The Transfer of Property Act, 1882 | Property Law - CLAT PG PDF Download

Application of the Transfer of Property Act

The Transfer of Property Act applies to transfers made by the acts of parties and not by the operation of law. It primarily deals with the transfer of property between living persons, with a focus on immovable property. The Act does not apply to transfers governed by personal law, such as Mohammedan Law.

Definition of Immovable Property

Immovable property, as per the Transfer of Property Act, includes land, benefits arising out of land, and things attached to the earth or permanently fastened to anything attached to the earth. It does not include standing timber, growing crops, or grass. The General Clauses Act and the Registration Act also provide definitions of immovable property similar to that of the Transfer of Property Act.

Actionable Claims
The Transfer of Property Act also addresses actionable claims.

Attestation

• Attestation, as defined in Section 3 of the Transfer of Property Act, refers to the witnessing of the signing or marking of a document by two or more witnesses.
• These witnesses must sign the document in the presence of the executant, and their intention to attest is essential.
• It is not necessary for all witnesses to be present at the same time, and there is no specific form for attestation.
• The Privy Council in the case of Shamu v. Abdul Khandir clarified that the witnesses must have seen the execution of the document.
• Witnesses must be legally capable of signing, and attestation does not require knowledge of the document's contents.

Constructive Notice
Notice, as defined in Section 3, can be actual or constructive. Actual notice is when a fact is directly brought to a person's attention, while constructive notice is based on presumption of knowledge. Different kinds of constructive notice include:

• Presumption of knowledge due to wilful abstention from inquiry.
• Gross negligence of the party.
• Registration of a transfer, which amounts to notice from the date of registration.

Possession as Notice
If a person is in actual possession of a property, the acquirer of the property is deemed to have notice of the title of the person in possession. Notice to an agent is treated as notice to the principal, and if an agent fraudulently conceals a fact, the principal is deemed to have notice.

Transfer of Property Defined

Section 5 of the Transfer of Property Act defines the term "Transfer of Property" as an act by which a living person conveys property, either in the present or future, to himself or to one or more living persons.

Property in This Context

• The term "property" in this context encompasses tangible material things such as land and houses, as well as rights exercised over any material things, such as the right to enjoy a property or rights regarding the repayment of debt.
• The word "transfer" refers to the transfer of all rights and interests in the property or the transfer of one or more rights related to the property.

Types of Transfers

The phrase "transfer of property" encompasses:

• Transfer of tangible things.
• Transfer of one or more rights concerning a tangible thing.
• Transfer of debt.

What May Be Transferred

• Section 6 of the Transfer of Property Act outlines exceptions to the rule that property of any kind may be transferred.
• The exceptions include:
• Spes Successionis: Referring to the "chance of succession," such an interest cannot be transferred. For example, the chance of a relative obtaining a legacy through a non-testamentary instrument like a Will.
• Right of Re-entry: This right pertains to the property owner who has transferred limited interest in the property to another party, such as in a lease agreement. The right of re-entry cannot be considered a transfer under Section 5 of the Transfer of Property Act because possession of the property reverts back to the original owner.
• Right of Easement: Easementary rights, which are dominant rights of a person over another's property (the servient property), cannot be sold separately from the property as this right is tied to the servient land.
• Religious Office: Rights related to a religious office, such as the office of a Mutawalli of a Wakf or the Mahant of a Math, cannot be transferred because the right is restricted to the holder himself.
• Right to Future Maintenance: Any right to future maintenance, regardless of how it arises, is non-transferable.
• Mere Right to Sue: A mere right to sue, such as the right to recover damages for a tortious act or breach of contract, cannot be transferred as it is considered a mere right to sue.
• Public Office: A public office is held based on personal qualities unique to the holder, making the transfer of such an office through alienation not permissible.
• Pensions, Stipends, and Public Office: These cannot be transferred.
• Illegal Transfers: No transfer can be made if it involves unlawful object or consideration, is opposed to the nature of the interest affected, or is made to a legally disqualified transferee.
• Transfers for future illicit cohabitation are void, while transfers for past cohabitation are not invalid as the past cohabitation was not the 'object.'
• In the case of Nagaratnamma v. Ramaiah, the Supreme Court upheld such a transfer.

Transfer of Property to Future Illicit Cohabitation

• Transfers made for future illicit cohabitation are considered void. However, transfers made for past cohabitation are not invalid because the past cohabitation was not the 'object' of the transfer. This principle was upheld by the Supreme Court in the case of Nagaratnamma v. Ramaiah.

Transferable Interest in Leasehold

• Certain interests in leasehold, such as a tenant's untransferable interest of occupancy, are inalienable. For example, a tenant with an untransferable interest in occupancy cannot alienate or assign their interest in the occupancy to another party.

Competency under the Transfer of Property Act

• Both parties involved in the transfer must be competent to enter into a contract as per Section 10 of the Indian Contract Act.
• This means they must be of legal age, of sound mind, and not disqualified by any law in force.
• Additionally, the person intending to transfer must have the title to the property or the authority to transfer it.

Property in Existence at Time of Transfer
The property being transferred must be in existence at the time of transfer, regardless of whether the transfer creates a right immediately or in the future.

Rule Against Inalienability: Section 10

Absolute Restraint

• The core principle of the Transfer of Property Act is that the right to transfer property is inherent to and inseparable from its beneficial ownership.
• Any condition that absolutely restrains alienation is considered void under the Act.
• Section 10 stipulates that when property is transferred subject to a condition that completely prohibits the transferee (or any claimant through them) from parting with or disposing of their interest in the property, such a condition or limitation is void.
• This principle applies to various forms of transfer, including sale, gift, exchange, and extends to other transfers not explicitly covered by the Transfer of Property Act, such as wills, partition, settlement, etc.

Transfer for Benefit of Unborn Person

This section presents an exception to the standard rule governing transfers between living individuals. It allows for the possibility of making a transfer in favor of an unborn person, provided certain conditions are met. The transfer intended for the benefit of the unborn individual is deemed valid if the following criteria are adhered to:

(1) No Direct Transfer
According to this section, transfers cannot be made directly to an unborn person. A direct transfer would suspend ownership of the property until the unborn individual comes into existence. This contradicts the principle that "property must always have an owner" at any given time.

(2) Creating a Prior Interest
A transfer to an unborn person can only be made indirectly. This involves establishing a prior interest in favor of a living person, known as a life interest. The living individual will hold the property until the unborn person comes into existence. There is no limit to the number of successive life interests that can be created in favor of living individuals. However, the unborn person must come into existence before the death of the living person holding the life interest.

(3) Making an Absolute Transfer of Interest

The transfer made in favor of an unborn person must be absolute. A life interest cannot be granted to an unborn individual. Such a limited interest is considered void. For example:

• If a property is transferred to 'A' for life, then to his first son 'B' for life, and finally absolutely to the unborn son of 'B', this is a valid transfer.
• However, if a property is transferred to 'A' for life, then to his first unborn son for life, and then to 'A's second son 'X' absolutely, this transfer is invalid because it creates a life interest in favor of the first unborn son. The subsequent transfer also fails due to the invalidity of the prior transfer.

Rule Against Perpetuity

The rule against perpetuities was established in the case of Whitby v Mitchell and has been modified to be outlined in Section 14 of the Transfer of Property Act (T.P. Act).

Property can be made inalienable or tied up in two ways:

1. By imposing a condition that completely restrains the transferee from disposing of their interest in the property.
2. By creating a series of partial future interests in favor of unborn individuals, delaying the time when the property will vest absolutely in a person.

Invalid Transfer Scenarios

• The transfer of property is considered void if it creates an interest that is set to take effect after the lifetime of one or more individuals who are alive at the time of the transfer, and the minority of some person who will be born at the end of that period. This person will receive the interest if they reach full age.
• The landmark case is Cadell v. Palmer, where a trust was established for a duration of 120 years, benefiting 28 named individuals or any of them for as long as they live. After this term, there would be a further 21 years of benefit, and finally, for individuals to be determined later.
• The House of Lords ruled that the transfer was valid for the individuals living at the time and for 21 years thereafter.

Indian Law

• In Indian law, the rule against perpetuity considers the number of lives in existence at the time of transfer, plus an additional period of 21 years.
• The period is determined by the minority of gross without reference to the person to whom the interest created will belong if they attain full age.
• Importantly, the period of gestation cannot be added at the end of the perpetuity period.

Example

• For instance, if a transfer is made to a bachelor 'A' for life, and then to 'A's son upon his marriage, the calculation for perpetuity will involve 'A's lifetime plus the duration of 'A's son's unmarried status after 'A's death. This means the transfer to 'A's son could extend beyond 21 years, rendering it void under the rule against perpetuity.

Exceptions to the Rule Against Perpetuity

• The rule against perpetuity does not apply to transfers of property made for the benefit of the public or for the advancement of religion or knowledge.

Direction for Accumulation

According to Section 17 of the T.P. Act, a direction for accumulation of income is a method of restricting the enjoyment of property. While such accumulation is generally considered void under Section 11, the present section serves as an exception to this rule. It permits the accumulation of income in the following ways:

• During the Life of the Transferor: Income can be accumulated until the death of the transferor. If the transferor's life exceeds 18 years from the date of transfer, accumulation is allowed until that date. However, if the transferor passes away before completing 18 years, the accumulation for that period is still valid.
• For a Period of 18 Years from the Date of Transfer (Whichever is Longer): If the transferor's life is less than 18 years from the date of transfer, accumulation is allowed for a period of 18 years. If the transferor lives longer than 18 years, accumulation can continue until the transferor's death.

Conclusion: In summary, the Transfer of Property Act, particularly Section 13 and subsequent provisions, outlines the legal framework for transfers involving unborn persons and the limitations imposed by the rule against perpetuity. These legal principles ensure that property transfers are conducted within defined timeframes and respect the rights of all parties involved.

Exceptions to Direction for Accumulation

Payment of Debt

• A direction for accumulation to pay the debt of either the transferor or the transferee is considered valid.
• For example, if X gifts a house to Z, with the income from the house being ₹2000 per month, and X directs that the rent should be used to pay X's debt of ₹50,000, the direction is valid.

Accumulation for Raising Portions

• A direction for accumulation of income to provide portions for the children or remoter issues of the transferor or any other person taking interest under the transfer is valid.
• Case Law: Edward v. Tuck.

Accumulation for Preservation of Property

• A direction for accumulation for the purpose of preserving or maintaining the property transferred is valid.

Vested and Contingent Interest

Vested Interest

• Defined under section 19 of the Transfer of Property Act.
• Interest becomes vested when the property is completely under the transferee's control and can be validly transferred by him even before he takes possession.
• If the transferee dies, his interest passes on to his legal heirs.
• An interest created in favor of a person through the transfer of property is considered vested if:
• i) No specific time is mentioned for it to take effect.
• ii) It is stated to take effect immediately.
• iii) It is to take effect upon the occurrence of an event that is certain to happen.
• Example: If X gifts 5 lakh rupees to Y, to be paid to Y upon the death of Z, Y's interest is vested because Z's death is certain. If Y dies before Z, the right to claim the gift transfers to Y's legal representatives. However, if Z dies while Y is still alive, Y is entitled to the gift of 5 lakhs because his interest is vested.

Contingent Interest

• Defined in section 21 of the Transfer of Property Act.
• An interest is considered contingent when it is set to take effect:
• 1) Upon the occurrence of a specified uncertain event, or
• 2) If a specified uncertain event does not occur.
• Contingent interest is conditional, meaning it depends on something uncertain, and there is no present fixed right.
• For example, if an estate is transferred to P on the condition that he pays Rs.6000 to Q, P's interest is contingent until he fulfills this condition.
• Similarly, if a house is transferred to X until he marries, after which it goes to Y, Y's interest is contingent until X fulfills the condition of marriage.

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Void Transfers

Conditional Transfers: A property can be transferred subject to a condition, and such transfers are valid. These conditions can be either precedent or subsequent. Section 25 of the Transfer of Property Act explains these conditional transfers.

Condition Precedent
A condition precedent is one that must be performed for the transfer to take effect or for the property to be vested.

(a) Condition Must Not Be Impossible to Perform:

• The condition precedent must not be impossible to perform. If it is, the transfer becomes void due to impossibility of performance.
• For example, if 'R' transfers his house to 'U' on the condition that 'U' touches the sky with his little finger, the condition is void because it is impossible to perform.

(b) The Condition Precedent Must Not Be Forbidden by Law:

• If the nature of the condition is something that the law does not permit, then such a condition is void.

(c) The Condition Precedent Should Not Defeat Any Legal Provisions:

• If the condition, if permitted, would defeat the provisions of any law, it is void.

(d) The Condition Precedent Should Not Be Fraudulent:

• The condition precedent should not involve any fraudulent activities.

(e) The Condition Precedent Should Not Imply Injury to Others:

• The condition precedent should not involve or imply injury to the person or property of another.

(f) The Condition Precedent Should Not Be Immoral or Against Public Policy:

• The condition precedent should not be immoral or opposed to public policy.

Extent of Fulfillment of Condition Precedent

Section 26 deals with the extent of fulfillment of condition precedent. When a valid condition is imposed and the property becomes vested upon the fulfillment of the condition, the rule of Cypres is applied. This means there must be substantial compliance with the condition imposed. The leading case in this context is Edwards v Hammand.

Illustrations

• A transfer of Rs.10,000/- to B on the condition that B should marry with the consent of C, D & E. If E dies, and subsequently B marries with the consent of C and D, under the doctrine of cypress (substantial compliance), the property comes to B.
• If in the above case C, D & E are all living and B marries without their consent, but subsequently gets ratified by C, D, and E, the condition is not fulfilled.

Fulfillment of Condition Subsequent

Section 29 deals with the fulfillment of condition subsequent. A condition subsequent is one where the disposition of property is affected only when the condition is fulfilled subsequently. In this case, the condition must be strictly fulfilled.

Examples:

1. A transfers Rs.50,000 to B, to be paid to B on reaching majority, with the condition that if B dies a minor or marries without C's consent, the amount shall go to D. If B marries without C's consent at the age of 17, the transfer to D takes effect.
2. B transfers property to A absolutely, subject to the condition that the property should revert to the grantor if it is attached under an execution decree against A. Here, the subsequent condition is invalid and ignored, but the transfer to A is valid.

Doctrine of Acceleration

According to Section 27 of the Transfer of Property Act, in a transfer of property, A may create an interest in favor of one person and, in the same transaction, create an ulterior disposition in the same property for another person. If the first transfer fails, the ulterior disposition takes effect, even if the failure does not occur as A intended. However, if the failure is supposed to happen in a specific manner, the ulterior effect will not take place unless the failure occurs in that manner.

Examples:

• In Lull v. Jones, A made a gift to B for life, with the remainder to B's children. The gift failed because B was one of the witnesses. According to the doctrine of acceleration, the gift to B failed, but the gift to B's children took effect.
• In Avelyn v. Ward, A transfers Rs.5,000 to B on the condition that B will execute certain leases within three months after A's death. If he fails, the transfer goes to C. If B dies before A, the transfer to C takes effect.
• In Underwood v. Wing, A transfers property to his wife W; if she dies during his lifetime, the property goes to B. If both A and W die in an air crash and it is not proven that W died before A, the transfer to B will not take effect.
• In another example, A bequeaths a sum of money to his children who survive him. If they die before him, the bequest goes to B. If A dies without children, the bequest to B takes effect according to the doctrine of acceleration.