TRANSFER OF PROPERTY ACT
No |
Particulars |
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UNIT - I |
1 |
General Principles of transfer by act of parties inter-vivos |
2 |
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3 |
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4 |
Person competent to transfer operation of transfer operation of transfer |
5 |
Conducting restraining alienation and restrictions repugnant to the interest created |
6 |
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7 |
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UNIT - II |
8 |
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9 |
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10 |
Priority of rights Rent paid to holder under defective title |
11 |
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12 |
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13 |
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UNIT - III |
14 |
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15 |
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16 |
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17 |
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18 |
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19 |
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UNIT - IV |
20 |
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21 |
Rights and liabilities of seller and buyer before and after completion of sale |
22 |
Different between sale and contract for sale |
23 |
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24 |
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25 |
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26 |
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27 |
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28 |
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29 |
Definition of Mode |
30 |
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31 |
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32 |
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33 |
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34 |
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UNIT - V |
35 |
Law of Trusts with Fiduciary relations |
36 |
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37 |
Kinds of trusts |
38 |
Creation of trusts |
39 |
Appointment of Trustees |
40 |
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41 |
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42 |
Disabilities of trustee |
43 |
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44 |
UNIT - I
In Section 3, the definition of immovable property is neither clear nor complete. Immovable property excludes standing timber.
According to Section 4 of the General Clauses Act, immovable property includes land benefits to arise out of land and things attached to the earth.
1] Land
2] Benefits 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 the earth.
C] Things rooted in the earth except;-
a] Standing timber.
b] Growing crops
c] Growing grass.
Land:-
Land means surface of the earth. It includes everything upon the surface of land, under the surface of land also above the surface of land anything upon the land, so long as it is not removed from there shall be part of the land and as such h in immovable property. Thus soil or mud deposited on the surface of earth would be immovable property. The water collected lien a pit or accumulated in the pond or lake is also immoveable property be cause the water is part and parcel of the surface of earth. Water flowing in the river gives the impression that it is movable but its water always remains on the surface e of the earth. Everything under the surface of land is also part of land and is included in the expression immovable property. For example sub soil, minerals coal or gold mines, etc.
Benefits to arise out of land
Besides land the benefit which a person gets from land this also an immovable One may get a benefit from a land under some right .A right by the exercise of which a person gets certain benefits is called beneficial right or beneficial interest of that person. Beneficial interest in a property is cackled intangible or incorporeal property thus any right which exercise over a land [or any other immovable property.] and by the exercise of which a person gets example a piece of land is immovable property, therefore immovable property. For examples a piece of land is immovable property therefore if they any right is exercised by a person upon that land, that right becomes intangible immovable property of the person that land that right become3s intangible immovable property of the person.
Things attached to the Earth
The expression things attached to the earth has been defined separately in section 3 of the Transfer of Property Act. Things attached to the earth l means 1] things embedded in the earth.2] things attached to what is so embedded in the earth and 3] Thing rooted in the earth.
Things embedded in the earth
Things which are fixed firmly in the earth and become p[art of the land are thing are things embedded ion the earth. For example houses buildings walls or electricity poles are immovable properties because they are things embedded in the earth. Walls and houses are not just placed on the surface of the land. The surface of the earth is dug deep land thereafter the whole structure is fixed permanently.
Things attached to what is so embedded in the earth.
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 property Doors windows or shutters of a houses are attached top its walls for permanent enjoyment of that houses. the thing attached must be attached permanently and must also be attached for the beneficial enjoyment of the house or building things attached without any intention of making them a part of the house or building would not be immovable properties, For example electric bulbs, window screens or the ornamental articles are movables because such things are attached too walls not for the permanent beneficial enjoyment of the house but only for the use and enjoyment of the thing itself.
(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 become part of land. Until cut down the trees are permanently attached to the land where they are grown.
a) 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 household furniture. If there is a tree , the woods of which are fit to be used for making doors, windows or furniture, the same tree which under general rule is an immovable property ,shall be treated as 'standing timber' and as such a movable property. Fruit bearing trees are not standing timber .They are planted and grown for taking fruits etc. from them and not for taking their wood.
There are certain trees, for example a mango-tree, which give us fruits but their wood is also used for timber purposes. Whether such trees are standing timber (i.e. movables) or not depends upon the intention of its owner. If its owner intends to keep the tree growing green for ever, the tree is not standing timber even if its woods are fit to be used for furniture etc. On the other hand, if the owner intends that the tree is to be cut down soon for utilizing its wood, the green would be standing timber.
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 and 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.
Like crops, the growing grass rooted in the earth, is also a movable property.
Examples of Immovable property
There are several interests or rights which have been recognized by the courts as immovable property. Some of such immovable properties are given below:
(1) Beneficial interests arising out of land, for example, right of way or an easement.
(2) Rights under lease or tenancy.
(3)Rights to extract gold, silver, coal or other minerals from their mines.
(4)Right of fishery i.e. right to catch and collect fish from a pond, tank, lake or river.
Movable property
A property which is not immovable is movable. Movable property has not been defined in the Transfer of property Act. Section 3 of the Act excludes standing timber, growing grass and the crops from the definition of immovable property. The general clauses Act, 1897 defines movable property as "property of every description except immovable property ".
According to section 2(9) of the 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 expect immovable property.
Examples of Movable property
1. Standing timber, growing crops and growing grass.
2. Government promissory notes.
3. Royalty the copy - right.
4. Right of worship i.e. right to offers prayers.
5. Payments made to Pandas by the pilgrims.
Importance of the nature of Property
Properties may be movable or immovable and tangible or intangible. The transfer of property Act has laid down specific rules of procedure for the transfer of these different.
Kinds of properties
Movable properties generally transferred by delivery of possession:
Writing and registration is not essential. But immovable properties are required to be transferred generally through written and register document. The validity of transfer depends also upon the fact whether the procedure prescribed for that kind of property has been followed or not.
Ex: A gift of an immovable property must be made through registered document but the gift of movable property may be made only by delivery of possession.
INSTRUMENT
Instrument means a legal document. Where property is transferred through any written document, that document is called 'instrument'. Section 3 of the transfer property Act defines 'instrument' as a non-testamentary instrument. Transfer of property under testamentary instrument or will takes place only after the death of the testator .Transfer of property 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. Where a gift of an immovable property is made through a registered document, the registered document is called as instrument gift.
ATTESTED
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 transferor said to execute the deed (or document) of transfer . Such transferors are called the executants.
The 2 persons must affirm, or become witness to the fact that executants and nobody 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 witness are called attesting witnesses.
Object of Attestation:
Attestation of a document ensures the authenticity or truthfulness of the execution of a document. The object of attestation is two fold.
First, it also confirms that executants and none else have executed the document.
Secondly, it also confirms that the executant has executed the document. With free consent and there was no force, fraud or undue influence. There is no other purpose behind attestation. By attesting a document, the attesting witnesses do not confirm that they have knowledge of the contents of that document. Nor they are supposed to have given consent to the transfer under the document.
WHO CAN ATTEST
Any two person 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.
ESSENTIALS OF VALID ATTESTATION
Section 3 of the Transfer of Property Act, following essential conditions are necessary for valid attestation-the attestation must be done by two or more persons. Attestation by only one witness is not valid.
1) Each attesting witness must
(a) See the executants signing the instrument (document) or divine his mark (thumb-impression) on
it
b) See some other person signing the instrument in presence of and under the direction executants a personal acknowledgement of his signature or mark or of the signature of such other person.
2) Each attesting witness has signed the instrument in presence of the executants:
NOTICE
Notice means knowledge or information of a fact. Where a person has knowledge of any fact or it could be proved that under the circumstance he must have knowledge of that fact.
Notice may either be
Actual express
Constructive
Actual or express notice
Actual notice means direct or express knowledge or information about something. Actual notice is a matter of fact. That is to say, whether a person has actual notice of a fact or not can itself be proved or disproved on the basis of certain conditions.
Following conditions are necessary for an express notice
i) The knowledge or information must be definite. It must not be here say or rumors. If a person comes to know about certain facts by way of rumors or through casual conversation between come persons, this knowledge is not legal because no person is bound to take notice of rumors. The knowledge is not legal because no person is bound to take notice of rumors. The knowledge of the fact must be of such a nature which a normal man would be expected to take seriously' so that he may so or may not do something in future. Unless the mind of the person has in some way been brought to an intelligent apprehension of the nature of the thing, there is no notice. Every notice means knowledge of a fact but every knowledge is not treated as notice.
ii) Only the knowledge of the arties interested in the transaction is actual notice regarding that transaction. Knowledge or information of any other person who is stranger for that transaction is no notice.
iii) The knowledge or information must be about or related to the transfer in question. Knowledge of something which is not relevant for a transaction cannot be taken to be actual notice for that transaction.
CONSTRUCTIVE NOTICE
Doctrine of constructive notice is based on equity. Where a person actually does not know anything about a fact but the court treats that under the circumstances he must have knowledge of that fact, the notice is constructive. There are certain circumstances in which the court presumes that under those circumstances a person should have knowledge of that fact.
1. Willful abstention from an inquiry or search
Willful abstention from an inquiry of search means deliberately avoiding taking notice of a fact which a reasonable man would have taken in the normal course of life. If a person refuses to accept a registered envelop addressed to him, it is his willful abstention from taking notice of the contents of that envelop.
ILLUSTRATIONS
a) A registered letter was sent by landlord A to his tenant B. B refused to take delivery of the letter. B has constructive notice of the contents of the letter because he has willfully abstained from knowing its contents.
b) A contract to sell his house to B. the house in on rent and B knows that the tenants have been paying the rents to C. B has constructive notice of the right of C to take rents form the tenants.
1. Gross-negligence
Negligence means carelessness. It is the omission to do, something which a reasonable man guided by those considerations which ordinarily regulate the conduct of human affairs, would do and doing something which prudent and reasonable man would not do.
LIOYDS BANK LTD.V. P.F. FUZDER AND CO.
G. deposited the title-deeds of this property with a bank N to secure his overdraft. This was, therefore, mortgage by deposit of title-deed in which the only security of repayment of loan is the possession of the title-deed by the person who gives money. After some time G asked the bank N that he was intending to sell the property and the purchaser wants to see the title-deed and after inspection of the deed by purchaser he would return the deed to bank. The bank B relying upon this statement gave the title-deed to G. but, after taking the title-deed G deposited it in another bank L and took another loan. Thus, it was second mortgage by G by depositing the same title-deed. The question arose whether the prior loan given by N was to be secured first or the second loan given by L which was at present in possession of bank L.
The court finally held that, It was held that since this was a mortgage by deposit of title-deeds in which the only security for the repayment of loan is the possession of title-deed, bank N committed gross-negligence in parting with the title-deed. N cannot be allowed to plead that it has no notice that G would take the deeds and deposit it in another bank. Thus, the mortgage of bank N was postponed to mortgage of bank L.
c) ACTUAL POSSESSION AS NOTICE OF TITLE
Actual possession of an immovable property is regarded as constructive notice of such title which the person in possession may have. Explanation II to Section 3 provides that any person acquiring any immovable property shall be deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof.
(i) A leased a houses and garden to B who takes possession of he properties. A then sells the said properties C. C is deemed to have constructive notice of B's rights over these properties i.e. C cannot plead that he had no knowledge pf the fact of B's possession on the properties.
(ii) A agrees to sell his property to B. on the basis of this agreement B puts his tenant in possession of that property. A afterwards sells the property to C. here C cannot be said to have constructive notice of B's possession because B had no actual possession; the possession was with B's tenant
d) NOTICE TO AGENT IS NOTICE TO ORICIPAL
Notice or knowledge of a fact to any agent amounts to constructive notice to his principal. The principal cannot deny that the notice of the fact was to agent and not to him. The rule that a principal was bund constructively with notice of certain facts to his agent was added in Section 3 by Explanation III under the Amending Act, 1929.
IMPORTANCE OF NOTICE
The doctrine of notice is an equitable doctrine. It protects the interests of a transferee for value without notice. There might be transfers in which there is some legal defect and the transfer is void.
GENERAL PRINCILES OF TRANSFER OF PROPERTY ACT
DEFINITION OF TRANSFER OF PROPER
Section 5 defines 'transfers of property' in the following words:
'Transfer of property' means an act by which a living person conveys property in present or I future, to one or more other living persons and 'to transfer property' is to perform such act.
Essentials of transfer of property
i) an act by which
ii) a living person
iii) conveys
iv) in present or future
v) property
vi) to another living person or to himself
i) TRASFERS OF PROPERTY IS AN ACT
Transfer of property is or activity or process. Under this activity something is done by the person who wants to transfer his property; it is not transferred automatically without transferors 'act' as is the case in will or inheritance.
ii) LIVING PERSON
In a transfer of property is to be made by a 'living person'. The person who makes the transfer is called the transferor. The transferor may be human person or a juristic person. Juristic persons are companies, firms, corporation, university etc. the living person i.e. the transferor must be in existence at the time of making of the transfer. The transferor must also be competent at the time of making of the transfer. The transferor must also be competent i.e. of the age majority, of sound mind and not otherwise disqualified to transfer a property.
iii) CONVEYS
In a transfer of property the 'living person' i.e. the transferor conveys the property. His conveying is doing of the 'act' which is called transfer. There must be conveying in every transfer of property. Conveyance means any act the transferor by which certain new titles or interests are created in favour of the transferee.
iv) IN PRESENT OR IN FUTURE
A transfer of property may be made so as to take place with immediate effect or to take place on a future date. The transferor can make arrangement that the property to vested or accrues to the transferee immediately after the completion of the transfer. He may also make such arrangements in which the vesting of the interest of the property is postponed to a future date.
a) A makes a gift of his property to B. he does not mention as to when B shall get the property and also does not lay down any condition. The transfer is present and B gets the property with immediate effect.
b) A transfers his property to B for life and then to C. the transfer in favour of B is present but the transfer in favour of B is future transfer.
v) PROPERTY
It means movable properties such as cars or tables. It means immovable properties such as lands or houses. It also means intangible properties such as lands or houses. It also means intangible properties such as right to catch fish or an actionable claim or other beneficial interests in a property.
v) TO ANOTHER LIVING PERSON
There must also be another person to whom the property may be transferred. Such other person is called transferee. The transferee need not be a competent person. Transferee may be minor, insane or even a child. But, the transferee must be in existence when the transfer is being made. Property cannot be transferred to a person who is not in existence on the date of the transfer. The transferee too may either be a human person or a juristic person. Another living person includes also juridical person such as firms, societies, companies, corporations etc.
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. Section 6 of the Transfer of property Act. 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
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
1) CLAUSE (1): SPES-SUCCESSIONIS
Spes-Successionis 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-successionis 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.
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.
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
i) the legatee may not survive the testator
ii) the will in his favour might not be 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.
2) CLAUSE (2): MERE RIGHT OF RE-ENTRER
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.
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 of the said land 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.
3) CLSUSE (3): 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 parson. 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 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 easementay 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.
4) CLAUSE (4): 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.
5) 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.
6) 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.
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.
7) CLAUSE (7) : PUBLIC OFFICE ANS 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.
8) 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.
9) CLAUSE (9) : TRANSFER OPPPOSED TO NATURE OF INTEREST ETC
THERE IS PROGIBITION IN THE TEANSFER 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.
i) TRANSFER OPPPOSED TO NATURE OF INTEREST CREATED THEREBY
There are certain propertied 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.
ii) TRANSFER WHERE ITS OBJECT OR CONSIDERATION IS UNLAWFUL
Any property which is otherwise trasferabe 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
iii) TRANSFER MADE TO A DISQULIFIED 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.
10) CLAUSSE (10) : 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 prescribe 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.
Section 7 of the Act provides
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 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.
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 leally 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.
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 TRNASFER
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.
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.
i) 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 onto the transferee along with the debt.
5. INTERST
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 transfer of property
a) delivery of possession
b) registration
a) Delivery of possession
Where writhing 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.
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.
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 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.
i) A transfers his properties to X for life who is unmarried and then to the eldest child of X
absolutely. The transfer I 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
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 the U.B but shall revert back to A or to A's legal
heirs.
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 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 element 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,
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.
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.
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 sand the majority of the ultimate beneficiary, the ultimate beneficiary has ultimate beneficiary ahs 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.
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.
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.
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.
Venkata Subnna v. D. Chinna Panayya,
In this case the husband executed a settlement deed under which he crated a life estate in favor 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.
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 o B's children is valid and takes effect.
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 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. 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.
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.
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.
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.
(ii) Awakes 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 dose not means 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.
(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. 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 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.
ILLUATRATIONS
a) 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.
b) 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 id dependent upon an event that may or a 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.
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.
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 ahs merely a future possible right I 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 cloud not obtain possession at the time of his death. A contingent interest confers no title.
ILLUSTRATIONS
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.
1) 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 contingent.
CONDITIONAL TRANSFERS
Property may be transferred either absolutely or conditionally. Where property is transferee 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 id 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 bee vested I 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 RECEDENT
Following cases the conditions are void
a) Impossible to perform:
b) - a 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.
c) unlawful
In the following cases the conditions are unlawful
1 Forbidden by law
If a condition by law, it is void. Transfer of property with such condition cannot take place.
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.
ii) Fraudulent
A condition the fulfillment of which amounts 'fraud' is unlawful. For instance 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.
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.
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. similarly
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 disfavors 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.
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 t6o 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 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.
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: B mat 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. 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.
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.
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 does property from de facto guardian believe
that the guardian was authorized to sell the property.
6. Where the transferee was a grantee from a Tehsidar 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.
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.
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.
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
1. a suit for partition
2. A suit on mortgage
3. a suit for pre-emption
4. Easement suit
5. 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.
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.
6. 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 lies 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.
Sec. 53 of the Act says that the transfer must be made with a bona fide intention. Where the transfer is made with a fraudulent 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.
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-larceners in favor 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.
UNIT - II
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) and 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.
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.
Owner's Duty to Elect - If a property is professed to be transferred and in the same transaction and in the sane 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 id 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/- 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/-.
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 15th 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.
EXPECTIONS
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.
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.
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 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.
BENAMI TRANSACTION ACT, 1988
Ostensible Owner
Ostensible owner is a person who has all the indicta of ownership without being the real owner. An ostensible owner has all the indications of ownership and looks like owner of a property but is not its real owner.
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 name of another person it is called a benami transaction. 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.
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.
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. Section 115 of this 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 IMLIED 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 benamider is dealing with his property as if it were his own but remain silent or acquiesces.
RAMCOOMAR KOONDOO V. 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 her favor 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 the court held that the privy council 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. If the transfer is with consideration, it may be any
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, there fore purchasers the property with dishonest intention, he cannot get the benefit of this section.
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 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 be4nefir 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
A transferee from 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 transferors 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.
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 that there is no presumption that every property purchased by the members of joint Hindu family is property of joint family.
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 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 no 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.
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. Subsequent enlargement of lesser or limited interest would a
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 fro9m 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.
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 wither 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 blind 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 part6-performance of contract. If the transferee has once taken possession of the property, the fact that subsequently he lost that6 possession cannot deprive him of his rights under Section 53-A.
3. Transferee is willing to perform his part of contract:
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 rights under the contract of sale from S.N. Roy and acquired also the same position as that of S.N. Roy. Probodh Kumar Ds 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 fo0r 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 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.
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.
UNIT -III
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.
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.
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.
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.
Essential elements of Usufructuary mortgage:
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 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.
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 an 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.
Following rights are exercised by the mortgagor:
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 upto 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 upto 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 that6 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.
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 a 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 any exercise his right of redemption in any of the following manner:
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 dose 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.
3. Sale by mortgagee.
4. Laps 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 SEPARATLY 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 RECOVE 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 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 any 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.
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:
b) He may sue the mortgagor personally and get a simple money decree
c) 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.
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 Sce. 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 fro 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:
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.
3. 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.
d) 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 mo9rtgage.
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.
4. 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.
5. 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 renewal of a lease holds mortgaged property is regarded as an accession to the property because it increases the value of mortgagee's security.
6. 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:
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.
7. 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.
8. 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 dos 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 too 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. 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.
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 given to 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
1. he 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
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 reteably 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 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.
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 donee
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
The essentials of valid gift are given below;
(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.
3. The property must be in existence at the date of making of the gift. The property must be transferable with in the meaning of 2. Section 5 of this Act. Gift of spe-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.
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 aganoist his consent. The donee may refuse the gift.
Ex: when it is non-beneficial property or onerous gift.
Modes of marketing Gift
Sec. 123 lays down two modes for effecting a gift depending on the nature of property. Registration is necessary for the gift of immovable properties. Where the property is movable, it may be affected by delivery of possession.
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 agter 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 comleted 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.
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 consist 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.
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.
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 donodr'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
3. the donee is an universal donee. If some property, movable or immovable is excluded from gift, the donee is not universal donee.
4. 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.
Object of Section 128
The main object of this section is to protect the interest of the creditors of the donor. In the absence of the rule laid down in this section the interest of the donor's creditors would be defeated. After taking a big amount as loan, the donor may succeed in his dishonest intention of defrauding the creditor by making gift of his whole property to some near relative.
If the donee to whom donor's whole property has been given in fight may out rightly refuse to accept the gift if he finds that most of the properties are onerous that is burden some. He becomes universal donee only where he accepts the whole gift.
UNIT- IV
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'.
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.
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:
2. 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 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 ding, 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 document6s 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 incumbrances, 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 incumbrances.
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.
3. Seller's duties after sale:
Seller's duties after the completion of the sale are given below:
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 they 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 mow of no use of 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
Seller's rights:
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 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 in cumbered 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:
1. 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 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.
2. 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 sle, 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 suns 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.
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 contrtact 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 too 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.
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.
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 iof 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.
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 leassee 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.
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 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 an 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.
If a lessee makes permanent constructions without lessor's consent, he is entitled to remove them without causing damsge 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.
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.
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.
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.
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. 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.
By implied surrender
Surrender is implied if it takes place by operation of law. By operation of law, there is surrender
By creation of a new lease.
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 ther 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.
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 laps 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.
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
Sec. 116 of the Act says
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 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 losser, 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 provides that if a lessee remains in possession after determination of the lease and lessor accepts the rent or otherwise assents to his possession then, in the absence of any contrary agreement lease is deemed to be year or month to month lease.
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.
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
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.
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.
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.
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 'hose in possession' are tangible movable properties.
Ex; Table, Television, Car etc.
Movables which were 'chose in action' are intangible movable properties.
Ex: Claim 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.
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.
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
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UNIT - V
LAW OF TRUSTS
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..
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.
1.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.
2. 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.
3.His duties are inform himself of state of trust property Protect title to trust property not to set up title adverse to beneficiary.
4.Take care of property as a man of ordinary prudence would deal with such property as own property.
5.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.
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 covey 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 Power to compound or compro
The beneficiary has
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 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.
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.
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