the trust, either when the
purchase- money was paid, or when the conveyance was executed, or

(b) a transferee for consideration from such a transferee. A judgement-creditor of the trustee
attaching and purchasing trust-property is not a transferee for consideration within the meaning of
this section.
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Sec.65. Acquisition by trustee of trust-property wrongfully converted:- Where a trustee
wrongfully sells or otherwise transfers trust-property and afterwards himself becomes the owner of
the property, the property again becomes subject to the trust, notwithstanding any want of notice on
the part of intervening transferees in good faith for consideration.

Sec.66. Right in case of blended property:- Where the trustee wrongfully mingles the trust-
property with his own, the beneficiary is entitled to a charge on the whole fund for the amount due
to him. 67. Wrongful employment by partner-trustee of trust-property for partnership purposes.-If a
partner, being a trustee, wrongfully employs trust-property in the business or on the account of the
partnership, no other partner is liable there for in his personal capacity to the beneficiaries unless he
had notice of the breach of trust. The partners having such notice are jointly and severally liable for
the breach of trust.

Illustrations:- (a) A and B are partners. A dies, having bequeathed all his property to B in trust for
Z, and appointed B his sole executor. B, instead of winding up the affairs of the partnership, retains
all the assets in the business. Z may compel him, as partner, to account for so much of the profits as
are derived from A's share of the capital. B is also answerable to Z for the improper employment of
A's assets.

(b) A, a trader, bequeaths his property to B in trust for C, appoints B his sole executor, and dies. B
enters into partnership with X and Y in the same trade, and employs A's assets in the partnership-
business. B gives an indemnity to X and Y against the claims of C. Here X and Y are jointly liable
with B to C as having knowingly become parties to the breach of trust committed by B.

Sec.68. Liability of beneficiary joining in breach of trust:- Where one of several beneficiaries;
[

(a) Joins in committing breach of trust, or

(b) Knowingly obtains any advantage there from, without the consent of the other beneficiaries, or
(c) becomes aware of a breach of trust committed or intended to be committed, and either actually
conceals it, or does not within a reasonable time take proper steps to protect the interests of the
other beneficiaries, or
(d) has deceived the trustee and thereby induced him to commit a breach of trust, the other
beneficiaries are entitled to have all his beneficial interest impounded as against him and all who
claim under him (otherwise than as transferees for consideration without notice of the breach) until
the loss caused by the breach has been compensated.

When property has been transferred or bequeathed for the benefit of a married woman, so that she
shall not have power to deprive herself of her beneficial interest, nothing in this section applies to
such property during her marriage.

Sec.69. Rights and liabilities of beneficiary's transferee:-Every person to whom a beneficiary

transfers his interest has the rights, and is subject to the liabilities, of the beneficiary in respect of
such interest at the date of the transfer.

VACATING THE OFFICE OF TRUSTEE(Sec.70 to 71)

Sec.70. Office how vacated:- The office of a trustee is vacated by his death or by his discharge
from his office.

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Sec.71. Discharge of trustee:- The trustee may be discharged from his office only as follows:--

(a) By the extinction of the trust;

(b) By the completion of his duties under the trust;
(c) By such means as may be prescribed by the instrument of trust;
(d) by appointment under this Act of a new trustee in his place;
(e) by consent of himself and the beneficiary, or, where there are more beneficiaries than one, all
the beneficiaries being competent to contract, or
(f) by the Court to which a petition for his discharge is presented under this Act.

Petition to be discharged from trust.-Notwithstanding the Provisions of section 11, every trustee
may apply by petition to a principal Civil Court of original jurisdiction to be discharged from his
office; and if the Court finds that there is sufficient reason for such discharge, it may discharge him
accordingly.

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