HIDAYATULLAH NATIONAL LAW UNIVERSITY, RAIPUR (C.G.

Assignment on: Capacity to transfer the property

Subject: Transfer of Property

Submitted by: Anant Ekka

Student ID: 013/2013/0800

Submitted to: Ms. Navita Agrawal

Submitted on: 09/08/2018

 Transfer of Property
Section 5 of the Act defines “Transfer of Property” as “In the following sections ‘transfer  of
property’ means an act by which a living person conveys property in present or in future, to
one or more other living person, or to himself, and one or more other living persons, and “to
transfer property” is to perform such act.

In this section “Living Person” includes “a company or association or body of individuals

whether incorporated or not, but nothing herein contained shall affect any law for the time
being in force relating to transfer of property to or by companies, associations or bodies of
individuals.”

The word “property” has not been defined in the Act, but it has a very wide meaning and
includes properties of all descriptions. It includes movable properties such as case, books,
etc., and includes immovable properties also such as lands or houses. It also includes
intangible properties such as ownership, tenancy, copyrights, etc.

a) Living person: 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. which
although are not human beings but law incorporates personality to them. 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 i.e. of the age of majority, of sound mind and not
otherwise disqualified to transfer a property. Second paragraph of Section 5 makes it clear
that transferor may be one person or a class or group of persons. It may also be
association of persons or corporation i.e. juristic persons.

In case of Raghubir Singh v. Jai Indra Singh, held that Court has not been regarded as 'living
person' therefore, transfer made by the order to the Court (e.g. Court-sale) is not a transfer of
property within the meaning of Section 5 of the Transfer of Property Act. The transferor must
be a 'living person means that the transfer or property by operation of law i.e. under wills,
inheritance or by court's order are excluded from this definition and are not to be regulated by
the Transfer of Property Act.
b) 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
conveyance in every transfer of property. Conveyance means any act of the transferor by
which certain new titles or interests are created in favour of the transferee (to whom the
property is being transferred). The word 'conveys' includes any form of assurance inter
vivos in which some new title or interest is created in favour of the transferee. In a
transfer of property there is actually transfer of title to or interests in that property. Before
transfer of property, the transferee does not have that particular interest. After the transfer
of property, the transferee gets, that particular interest which is given by the transferor.
Anything done or any form of assurance by virtue of which transferee gets new title or
interest which he did not have before the transfer, is called conveyance.

For example A and B are owners of their houses. B has no title or interest in A's house. A
does something (e.g. makes gift or sale) by virtue of which B becomes owner also of A's
house. Here A's act is conveyance because this has the effect of creation of new title or
interest (namely, the ownership also of A's house) in favour of B.

c) 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 expression 'in present or in future'
governs the word 'conveys'. It does not govern 'property'. The transferor can make
arrangement that the property is 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. He is free to transfer a property
also upon the fulfilment of certain conditions.
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 (although he gets only life-interest) but the transfer in favour of B is future
transfer.
c. A makes gift of his watch to B provided B gets first division in the next examination.
Here, although the gift has been declared today but it shall take effect only if B gets
first division. Such transfers are called conditional transfers.
The conveyance may, therefore, be present, future or conditional.

d) Property: The word 'property' has been used in a comprehensive .sense. It has a very wide
meaning and includes properties of all descriptions. 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 right to catch fish or an actionable claims or other beneficial
interests in a property.

Property is essentially a bundle of rights or interests. When a property is transferred, there

may be transfer of all the rights in that property or only of some of it. All the rights in a
property signifies ownership or absolute interest. Only some of the rights or interest in a
property would mean partial or limited interest.

In Sunil Sidharthbai v. Commissioner of Income-tax, the Supreme ours rightly observed that
in general, transfer of property means passing of a right in the property from one person to
another. In one case there may be passing of entire bundle of rights (i.e. ownership) from
transferor to transferee, but in another case there may be transfer of only some of such rights
(i.e. partial interest). Thus, if A makes a gift of his house to B, there is transfer of absolute
interest of the house. It is a transfer of 'property'. On the other hand, if A transfers the right of
enjoyment of his house-to Bibia certain period it is called 'lease'.: It is transfer of only partial
interest in. the-house but it is also a transfer of 'property'.

The property must be a present property. That is to say, it exists on the date of the transfer.
Transfer of any non-existent property is void. In Jugalkishore v. Raw Cotton Ltd., the
Supreme Court held that the word ‘in present or in future’ qualify the word ‘convey’ and not
the property.

e) To another living person: There must also be another person to whom the property, may
be transferred. Such other person is called transferee. Since transfer of property as defined
under Section 5 is an act between two persons, the transferee must also be a living person.
The transferee need not be a competent person. Transferee may be minor, insane or even
a child en ventre sa mere (child in mother's womb). 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.
f) To himself: A transfer of property under Section 5 of the Act requires two living Persons,
the transferor and transferee. One cannot transfer a property to himself. But, one can
transfer a property to himself in some other capacity. The word to himself were added to
this section by the Amending Act,1929 to include in the transfer of property also a case
where a person makes any settlement of his property in a trust and appoints himself as the
sole trustee.1 Here, the transferor and the transferee are physically the same person but as
transferor he has the legal status of settlor whereas as transferee his legal status is that of a
trustee.

Certain transactions to see whether they are transfer of property or not within the meaning of
this act.

a) Family settlement: Family settlement or family, arrangement is not a transfer of

property. In a joint-family property all the members have their specific shares but they are
not separated and are held conjointly by all of them. When a family settlement takes
place, the already existing specific shares of the members of the family are defined and
separated in order to avoid any possible dispute. Thus, in a family settlement there is a
mutual agreement between the members of the family to hold their respective shares
separately.
b) Compromise: Compromise is also not a transfer of property. Compromise means
agreement for the settlement of doubtful claims between the parties in respect of some
property. Like family settlement, here too the titles or interests of the parties are
antecedent or already existing; the compromise deed simply defines them. Since there is
no conveyance, a compromise deed is not a deed of transfer.
c) Partition: Partition is not a transfer of property. Partition means separating the parts of
co-owned property. If in a property there are several co-owners having, under the law,
their respective interests but the whole property is neither used nor enjoyed by them
separately then, after the partition each member gets merely the separate right of
enjoyment. Accordingly, it has been held in a case of Chanaderwati v. Lakshmi Chand,
that partition is really a process by which a joint enjoyment is transformed into an
enjoyment severally, and no conveyance is involved ip the process as the conferment of a
new title is not necessary.

1
Tek Bahadur v. Devi Singh
d) Surrender: Surrender is also not a transfer of property within the meaning of Section 5
of the Act. Technically, surrender means merging of a lesser (or smaller) interest with a
greater interest in such a manner that the greater interest is not enlarged. Surrender is
therefore falling of a lesser estate into a greater.

For example, A is landlord and B is his tenant. A as landlord has ownership of the house.
Ownership or absolute interest is a larger interest. B as a tenant has also an interest in A's
house but A's interest is lesser interest because it is limited only to right of enjoyment. Now,
if A vacates the house before expiry of the term of tenancy, it would amount surrendering of
his right of residence. Here, the lesser for smaller interest, namely the right of residence,
which was away from the absolute interest of the landlord during tenancy, comes back to
ownership (larger interest). There is no creation of any new title or interest in favour of the
landlord.

e) Release: Release is a transfer of property. If a larger interest falls into a smaller interest in
such a way that smaller interest is enlarged then, for the holder of smaller interest there is
creation of a new title or interest. Since some new titles or interest are added to his
already existing interest, there is conveyance hence it amounts to transfer of property. In
Muniappa Pillai v. Periasaini, after taking some money A executed a deed transferring his
right, title and interest in his half share of the property absolutely in favour of B. The
document, thus gave B absolute rights in the share which belonged to A and to which B
was not entitled. The Madras High Court held that this document clearly came under the
definition of deed of ‘transfer’ within the meaning of section 5. Release may be with
consideration or without consideration.

f) Relinquishment: Relinquishment means giving up one's rights or interests. Its effect is

extinction of one's rights in a property; there is no intention that the person relinquishing
his interest is conveying that interest in favour of another person. Relinquishment is
therefore, not a transfer of property. Moreover, since relinquishment connotes the
extinction of a right therefore, there is nothing left to transfer so that it may amount to a
transfer of property as defined in Section 5 of the Act.

g) Charge: Charge is not a transfer of property. Charge is created on a property for securing
a payment out of that property. When the property of a person is charged for securing
certain payments e.g. maintenance, it is simply securing 'personal obligation out of his
 property. A charge is, therefore, not a transfer because the only right created under it is a
right to payment out of the property subjected to the charge.

h) Property situated outside India: The definition of transfer of property given in Section
5 is applicable also to properties situated outside India or the territories to which the Act
is not applicable. It may be noted that because of its very nature, transfer of immovable
property is governed by the law of the land where the property is situated. But, this does,
not mean that a person cannot claim rights under the transfer of that property under this
Act. However, his claim is subject to contrary claims or rights of the affected party under
the law of the land where property is situated.

Essentials of Valid Transfer

Transfer of property is an act by which a living person conveys certain properties absolutely
or conditionally and in present or in future, to another living person. In a valid transfer of
property, following essential conditions must be fulfilled.

1. 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 by any law enforced in India.
Section 6 also specifies certain non-transferable interest e.g., Spes-successionis, right of
re-entry; easements etc. etc. Transfer of any non-transferable property is void.

2. 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 corporation, or
association. But at the time of transfer, the transferor must be a competent person.
According to Section 7, any person who is competent to contract is also competent to
transfer a property. Thus, any person who is adult (i.e., attained the age of majority), has a
sound mind and is not otherwise disqualified, is competent to transfer a property. Juristic
persons e.g., companies or associations are always deemed to be adult and of sound mind.

3. 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 a right to transfer only those
 properties or interests in which he has ownership. According to Section 7, besides being
competent, the transferor must also have the title in the property. That is to say, he should
be entitled to transfer the property concerned or be authorized to transfer it if not his own.
A tenant cannot make a gift of the house in which he is tenant because although he is sane
and adult, but is not owner of the house and is, therefore, not entitled to transfer its
ownership by way of gift.

4. Transferee must also be competent. But, the transferee need not have the capacity, i.e.,
age of majority and sound mind. All that is required for being a competent transferee is
that the transferee is a living person in existence at the date of the transfer. Thus, a
transferee may be an insane person or minor or even a child in mother's womb (provided
it is born alive). However, the transferee should not be legally disqualified to be a
transferee. Officials of the Court or judges cannot be transferee of actionable claims under
Section 6(h) (iii) of the Transfer of Property Act. Transferee too may be a human person
or a juristic person.

5. Necessary formalities prescribed by law for the transfer must also be completed. The
Transfer of Property Act makes provision for various kinds of transfer of property e.g.,
sale, gift, exchange, mortgage, lease and the transfer of actionable claims. These specific
kinds of transfer have their respective procedure as laid down in this Act or in the Indian
Registration Act. Generally, there are two modes of transfer of property, registration and
delivery of possession. In some cases writing is sufficient. Where writing is not
necessary, the transfer may be made without registration and writing i.e. simply by
delivery of possession. Every transfer of property must be made in the manner prescribed
for that kind of transfer and for that kind of property.

Competency of the Transferor

Section 7 of the Act provides for the competency of a transferor. Under this section a person
is competent to transfer a property if he is competent to contract entitled to transfer or is
authorised to transfer the property, if not his own.
1. Competent to Contract. —According to 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 and
(iii) is not otherwise disqualified from contracting by any law. A person who-is
competent to contract is competent–transfer a property.
(i) Age of majority- When the transfer is being made, the transferor must be an adult
person i.e. must have attained the age of majority. Under Section 3 of the Indian
Majority Act 1875, a person attains majority at the age of eighteen years. But, if a
guardian has been appointed under the Guardian & Wards Act, 1890, the minor
attains majority at the age of twenty-one years. A person who is below the age of
eighteen years (or twenty-one years, as the case may be), is a minor. Transfer of
property by a minor is void and cannot be validated by his subsequent ratification
on attaining his age of majority.
(ii) Soundness of mind- Transfer must possess a sound mind at the time of • the
transfer i.e. he must not be of unsound mind. Unsoundness of mind is of two
kinds, idiocy and lunacy. Idiocy is incurable and permanent. Transfer of property
by an idiot or insane person is void. Lunacy is not permanent and a lunatic may
sometimes possesses a sound mind. Such period is called 'lucid interval'. Transfer
of property by a lunatic during 'lucid interval' is valid. However, 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. But, besides these, there might be other legal inabilities or
disqualifications. Here, 'not otherwise legally disqualified' means that the
transferor should not be legally prohibited to transfer the property by any other
law to which he is subject. For example, a judgment debtor whose property is
being sold in execution of decree, is legally disqualified to transfer his own
properties. Similarly, where a person's properties are under the management of
Court of Wards, he is legally disqualified to transfer any interest in his property or
create a charge over it.

2. Entitled to Transfer: Authority for 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 person is entitled
to transfer any interest which he himself does not have at the time of transfer. If a person
is transferring absolute interest he must have ownership in the property. If he is
transferring partial interest he should have partial interest in the property. For example,
where a person makes a sale or gift of a property he must have ownership (absolute
interest) in the property. If a person makes a sub-lease of certain property he must be
lessee of that property. Without having title or interest in the property, the transferor has
no right to transfer it. But a person who is not owner of a property may have right to
transfer that property under an authority given to him by the owner of such property. Thus
an agent who is authorized by the principal to transfer certain property, has right to
transfer that property. However an agent who has not been given any express authority
also to transfer the property has no authority to transfer any property in his management."

The authority to transfer is given under power of attorney. Thus, under authority of a
power of attorney, any person may be authorized to transfer a property which is not his
own. Other instances where a person is authorised to transfer property not his own are the
manager of a joint Hindu family in the case of legal necessity, a guardian of any minor
appointed under the Guardian & Wards Act, an executor or administrator having
authority to transfer the property of a deceased under the Indian Succession Act. It may
be noted that in these cases, the transferor's right of disposal has been defined and limited
by the personal laws or statutory Laws.

An agreement for sale of an immovable property was not joined by one of the co-sharers.
It was held that the entire agreement comprising the whole of the of property including
the share of the signing co-sharer was void and d a ineffective.