Q. 6. “The accessory follows the principal.” How far the maxim is applicable to a transfer of property ?
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Discuss the effect of transfer? Explain whether a transfer passes all interests of the transferor ?
Or
“A Transfer passes all interests of the Transferor”. Explain.
Ans. The Section 8 of the Transfer of Property Act deals with operation of transfer. i.e. effect of transfer.
The first part of the section is an application of the general rule of jurisprudence as expressed in the maxim resessovira sequitur rem principaleur-The accessory follows the principal things. In another word which is accessory or incident does not lead but follows the principal According to Justice Mukherji of Allahabad High Court this section only lays down a rule of interpretation that in a case of transfer whether a particular interest possessed by the transferor was meant by the conveyance to pass or not. Section 8 deals about the transfer of property which may be tangible or intangible. But when it speaks of interest it includes title whether it may be large or small.
Transfer passes all interests of transferor which he possesses in that property. According to the rule, presumption will be that the transferor passed or conveyed all total interests of that transferring property which he was possessed therein, in other words all the interests which the transferor is then capable of passing in the property unless a different intention is expressed or necessarily implied.
Interest of the property has several incidents or things appertaining to it. When a property is transferred their interest and together with them their legal incidents also convey on to the transferee. According to Section 8. followings are the provisions of law regarding operation of transfer:
(1) Unconditional transfer conveys all the interests of the property possessed by the transferor
(2) Legal incidents pertaining to the property transferred also pass on to the transferee
(3) For any different intention of the transferor the rule of interpretation is that it is to be interred from the surrounding circumstances and by construing the whole instrument.
Legal Incidents of Transfer
The following are the certain the legal incidents which pass on to the transferee upon the transfer of the property
Land. The legal incidents of a piece of land includes –
(1) every things attached or annexed it for permanent enjoyment.
(2) beneficial interest of it,
(3) things attached to the earth.
(4) every thing which is part and parcel of the land;
(5) every thing beneath the land,
(6) easement annexed to land;
(7) right to collect the rent, and
(8) all houses, structures standing on it including the trees standing on it pass by necessary implication and it is not necessary to mention them Divisional Forest Officer v. Dant, AIR 1968 SC 612.]
Where a land is let out to a tenant, right to fruit tree standing on that passes-Vishvanath v. Ram Raj, AIR 1991 All 193.)
If only standing trees on land are transferred there cannot be presumption that land on which trees are standing has also been transferred.-[Syam Sunder Ganariwala v Delta International Lid., AIR 1998 Cal 233.]
Machinery. Where machinery is a part of the land it is transferred with land and with the machinery all accessories such as nut, bolts etc. are also transferred because all are legal incidents of machinery.
House. Legal incidents of house include easement such as right of way, light and any other quasi-easement. When a house is sold the purchaser gets the right of easements annexed to it and doors, windows, locks, keys, bars etc.
Debts. Legal incidents of debt is security of debt. Therefore. in the case of transfer of debt or actionable claims, the securities are also transferred with the debt.
Unless different intention is expressed or implied, what interest of the property is transferred by the deeds depends upon its own terms and intention of the parties. It is to be noted here that plain and simple transfer results into transfer of all incidents appended to the property transacted. When some interests are reserved the property will be conveyed sans reserved interests. But sometimes such reservations regarding rights to be transferred are inferred on the basis of facts and circumstances of the case as they are not expressed. (Sri Gujratee Harijan Society v. Add Commissioner, AIR 1992 Bom. 263 and Sanat Kumari v. Lakshi Amma Jankı Amma, AIR 2000 SC 3009.]
Q. 7. “An absolute restraint on alienation is void but partial restraint is not.” Comment.
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Enumerate and illustrate the restrictions which are declared illegal on certain alienations.
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Discuss conditions restraining alienation. State the exceptions, if any.
Ans. Section 10 of the Transfer of Property Act deals with condition restraining alienation. Where property is transferred subject to that condition or limitation absolutely restraining transferee or any person claiming under him from parting with or disposing of his interest in the property, the condition or limitation is void, except in case of lease where the condition is for the benefits of lessor or those claiming under him, provided that property may be transferred to or for benefit of a woman (not being a Hindu, Mohammedan or Buddhist) so that she shall have no power during her marriage to transfer or charge the same or her beneficial interest therein.
Conditional Transfer
Every owner of property who is competent to transfer has freedom of transferring his property either unconditionally or subject to certain conditions. In a transfer of property where a condition is laid down by the transferor, the transfer is a conditional transfer.
The condition may be condition precedent or condition subsequent precedent or subsequent. The condition precedent is such a condition which is to be completed or fulfilled prior to the transfer of property and whether the transfer would take place or not, is itself dependent on that condition whereas condition subsequent is a condition which is required to be fulfilled after the transfer of the property has already taken place It affects the interests of the transferee after the transfer. Condition subsequent has been embodied in Sections 10, 11, 12 and 17 of the Transfer of Property Act. Certain subsequent conditions have been declared void. The void condition subsequent has no effect and transferee is bound to fulfil such condition.
According to Section 10 of Transfer of Property Act, if any such transfer is made where absolute restriction is imposed on transferee from disposing of or parting with his interest in the property, the condition is void. The transferee is free to transfer that property to any body by any means. Such absolute condition or restriction limiting his right of disposing the property would not be binding on him and he would be free to transfer to any body by any means. A partial condition or restriction limiting his right to transfer the property may be imposed and that is not against the provisions of Section 10 of the Transfer of Property Act.
Illustration
(i) A sells his house to B with a restriction limiting his right of transfer that B cannot transfer that property except ‘E’. This restriction is absolute hence void because ‘C’ may be such person who may never purchase the property
(ii) A husband settles his property on his wife subject to the condition that she cannot transfer the property without his consent. The condition is void as it takes away the power of alienation of wife absolutely.
Partial Restraint. Section 10 of Transfer of Property Act is silent regarding partial condition or restriction on alienation by transferee. But in case of Mohammad Raza v Abbas Bandi Bibi, AIR 1932 PC 158, where the condition was imposed to restrict the transferee from transferring the property to stranger, ie, outside the family of the transferor, the Privy Council observed that the condition was merely a partial restraint and therefore it was valid.
Restriction on transfer by compromises. As family settlement or transfer by compromises is the transfer under Transfer of Property Act hence such restriction on alienation is valid. The principle of Section 10 is based on principle of equity, therefore, it has been applied where the Transfer of Property is not applicable.
Exceptions
Section 10 makes two exceptions to the general rule that conditions absolutely restraining alienation are void:-
(1) Lease. As under the lease transfer is made of limited interest and transferor (lessor) retains or reserves the ownership and transfers only the right of enjoyment to the transferee (lessee), therefore, a lessor can impose the condition that he shall have no right to sub-lease or assign his interest to any other person. Hence such absolute restraint on lessee is valid
(2) Married Women. Where a property is conveyed to a married women who is not Hindu, Muslim or Buddhist, the transferor can legally impose the absolute conditin restraining alienation transfer. Such condition is not void under Section 10 of the Transfer of Property Act.
Q. 8. To what extent and subject to what conditions does the Transfer of Property Act, 1882 permits transfer for the benefit of unborn persons?
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To what extent and in what manner the property can be transferred to an unborn person?
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Discuss the law relating to transfer for the benefit of an unborn person.
Ans. Provisions regarding transfer of property for the benefit of unborn persons have been laid down in Section 13 of the Transfer of Property Act. 1882. Accordingly where on a transfer of property, an interest is created therein for the benefit of a person not in existence on date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property.
Illustration
A transfers property of which he is the owner to B. in trust for A and his intended wife successively for their lives and after the death of the survivor for the eldest son of the intended marriage for life and after his death for A second son. The interest so created for the benefit of the eldest son does not take effect, because it does not extend to the whole of A’s remaining interest in the property.
Transfer for the benefit of unborn person. Unborn person means a person who is not in existence. A child in mother’s womb or a child en ventre sa mere is also treated a person in existence Therefore a child in mother’s womb is a competent transferee. But a child who is not even in mother’s womb is not in existence and therefore such child is not a living person, therefore property cannot be transferred to such child who is not even the mother’s womb. According to Section 5 of the Transfer of Property Act, a property can be transferred only between the living persons As child who is not even in the mother’s womb, is an unborn person.
A transfer cannot be made directly to an unborn person. Such a transfer can only be made by the machinery of trusts. Hence, it is clear that property cannot be transferred to an unborn person directly. Such transfer can be made by the machinery of trust.
Prior Interest. The property which is to be transferred must vest in some person between the date of the transfer and coming into existence of the unborn person. The interest of the unborn person must, therefore, be in every case preceded by a prior interest and before termination of prior preceding interest, the unborn person must come into existence otherwise it would not vest in the unborn person.
According to Section 13 a property can be transferred for the benefit of an unborn person subject to the following conditions:-
(1) Transfer for the unborn person must be preceded by a life interes in favour of a person in existence at the date of the transfer, and
(2) Only absolute interest may be transferred in favour of the unbort person.
It is clear from the above that-
(i) the intermediary person living at the time of the transfer is to br given only life interest. It means giving him only the right of enjoymen and possession. He has to preserve the property like a trustee during the lif time on behalf of the unborn person.
(ii) The unborn must come into existence before the death of the person holding property for the life. When after the death of last living person, in other words, after the termination of the preceding interest the unborn person comes into existence, he cannot succeed to get the property, because of the fact after termination of life interest, the property cannot remain in abeyance and cannot wait for a moment. In such a situation, the property will revert to the transferor or his heirs.
It can be very clearly explained by the following:
A made a gift of her property to daughter of her nephew B for life and then absolutely to B’s male descendant, if she should have any, but in the absence of any male child of B to daughter of B without power of transfer and if B has no child then to A’s Nephew B died issueless. The Court observed that the gift for life to B was valid as the B was a living person at the time of transfer. But gift in favour of daughter of B was void under Section 13 of the Transfer of Property Act, because of the fact that the gift was without power of transfer, ie, without absolute power. Therefore, this prior transfer was invalid, therefore, its subsequent transfer to A’s Nephew was also invalid.-[Girjesh Dutt v. Data Din, AIR 1934 Oudh 35.]
So far as Mohammedan Law is concerned vide Section 2 of Transfer of Property Act, it is not applicable to Mohammedan Law. However under Mohammedan Law also a gift in favour of a person not in existence has been held void (Abdul Cadur v. Turnec, (1884) 9 Bom. 158.]
It is true that no interest could be created in favour of an unborn person but when the gift is made to class of series of a person, some of whom are in existence, and some are not, it is valid in favour of those persons who are in existence at that time. [R.B. Bahadur Singh v. Kueri, AIR 1953 SC 7.]
Q. 9. Explain and illustrate the rule against perpetuity as laid down in Section 14 of the Transfer of Property Act, 1882.
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Explain the rule against perpetuity. Mention the exception to the rule against perpetuity. Explain the difference between Indian and English law.
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Discuss the rule against perpetuity and explain its exceptions.
Ans. Section 14 of the Transfer of Property Act deals with the rule against perpetuity. According to this section, no transfer of property can operate to create an interest which is to take effect after the life time of one or more persons living on the date of such transfer and the minority of some person who shall be in existence at the expiration of that period and to whom, if he attains the full age, the interest created is to belong.”
Transfer in perpetuity.- Perpetuity means for ever or for indefinite time Rule against perpetuity is such a rule which is opposed to the transfer of property for indefinite period or making the property inalienable for ever or for indefinite time. When the property is transferred in such a way that it becomes non-transferable in future the property is tied up for ever. The following are the way of transfer which makes the property non-transferable in future
(1) By taking away the power of transferee for further transfer, and
(2) By creating future remote interest
Under Section 10 it has been laid down that a condition restraining the transferee’s power of transfer is void and under Section 14 a condition which tends to create future remote interest has been prohibited and has been declared as against the law. It is a rule against the perpetuity. It can also be called the rule against remoteness of vesting
Object of rule against perpetuity
The main object of rule against perpetuity is to ensure the free, without restrictions and active circulation of property in the society. Such type of free circulation of property in the society ensure the betterment of property, increase the value of property and make the society rich. In addition to this ensure the betterment trade and commerce and betterment of trade and commerce is very essential for the improvement of economic position of society. A transfer which renders property non-transferable for an indefinite period or for ever is detrimental to the interest of its owners who are unable to dispose it of even in most urgent needs or for any higher value. Really when a property is tied up from one generation to ancther in one family. the society as such would be deprived of any benefit out of it. It is based on a good public policy. The main object of rule against the perpetuity has been observed in case of Jekyll M.R. in Stanley v. Leigh, (1732) All ER 917, as under:
“A great mischief would arise to the public from estates remaining for ever or for a long time inalienable or in-transferable from one hand to another, being a damp to industry and prejudice to trade, to which may be added the inconvenience and distress that would be brought on families whose estates are so fettered.”
Section 14 of Transfer of Property Act states that in a transfer of property, vesting of interest cannot be postponed beyond the life of last preceding interest in the living person (or persons) and the minority of the ultimate beneficiary. The essentials of this section are as under:
(1) There is a transfer of property.
(2) The transfer is for the ultimate benefits of an unborn person who is given absolute interest.
(3) An unborn person(s) is preceded by life interest or limited interests of living person(s).
(4) Unborn person(s) or ultimate beneficiary must come into existence before the death of the last preceding person
(5) Vesting interest in favour of unborn person may be postponed only upto the life or lives of living person(s) plus minority of ultimate beneficiary (the unborn person(s)), but not beyond that.
Maximum permissible remoteness of vesting Life of the preceding interest + Period of gestation station of ultimate beneficiary (i.e. unborn person) + Minority of the ultimate beneficiary (ie. unborn person).
Exceptions to the rules against perpetuity
(1) Transfer for the benefit of the public. It is not applicable to case where a property is transferred for the benefit of the public, such as a transfer of property for the benefit of public in advancement of religion, knowledge, commerce, health, safety or any other object beneficial to mankind.-[See Section 18 of the Transfer of Property Act.)
(2) A lease with a covenant for renewal does not offend the rule against the perpetuity because of the fact that there is a transfer of limited interest in the property.-[Kempraj v. M/s. Burton Son & Co. (Pvt.) Ltd., AIR 1970 SC 1873.] The clause for renewal of lease cannot be treated as a transfer.
(3) The Rule against perpetuity does not apply to personal agreement. Because of the fact it is an agreement which does not create an interest in the property, though there may be related to directly or indirectly to some immovable property. If there is no transfer of interest, the rule cannot apply even though such contract may be related to right and obligation in some of the property-[Jagar Nath v. Cheddi Dhobi, AIR 1973 All 307 and Ram Baran v. Ram Mohit, AIR 1967 SC 744.J
(4) Agreement of sales. Mere contract for sale of immovable property does not create any interest in immovable property. Therefore the rule cannot apply to such contract.-[Shivji v. Raghunath, AIR 1997 SC 1917. Similarly where the shebaits of a temple, under an agreement appointed pujari out of particular family to perform religious service to a temple, the agreement was valid because being a personal agreement- [Nafar Chand v. Kailash, (1921) AC 328.] In this way it is also not applicable to a covenant of pre-emption [Mahraj Bahadur v. Balchand, AIR (1922) PC 165.]
(5) Mortgage and rule against perpetuity. In case of mortgage the rule against the perpetuity does not apply. Because there is no future interest is created in the property which is mortgaged. It is very essence of the mortgage that equity of redemption is a present interest in the property which is to be redeemed.
(6) It does not apply to a vested interest.
(7) It does not affect the right of Government to grant of maintenance for a private property.-[Crown Grants Act, 1895.]
Rule against perpetuity under Hindu and Muslim Law. Since amendment of Section 2 in 1929 this Act including Section 14 are applicable to Hindus except in case of religious and charitable endowment. With reference to Muslim Law a gift to remote and unborn generation is forbidden except in case of a Waqf provided there is an ultimate gift to charity.
Difference between English and Indian Law regarding rule against the perpetuity
Under the English Law, vesting of interest is to be postponed upto the life or lives of last preceding person(s) plus a period of 21 years and there is no any consideration regarding the age of minority of ultimate beneficiary. This rule of English Law has been amended. Now according to Section 163 of the Law of Property Act, 1925 a transfer shall not be void even if the vesting has been postponed beyond 21 years but it shall take effect as if age of 21 had been substituted for the age specified in the instrument and that fixed age may be longer than 21 years. [Perpetuities and Accumulation Act, 1964 (England); Prof. Sinha, R.K. The Transfer of Property Act Nineteenth ed. page 108.]
Q. 10. Define vested interest and contingent interest. Distinguish between vested interest and contingent interest.
Ans. Vested interest has been defined under Section 19 of The Transfer of Property Act. According to this section, “where, on a transfer of property an interest therein is created in a favour of a person without specifying the time when it is to take effect or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the terms of the transfer.
A vested interest is not defeated by the death of the transferee before he obtains possession.
Explanation.- An intention that an interest shall not be vested is not to be inferred from the merely from a provision whereby the enjoyment thereof is postponed, or whereby a prior interest in the same property is given or reserved to some other person or whereby income arising from the property is directed to be accumulated until the time of enjoyment arrives or from a provision that if a particular event shall happen the interest shall pass to another person.”
Vested Interest
A transfer of property involves transfer of interests. From the point of view of the quantity it may be either absolute or partial. Likewise on basis of time of accuring (i.e., when transferee gets the interest) the interest may be vested or contingent. In the case of vested interest as soon as the transfer is made or completed the interest is accrued to the transferee with immediate effect. A contingent interest is created in favour of a person to take effect only on the happening of a specified uncertain event. An estate or interest is contingent when the right of enjoyment is to accrue on an event which is dubious or uncertain. Where the right accrues immediately but the enjoyment of interest is postponed to future date the interest is vested and not contingent. Where there is an immediate right of present or future enjoyment that is vested interest and where the right itself is to accrue on the happening of uncertain event it is a contingent interest.
Section 19 of the Transfer of Property Act provides that unless a contrary intention appears from the terms of the transfer, the interest created in favour of the transferree is said to be vested where:
(1) no time is specified when it is to take effect, or
(2) it is specified that it is to take effect forthwith, or
(3) it is to take effect upon the happening of an event which must happen.
When a property is transferred without specifying the time to take effect, such in ention is presumed by law that it is to take effect immediately. Secondly, in order to be more specific, the transferor may express his intention that interest shall accrue to transferee with immediate effect. In above both the cases there is transfer of vested interest. Where the transferor provides that the transfer shall take effect upon the happening of an event which is of “must nature” and which is bound to occur in future, such type of interest is a vested interest. For example, death of any person, or any future date or year or any particular age of transferee are future events of ‘must nature’ or must happenings.
For example, in 2001 if a person makes the gift for his property to take effect in 2003 the donee gets a vested interest because after 2001 the year 2003 is bound to come.
Illustration
(i) A executes the gift deed of his house to B. But in the gift deed there was no specified date on which the ownership is to be transferved. Interest of B is a vested interest..
(ii) A executes the gift deed of his house to B on the death of C. B has a vested interest in the house even before C dies. But the possession and enjoyment of house shall be made after the death of C. If B dies before the death of C, the possession of house shall be given to B’s legal heirs.
The vested interest remains unaffected also where the title is to pass on the happening of a particular event in future but the future event shall be of must nature.
In the following situations transferee has the vested interest:
(1) Postponement of enjoyment.-Postponement of enjoyment of property does not effect the vested interest. The primary thing is the transfer of interest of title and possession of property is secondary. A transfers his property to B to be given to B on attaining the age of majority. The interest of B is vested interest, although he shall get the possession and enjoyment of property only on attaining the age of majority.
(2) Prior Interest. Where a prior interest is created in the same transfer deed of the transfer of interest is the vested interest and there is only postponement of enjoyment of property. A transfers his house to B for his life and then to C. The interest of C is vested interest. Only his right of enjoyment of house is postponed till the life of B.
(3) Direction of accumulation of Income. Direction for accumulation of income is valid provided it is within the period prescribed in Section 17 of the Act. Where a property is transferred with such direction, the interest of the transferee is nevertheless vested. In such cases too it is only the right of enjoyment which is postponed, vesting is not postponed.
In Kokilambal v. N. Raman Kokilambal, AIR 2005 SC 2468, there was transfer of property with a condition that right of enjoyment is to terminate only on the death of the transferor. The apex court held that the transfer did not create a vested interest.
(4) Conditional Limitation. The Conditional limitation does not prevent the vesting of interest. In such cases the interest already vested may be divested in another person according to conditional limitation. For example. A transfer his house to B with the condition that if B does not take the possession within a year of date of transfer the house shall go in favour of C. In this case B interest is vested interest if B does not take the possession within a year it shall be divested to C.
Nature of vested interest is a present fixed right to property and it is also a transferable as well as heritable interest.
Contingent Interest
Section 21 of the Transfer of Property Act deals with provisions of contingent interest. Contingency means uncertain future event. Where in transfer of property the vesting of interest depends upon uncertain future event, the interest is contingent. Where the creation of interest is made dependant on the happening or non-happening of any uncertain future event, the interest of the transferee remains a contingent interest. [Chinna Reddy v. Pujari Keshanna, AIR 1954 Hyd 185]. In case of contingent interest the creation of interest is made dependent on the happening or not happening of the specified uncertain future event. It does not vest in the transferee immediately. The creation of interest and its vesting depends upon the happening or not happening of that uncertain future event. For example A transfers his house to B provided C survives upto the age of 20 years. The interest of B is contingent interest as it is uncertain future event. Likewise A transfers his house to B provided C does not survives upto the age of 20 years. It is also a contingent interest, because it is uncertain future event. In first case the vesting would take effect on the happening of (i.e., survival) that uncertain future event whereas in second case the vesting would take effect on not happening of (i.e., not survival) that uncertain future event. It therefore, may be concluded that contingent interest becomes vested only upon the fulfilment of the condition precedent, in other words only upon the happening of uncertain specified future event.
Exception
The explanation of Section 21 deals with exception of the contingent interest. Accordingly where under a transfer of property a person becomes entitled to an interest therein upon attaining a particular age and transferor also gives to him absolutely the income to arise from such interest before he reaches that age or directs the income or so much thereof as may be necessary to be applied for his benefits, such interest is not contingent but the vested interest.
Nature of Contingent Interest
(i) Future possible interest.- Vesting of interest depends upon the happening or not happening of specified uncertain future event. Therefore, it is called contingent interest. Future interest may be vested or may not be vested.
(ii) Not heritable. Contingent interest is not heritable because of the fact there is only possibility of vested interest. If transferee after fulfilment of condition precedent aquires or accrues the vested interest after such situation it becomes heritable. In case of Rajesh Kants Roy v. Smt. Shanti Devi, AIR 1957 SC 255. Hon’ble Supreme Court has observed that “if a person dies before the contingency and before the vesting occurs the heirs of such person donot get the benefit of the gift (transfer).”
(iii) Transferable Interest.-Though contingent interest is transferable interest but the transferee’s title is subject to the same contingency as it was at the time of transfer. Since the contingent interest is itself an uncertain future interest in the property and transferor’s title is not fixed and perfect, the transferee gets also unfixed and imperfect title. If contingent interest after the transfer becomes vested interest the transferee’s right similarly becomes vested interest.
Distinction between vested interest and contingent interest:
(1) Time of accrual. The vested interest accrues immediately to the transferee whereas contingent accrues to the transferee when specific uncertain event happens or does not happen.
(2) Nature of the title. The vested interest confers fixed and perfect title whereas contingent interest accrues, imperfect and incomplete title which depends upon the happening or non happening of uncertain future event. The vested interest is owned absolutely whereas contingent interest is owned conditionally.
(3) Transferee’s right in property.-Transferee’s right in the transferred property is vested, heritable and transferable. The transferees has fixed and present right. In contingent right transferees has imperfect and uncertain future rights which depends upon the happening or not happening of the future event.
(4) A vested interest is capable of being attached and sold in execution of a decree but in contingent interest it is not possible.
Q. 11. Explain conditional transfer. Distinguish between condition precedent and condition subsequent.
Or
Discus fully the law relating to conditional transfers with special reference to fulfilment of condition precedent and condition subsequent.
Ans. Conditional Transfer
Section 25 deals with the conditional transfer. According to this “an interest created on a transfer of property and dependent upon a condition fails if the fulfilment of the condition is impossible or is forbidden by law or is of such a nature that if permitted it would defeat the provisions of any law, or is fraudulent or involves or implies injury to the person or property, of another or the Court regards it as immoral or opposed to public policy.”
Illustrations
(1) A lets a farm to B on the condition that he shall walk a hundred miles in an hour. The lease is void.
(2) A gives Rs. 500/- to B on condition that he shall marry A’s daughter C. At the date of transfer C was dead. The transfer is void.
(3) A transfer Rs. 500/- to B on condition that he shall murder C. The transfer is void.
(4) A transfer Rs. 500/- to his niece C, if she will desert her husband. The transfer is void.
A transfer of property with certain condition is called conditional transfer. Such conditions are of the following kinds:
(1) Condition precedent (Section 26)
(2) Condition subsequent (Section 29)
(3) Collateral condition.
(1) Condition precedent. It means where the condition of transfer of property is to be fulfilled prior to the transfer a person aquires interest in the property. There may be a condition attached on whose performance the contract as a whole comes into operation. A condition precedent is that condition which precedes the transfer of property. For example, A contracts to sell his house to B if B marries C. This is case of contract with the condition precedent and its effect is that until B marries C, obligation to sell the house does not arise. [Section 26 of T.P. Act.]
(2) Condition Subsequent.- A condition subsequent is that condition which is required to be fulfilled after the transfer of property has already taken place. For example A case of conditional subsequent and B’s death, his Farm to B until he dies. This is a case of conditional subsequent and on B’s death. For example A transfer, his house to B provided that if B shall not go to England within 3 years after the date of transfer his interest in the house shall cease. B does not go to England within period prescribed. His interest in the house ceases.
(3) Collateral Condition. A condition is collateral if condition is required to be fulfilled simultaneously with the transfer. It is to be performed side by side the operation of the transfer. For example A agrees to let his farm to B so long as B lives in the same house with A. It is a case of collateral condition and the contract of lease remains in operation so long as B continue, to live in the same house with A.
Void Condition Preceendent
The following are the void condition precedent:-
(1) Impossible to perform. Such conditions which practically cannot be performed is called impossible condition. Such condition is void and transfer of property is also void.
(2) Unlawful. If conditions are unlawful the transfer with unlawful conditions fails and is void too. The following cases of the conditions are unlawful and void:-
(i) Forbidden by Law. If transfer of property is made with condition forbidden by law it cannot take place. For example, A transfers his house to B on condition that B shall transfer his excise licence to C. Transfer of licence is forbidden by law and the condition cannot be performed. Transfer of house fails.
(ii) Defeats the provision of Law. If such condition is imposed with transfer of property which defeats the provisions of any existing law, the transfer is void.
(iii) Fraudulent. If any condition is imposed for any fraudulent action, the condition is void and transfer fails.
(iv) Involves any injury to person or property. A transfers his property to B on condition that B shall murder C or sets fire to C’s house. The corndition is void. The transfer fails.
(v) Opposed to public policy. A makes a gift of Rs. 25,000/- to B when B deserts her husband. Condition imposed is void and transfer fails. B can never be entitled to get Rs. 25,000/-.
Performance of condition precedent. Section 26 deals with the provisions relating to performance of condition precedent. According to this section “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 shall be deemed to have been fulfilled, if it has been substantially complied with.”
(A) A transfers, Rs. 500/- to B on condition that he shall marry with the consent of C, D and E. E dies. B marries with the consent of C and D. B is deemed to have fulfilled the condition.
(B) A transfer Rs. 5000/- to B on condition that he shall marry with the consent of C, D. and E. B marries without the consent of C. D and E; but obtains their consent after the marriage, B has not fulfilled the condition.
Fulfilment of condition subsequent. Section 27 of the Transfer of Property Act deals with the provisions relating to fulfilment of condition subsequent. According to this section “Where, on a transfer of property, an interest therein is created in favour of one person, and by the same transaction an ulterior disposition of the same interest is made in favour of another, if the prior disposition under the transfer shall fail, the ulterior disposition shall take effect upon the failure of the prior disposition, although the failure may not have occurred in the manner contemplated by the transferor.
But where the intention of the parties to the transaction is that the ulterior disposition shall take effect only in the event of the prior disposing failing on a particular manner, the ulterior disposition shall not take effect unless the prior disposition fails in that manner.”
Where “An ulterior disposition of the kind contemplated by the last preceding section cannot take effect unless the condition is strictly fulfilled.
Illustrations
(i) A transfers Rs. 500/- to B to be paid to him on his attaining the age of majority with the proviso that if B dies a minor or marries without C’s consent, the Rs. 500/- shall go to D. B marries where he is only 17 year’s of age without C’s consent. The transfer to D takes effect.
(ii) A transfers a garden to B with a condition that if B cuts down a particular tree of Neem, the garden shall belong to C, B has a vested interest in the garden. If B cuts other trees except that particular tree of Neem, the interest of B shall not be divested. But when B cuts that tree of Neem his interest in the garden is divested to C. In this way already vested interest is divested.
Distinction between condition precedent and condition subsequent
(1) Section 26 of the Transfer of the Property Act deals with the provisions relating to fulfilment of condition precedent whereas Section 27 deals with the provisions relating to fulfilment of the condition subsequent.
(2) The rule is that a condition precedent is to be interpreted liberally. It means that the condition shall be deemed to have been fulfilled if it has been substantially complied with. Whereas a condition subsequent is to be interpreted strictly. It means that the condition subsequent is to be fulfilled strictly otherwise already vested interest shall not be divested.
(3) The general principle is that where the transfer is made with the condition precedent the transfer fails unless the condition is fulfilled whereas condition subsequent is that condition which requires to be fulfilled after the transfer of property has already taken place.
(4) As a general rule, law disfavours divesting of interest which is already vested in a transferee. Law leans in favour of early vesting and the law views with disfavour the divesting of estate once vested. Section 26 gives effect to the first principle by providing that a substantial compliance is sufficient in case of condition precedent. That a condition subsequent which has the effect of divesting an estate is subject to the rules of strict interpretation.
Q. 12. What is the difference between English Law and Indian Law regarding election ?
Or
Explain the doctrine of election.
Or
“The foundation of doctrine of election is that a person taking the benefit of an instrument must also bear the burden.” Explain.
Or
“He who accepts benefit under a deed or will or other instrument must adopt the whole contents of that instrument, must confirm to all its provisions and renounce all rights that are inconsistent with it.”(Maitland).
Or
“Who takes benefits of the instrument must adopt the whole of it.” Discuss.
Ans. Section 35 of the Transfer of Property Act deals with the provisions relating to the doctrine of election and it clearly explains when the election is necessary. Election means choosing between two alternative interests or rights. If one right in lieu of the other is conferred under any deed or will or other instrument on a person, he is bound to elect only one of them. He cannot take under and against the same instrument. [Beepathumma v. S.V. Kathambolithiya, AIR 1965 SC 241.]
Doctrine of election is based on the principle of equity and is applied to every kind of instruments whether deed or will and to every kind of property movable or immovable. In a leading case of equity [White v. Tudor’s, Vol. 1, ed. VIII at P. 444] the equitable principle of election has been stated as under:
“Election is the obligation imposed upon a party by Courts of equity to choose between two inconsistent or alternative rights or claims in case where there is clear intention that he should not enjoy both. Then he who accepts a benefit under a deed must adopt the whole contents of the deed.”
Illustration
A transfers to B an estate to which C is entitled and as part of the same transaction gives C a coalmine. C takes the possession of coalmine and exhausted it. He thereby confirmed the transfer of estate to B.
The foundation of doctrine of election is that a person taking the benefits of an instrument must also bear the burden.
According to Maitland, “He who accepts benefit under a deed or will or other instrument must adopt the whole contents of that instrument, must confirm to all provisions and renounce all rights that are inconsistent with it.”
Analysis of the section. Section 35 lays down-“where a person professes to transfer property which he has no right to transfer and as part of the same transaction confers any benefit on the owner of the property, such owner must elect either to confirm such transfer or to dissent from it, and in the latter case he shall relinquish the benefit so conferred, and the benefit so relinquished shall revert to the transferor or his representative as if it had not been disposed of, subject nevertheless,
where the transfer is gratitious, and the transferor has before the election died or other became incapable of making a fresh transfer, and in all cases where the transfer is for consideration.
to the charge of making good to the disappointed transferee the amount or value of the property attempted to be transferred to him.”
The following are the main rules of the doctrine of election:
(1) The person who professes to transfer a property is not the owner of that property;
(2) in lieu of this transfer the transferor confers certain benefits upon the owner of the property; and
(3) The transfer of property and conferring of the certain benefits forms part of the same instrument.
Then the owner of the property is bound to elect either to take the benefits and in lieu of taking benefits transfer his property or to retain his property and give up the benefit.
(4) The election may be express or implied.
Rights of Disappointed transferee. Where the benefits conferred by the owner of property is forfeited and reverts to grantor, the transferee who is disappointed by such election is not helpless in the matter. Where the transfer is gratuitous, he is entitled out of the benefits conferred on the owner of the property to the amount of value of the property attempted to be transferred to him. In such case where the transferor dies or becomes incapable of making a fresh transfer, he is entitled to charge for such amount upon the benefits which is reverted to the grantor.
Where the transfer is with consideration whether the transferor is alive or dead at the time of election the transferee is entitled to get the reasonable amount of compensation from the transferor or his representative. The reasonable compensation means equal to the value of property which was professed to be transferred to the transferee.
Distinction between Indian and English Law
In the English law where the election is against any deed or instrument. the benefits does not revert to the transferor. The owner of property while rejecting the transfer may insist upon taking also the benefit which to be paid to him. He is a refractory donee and such refractory donee takes the benefit subject to a charge to compensate the disappointed transferee. Therefore, it is clear that in English law, the transferor or his representatives are not liable to compensate it. But in Indian Law, the transferor or his representatives are liable to compensate the transfered.
Q. 13. Write Short Notes on:
(1) Rule against Accumulation
(2) Doctrine of Acceleration
(3) Doctrine of Priority
(4) Apportionment
Ans. (1) Rule against Accumulation
Section 17 of the Transfer of Property Act deals the provisions relating to rule against accumulation. The policy of this section is to prevent the storage for the unreasonable period. There should be free flow of property through the normal channels of transfer and succession. The policy against accumulation is based on the policy against perpetuities which regulates the period for which the vesting of the property is suspended.
Section 17 lays down.”(1) Where the terms of transfer of property direct that the income arising from the property shall be accumulated either wholly or in part during a period longer than :
(a) the life of the transferor, or
(b) a period of eighteen years from the date of transfer.
Such direction shall save as hereinafter provided, be void to the extent to which the period during which the accumulation is directed exceeds the longer of the aforesaid period and at the end of such last mentioned perio the property and the income thereof shall be deposed of as if the period during which the accumulation has been directed to be made had elapsed.
(2) This section shall not affect any direction for accumulation for the purpose of-
(i) the payment of the debts of the transferor or any other person taking any interest under the transfer, or
(ii) the provision of portions for children or remoter issue of the transferor or of any other person taking any interest under the transfer, or
(iii) the preservation or maintenance of the property transferred and such direction may be made accordingly.”
It is clear from the above that any direction or condition which makes accumulation beyond the above mentioned maximum period is void and imperative. The accumulation of income upto the life of transferor or upto a period of 18 years for the date of the transfer whichever is longer period would be effective.
This section shall not affect any direction for accumulation for the purpose of-
(i) payment of debt of transferor or any other person taking any interest under the transfer, or
(ii) the provision of portions of children or remoter issue of transferon or any other person taking any interest under the transfer; or
(iii) for preservation and maintenance of the property transferred.
Illustrations
(i) A transfers his property to B for life with the direction that the income of said property shall accumulate during A’s life and shall be given also to C. The direction of accumulation of income for C is invalid.
(ii) A transfers his property to B in 1970 for accumulation of its income upto Rs. 2000. A dies in 1995. The income of that property shall be accumulated for 25 years, i.c., upto the life of transferor which is more than 18 years itself. The direction for accumulation is valid upto 1995 (for 25 years) because it is longer period.
(2) Doctrine of Acceleration
Section 27 of the Transfer of Property Act deals with the provisions related to the doctrine of acceleration. According to this rule, where there is a gift in remainder, expectant on termination of an estate for life and the prior life interest becomes void the gift does not fail but is accelerated.- Ajudhia v. Rakhman, 10 Cal 482 (PC).) In Full v. Facobs, 3 Ch. D 703 there was gift to the daughter of testator of his real and personal property for her life and after her death it was to be equally divided between her children on their becoming age. The gift of daughter was held void on the ground of attesting the will. The gift of children was accelerated and took effect immediately. According to general rule, prior disposition must be valid and not invalid ab initio. Otherwise subsequent gift also fails according to Section 16 of the Act.
The above rule has been justified on the ground that this gives effect to the intention of the testator. [Ismail v. Umar, AIR 1942 Bom 155.]
Illustrations
(1) A transfers Rs. 500/- to B on a condition that he shall execute a certain lease within 3 months after A’s death and if he should neglect to do so, to C. B dies in A’s lifetime. The disposition in favour of C takes effect.
(2) A transfers his property to his wife but in case she should die in his lifetime, transfer to B that which he has transferred to her. A and his wife perish together, under the circumstances which make it impossible to prove that she died before him. The disposition in favour of B does not take effect.
Exception. The second clause of the section refers to the exception clause where the intention has been expressed that the gift over shall not take effect unless the prior gift fails in the particular manner stated.
The above exception has been illustrated vide Illustration No. 2.
It is therefore, concluded that if two interests are created in the same transaction then upon the failure of the first interest the subsequent interest takes effect though failure of the first was not in manner intended by the transferor.
(3) Doctrine of Priority
Doctrine of priority has been laid down under Sections 16 and 30 of the Transfer of Property Act. Section 16 deals with the transfer to make effect on failure of prior interest. Accordingly where by reason of any of the rule contained in Section 13 and Section 14 an interest created for the benefit of a person or of a class of person fails in regard to such person or whole of such class, any interest created in the same transaction and intended to take effect after or upon failure of such prior interest also fails.
Therefore, when a prior interest is invalid either as offending the rule against perpetuity or as being illegal or impossible under Section 25, the subsequent interest also fails (Section 16). But when subsequent interest is invalid the prior interest is not affected. A makes a gift to B for life and after his death to his heir in tail male. In this case the gift to his heirs in tail male is invalid but its invalidity will not affect the gift made to B for life.
According to Section 30 of the Transfer of Property Act, the prior disposition is not affected by the invalidity of ulterior disposition. Section 30 says, “If the ulterior disposition is not valid the prior disposition is not affected by it.”
Illustration
A transfers a farm to B for her life and if she does not desert her husband to C. B is entitled to the farm during her life as if no condition hat been inserted.
(4) Apportionment
The rules regarding the apportionment are embodied under Sections 36 and 37 of the Transfer of Property Act. Apportionment means distribution of common fund between claimants or among the claimants. Thus such periodical income is distributed between the transferor and transferee on fixed date on the basis of accrual on each date. For example, a house is on rent of Rs. 600 on rate of per month and to be payable at the end of each month. A sells this house on 15th April. In this way B became the owner of this house from 15th April. A, the seller is entitled to get Rs. 280 as rent for 14 days and B, as a purchaser shall get Rs. 320/- as rent for 16 days out of Rs. 600/- which is rent for the whole month.
Thus, Section 36 of the Act provides rules only for division of the periodical income between transferor and transferee. This section deals only such transfer which are made between two or more living persons.
Section 36 provides that in a transfer of property all rents, ammunities, pensions, dividents and other periodical payments in the nature of income shall be deemed to accrue from day-to-day and be apportionable accordingly.
Section 36 deals with apportionment by time whereas Section 37 deals with 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 benefits of property must be given or divided in favour of sharers in apportionment to the value of each share. For instance A sells his farm to b & C. Both A and B contribute to the price of house in 1/3 and 2/3 shares The house is on monthly rent of Rs. 600. The tenant is under obligation to pay as rent Rs. 200/- to B and Rs. 400/- to C.
The above rules are subject to the following obligations:
(1) The persons under obligation to pay the benefits in proportion to respective owners must have reasonable notice of each fact.
(2) The obligation must be capable of being to be paid or performed in favour of each owner. In other words the property is capable of being divided or separated or severed.
(3) The division of property must not substantially increase the burder of obligation.
Exception of rule of apportionment by estate does not apply in case o transfer by operation of law and agricultural tenancies because it may cause inconvenience and harassment to agriculturists.
Q. 14. Point out and illustrate various persons who not being full owners of property, but they are entitled to transfer property.
Or Discuss the circumstances under which transfer by person is authorized only under certain circumstances.
Ans. There is a strict enforcement of the general rule that “Nemo dat quod Non haber”-No one can confer a better title on property than that he himself possesses. Section 41 of the Transfer of Property Act deals with the exception of above said general rule of transfer that transfer by ostensible owner, i.e., one can transfer a better tittle than he himself has in the property. According to Section 41, “Where with consent express or implied or the person interested in immovable property a person is the ostensible owner of such property, and transfers the same for consideration, the transfer shall not be voidable on the ground that transferor was not authorized to make it; provided that the transferee, after taking reasonable care to ascertain that the transferor has power to make the transfer, has acted in good faith.”
Section 41 enunciates that if true owner permits another to hold himself out as the real owner as by entrusting him with the documents of title or in other manner and that person deals with third person as a bona fide real owner transferee acquires a good title to the property as against the true owner provided that the transferee after taking reasonable care to ascertain that the transferor had power to make the transfer, has actual in good faith. Where the true owner allows to ostensible owner to hold himself to express as the real owner of property and third person purchase for value in good faith and without any notice from the apparent, the real owner is not entitled to recover upon the secret title.
The rule of this section is based upon the doctrine of estoppel. The judicial committee in case of Ram Coomar v. Macqueen, (1872) 11 Beng. L.R. 46 observed that it is based on natural equity and must be applicable universally. If a man allows another to hold himself out as the owner of an estate and a third person purchases it for value from the apparent owner in the good faith that he is the real owner and without any notice this real owner shall not be allowed to recover upon his secret title. Section 41 is the statutory application of law of estoppel. It deals with another branch of estoppel.
The following are the necessary conditions for the application of the rules of transfer by ostensible owner:
(1) Transfer must be made by the ostensible owner.
(2) There should be real or implied consent of the real owner.
(3) There should be transfer for the consideration. In other words transfer must be for value.
(4) The transferee has acted in good faith and belief and after taking reasonable care to ascertain that the transferor had power to transfer.
For taking the benefits of Section 41 the following two conditions are necessary:
(1) The transferor was ostensible owner and had held that property with consent of the real owner. The consent of real owner may be express or implied.
(2) The transferee has paid the consideration and has acted in good faith after completing an enquiry with reasonable care [Ballu Mall v. Ram Krishna, (1921) 43 All 263.]
Benami Transfers
A Benamidar is an ostensible owner. Therefore, if any person purchases the property by a Benamidar, the real owner cannot recover. It is necessary here that purchaser has purchased the property with full value, in good faith. belief and without any notice whether express or constructive.
Law relating to Benamidar transfer is now subject to the provisions of the Benami Transactions (Prohibition of the Right to Recover Property) Act, 1988. Sections 3, 5 and 8 of this Act came into force on 5th September, 1988 and rest sections of the Act came into force on 19th May, 1980. According to Section 2(a) “Benami Transaction” means any transaction in which property is transferred to one person for a consideration paid or provided by another person. Accordingly the person to whom name the property is purchased shall become the real owner. Benami Transaction Prohibition Act, 1988 is not retrospective. It is prohibitory in nature.- [Raj Gopal Reddy v. P. Chandra Shekharan, AIR 1996 SC 268.] It is not declaratory in nature.
Subject to certain exceptions all the benami transactions entered into after commencement of this Act have been made punishable. Section 3 (3) of this Act now creates a new offence of entering into such benami transaction and no person can take the plea under Section 41 of the Transfer of Property Act.
The Benami Transactions (Prohibition) Act, 1988 has been amended by the Benami Transactions (Prohibition) Amendment Act, 2016. (The main changes brought out by this Amendment has been dealt with in answer to Q. 15)
Exceptions
Following are the exceptions of the general rules of the Benami Transaction Act, 1988.
(1) Coparcener of a Hindu joint family and that property is held by him for the benefit of coparceners.
(2) The benamidar is a trustee or other person standing in feduciary relation or capacity and the property is held by him for the benefits of other persons.
(3) The Benami Transaction Act, 1988 does not affect the Section 53 of the Transfer of Property Act, 1882.
Doctrine of holding out
A transferee is protected in the case of ostensible owner where the property is transferred by the ostensible owner. This protection is given against the real owner. Section 41 of the Transfer of Property Act deals with the provisions of the doctrine of holding out. The doctrine of holding out deals with such cases where the rights of two innocent parties comes into conflicts. If a property is owned by A but B is allowed by A to appear as owner in the eyes of the public and taking the benefits of this B sells the property to a bona fide purchaser. Here a question arises whether A can recover the property from such purchaser. Since the owner rendered the fraud possible by holding out B as owner he has to suffer. The following conditions are essential for the doctrine of holding out:
(1) The transferor should be the ostensible owner of the property which is transferred.
(2) The ostensible owner should be holding the property with the consent of the real owner.
(3) The transferee has purchased the property with full consideration and with good faith and reasonable care. The onus is upon the transferee to show that he is the bona fide purchaser with consideration and good faith, without knowledge of real owner.
The Test of Benami.-1. Source from which the money came, (2) Nature of possession of property, (3) The motive of giving the colour of Benami Transaction, (4) The position and relationship between the claimant and Benamidar, (5) Custody of the title deed, and (6) Conduct of parties.