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1 LAW OF PROPERTY AND EASEMENT

(1) General Principles of the Law of Transfer of Property
The Transfer of Property Act, 1882, regulates the transfer of property in India. It
was enacted on 17th February, 1882, and came into force from 1st July, 1882.
a.) Concept of Property
“Property‟ has a wide connotation in its real sense and it refers to all kinds of
property, movable or immovable, tangible or intangible, anything that is a
source of wealth or income. A person, who has the exclusive right to the things
that is owned by him, i.e. the proprietor, is free to claim, use and dispose them
as he pleases. He can exchange them for other things, or gift them to any other
person without taking anything in return, or just let it waste. He enjoys the right
to rent, sell, mortgage, transfer, exchange, consume or even destroy them; he
can also exclude others from doing these actions.
There are certain things like water, air, sun, etc. over which no one can claim
exclusive rights and therefore, cannot be called “Property”.
Thus, the principles to property rights can be summed up as
• Exclusive right over the use of the property any which way it shall please him
• Free to derive any benefit from the property
• Right to sell or transfer the property to whomever he shall wish
• Right to exclude others from the property
BASIC PRINCIPLES
When a person acquires or owns an immovable property, the law also give him
the right to use, lease, sell, rent or transfer/gift of the land. The owner also has a
right to mortgage his immovable property as a security for loans. However,
there are some laws which restrict the type of use a land can be put to, e.g., a
land may be used only for residential or commercial purposes to prevent
haphazard/unorganised growth of cities and towns. Laws in some of the States
prevent/restrict outsiders from acquiring property within the State. Restrictions
are also placed on non-agriculturists from acquiring agricultural land. There are
also other laws which prescribe rules and regulations for protection of
environment or which provide for approval of building plans/designs so as to
protect people from natural or manmade hazards. Some laws like the
Registration Act, 1908, also lay down provisions governing registration of
property transactions so as to keep proper records of ownership of property in
the public domain. Some laws relating to taxation like the Income Tax Act, 1956
lay down certain provisions and procedures to be observed while undertaking
property transactions so as to ensure tax compliance of an owner before
disbursal of property.
In India, transactions for purchasing/selling/transferring/creating an interest in
immovable property and transmission of title in respect of a property are
governed by several laws, rules and regulations. As matters relating to land fall
within the legislative powers of State Governments under the Constitution of
India, these may differ from state to state. The Transfer of Property between
any two parties is governed by the Transfer of Property Act, 1882. The Transfer
of Property Act came into force on the first day of July 1882. Prior to this
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enactment, the law with regard to transfer of property was governed by the
principles of English law and equity. A few points were also covered by the
regulations and the Acts passed by the Governor General in Council. The
English law, so far as it was suitable to the local conditions in India, was
introduced into the Presidency Towns of Madras, Bombay and Calcutta by the
Charter granted in 1826 by King George I to the East India Company.
In the Mufassil, there was no law of property as such and suits involving
questions of property law were being decided according to justice, equity and
good conscience. This state of affairs was quite unsatisfactory, as the law was
wanting in uniformity and certainty. To consider the practicality of laying down a
territorial law uniformity applicable to all the inhabitants of British India, the
Third Law Commission appointed in 1861 prepared a draft Bill of Rules that
with modifications were ultimately embodied in the Transfer of Property Act (IV
of 1882). In 1921, an exhaustive examination was made of the case law
bearing on the Act of 1882 and with a view to remedying the defects and
anomalies revealed by the judicial decisions, the Legislative Department
prepared a draft bill for amending the Act. This Bill was further revised by a
Select Committee and was finally passed into law as from Ist April, 1930.
TRANSFER OF PROPERTY ACT, 1882
With the exception of certain instances, the Act does not govern the transfer of
property by operation of law, such as sale by the order of court, auction or
forfeiture as well as transmission of title under other laws like Hindu Succession
Act. As such, transfers by will and inheritance are not governed by the Act. The
object of the Transfer of Property Act is to define and amend law relating to
Transfer of Property by act of parties and not to transfer by operation of law. A
Transfer of Property is a contract and hence all necessary requirements to
constitute valid contract are to be satisfied.
Essentials of valid transfer
A) Transfer must be between two or more living Persons (Section.5)
Transfer of Property means an act by which a living person conveys property, in
present or in future, to one or more other living persons, or to himself, or to
himself and one or more or other living persons, and to transfer property is to
perform such act. The Transfer must be inter vivos. Therefore there cannot be a
transfer to person not in existence at the time of transfer. In case of transfer of a
property of a deceased person, Succession Laws as per the religion of the
deceased will be applicable. The living person including company or association
or body of individuals whether incorporated or not.
B) The property must be transferable (Section. 6)
Property of any kind of may be transferred except as provided by this Act or any
other law for the time being in force. Properties mentioned in Section 6 (a) to (i)
cannot be transferred. These are restrictions on the Transfer of Property and
any transfer in contravention of any of the clauses is null and void.
C) The Transfer must not be
1. Opposed to the nature of interest affected thereby Section 6 (h)
2. for unlawful object and consideration as per provision of Section 23 of the
Indian Contract Act 1872, which provides a consideration or object is
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unlawful if
a. It is forbidden by law, or
b. It is of such a nature that if allowed it will defeat the provision of any law,
or
c. is fraudulent, or
d. it involves or implies injury to the person or property of another or
e. The court regards it as immoral or opposed to public policy.
3. To a person legally disqualified to be a transferee. As per Section 136. of
Transfer of Property Act, a Judge, a legal practitioner or an officer
connected with Court of Justice are disqualified from purchasing an
actionable claim. This prohibition is only with respect to actionable claim. It
does not apply to any other kind of property.
D) Persons competent to transfer (Section.7) - Every person competent to
contract and entitled to transferable property, or authorised to dispose off
transferable property not his own, is competent to transfer such a property
either wholly or in part, and either absolutely or conditionally, in the
circumstances, to the extent and in the manner, allowed and prescribed by any
law for the time being in force.
Who is competent to transfer? The transferor must be –
1) Competent to contract
According to Section 11 of the Indian Contract Act, “every person is competent
to contract who is of the age of majority…”Under section.3 of the Indian
majority Act,1875 a person attains majority at the age of 18 years and if a
Guardian is appointed, he would attain majority at the age of 21.
2) Sound mind
Under section 12 of the Indian Contract Act, a person is of sound mind for the
purpose of making contract if he is capable of understandings it and of forming
a rational judgment as to its effect upon his interest. A contract made by a
person of unsound mind is void.
3) Disqualified person
An insolvent and alien enemy are disqualified from contracting. A transfer by a
de facto Guardian of minor’s property is invalid and will be hit by section 11 of
Hindu minority and guardianship Act, 1956.
4) Transferor must be entitled to transferable property - or authorised to
dispose off transferable property not his own. One who is absolute owner of the
property which is free from encumbrances is capable to transfer the same. An
owner of the property may authorise his power of attorney holder to transfer the
property for him and on his behalf.
The Transfer must be made in the mode prescribed by the Act, under
section 9 - Section 9 of Transfer of property provides for oral transfer. A Transfer
of Property may be made without writing in every case in which a writing is not
expressly required by law.
Writing is necessary in case of following instruments
1) Sale of immovable property of the value of rupees hundred or upwards
(S.54)
2) Leases of immovable property from year to year or for a term exceeding one
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year or reserving a yearly rent (Section 107)

3) Simple mortgage irrespective of amount secured (Section 59)
4) All other mortgages securing Rs100 or upwards (section 59)
5) Exchange (section 108)
6) Gift of immovable property (section 123)
7) Transfer of actionable claim (section 130)
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1.1 KINDS OF PROPERTY

Property is essentially of two kinds Corporeal Property and Incorporeal
Property. Corporeal Property can be further divided into Movable and
Immovable Property and real and personal property. Incorporeal property is
of two kinds-in re propria and rights in re aliena or encumbrances.

1) Corporeal And Incorporeal Property -

(I) Corporeal Property -

Corporeal property is the right of ownership in material things.

Corporeal property is always visible and tangible. Corporeal property can be
perceived by senses. It can be seen or touched.

Examples -A House, Land, Car, Bike etc.

Corporeal property may be divided into two classes-
1. Movable Property (Chattels) and Immovable property. (Land and buildings)
2. Real Property and Personal Property

(II) Incorporeal Property -

Incorporeal property also called as intellectual or conventional property. It includes
all those valuable interests which are protected by law. Incorporeal property is
intangible. It cannot be Perceived by Senses.

Examples - Patents, Copyrights, Trademarks etc.

Incorporeal property is divided into two classes-

(a) Jura in re propria Over Material things (for example patents, copyrights,
trademarks etc)
(b) Jura in re Aliena encumbrances, whether over material or immaterial
things, for example, Lease, Mortgages and Servitude etc.

2) Movable Property and Immovable Property -

All Corporeal Property is either movable or immovable. In English law, these are
termed as chattels and land respectively.
(I) Movable Property -
Movable property is one, which can be transferred from one place to another
place with the human efforts.

(II) Immovable Property -

According to the General Clauses Act, 1897 "Immovable property includes land,
benefits arising out of land and things attached to the earth or permanently
fastened or anything attached to the earth."
According to the Indian Regulation Act, "immovable property includes land,
building, hereditary allowance, rights of way, lights, Ferries, Fisheries or any
other benefit to arise out of land and things attached to the earth or
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permanently fastened to anything attached to the earth but not standing

Timber, growing crops or grass.
Section 3 Para 2 of the Transfer of Property Act 1882 defines immovable
property as "immovable property does not include standing Timber, growing
crops or grass. Movable property includes corporeal property which is not
immovable.

According to Salmond immovable property (i.e., land) has the following

elements-

A) a determinate portion of the surface of the earth.

B) The ground beneath the surface down to the centre of the earth

C) The column of space above the surface ad infinitum.

D) All objects which are on or under the surface in its natural state for example-
minerals natural vegetation, or stones lying loose upon the surface.
E) An object placed by human agency on or under the surface of the land with
the intention of permanent an annexation, for example, House walls, Doors,
Fences, etc.

Distinction between Movable and Immovable Property

Movable Property: The General Clauses Act of Transfer of Property Act, 1882,
has no distinctive definition of the term “movable property‟. It merely has been
defined as “property of every description except immovable property”. Thus, it is
essential to examine what are the things that fall under the category of
“immovable property”.
Immovable Property: The Transfer of Property Act, 1882, does not provide an
exhaustive definition of the term „immovable property‟. It simply states that that
standing timber, growing crops and grass shall be excluded from immovable
property‟.
According to Section 3 (26)1 of the Act, immovable property shall include-
• Land- in its legal term land includes following elements
a. A defined portion of the earth’s surface area
b. Ground beneath the surface
c. All-natural objects that lie under the surface e.g. minerals.
• Benefits arising out of land
• Things attached to the earth, or
• Permanently fastened to anything attached to the earth.
“Attached to the earth” means-
• Rooted to the earth as the trees or shrubs are;
• Imbedded in the earth as the walls or buildings; or
• Attached to what is embedded i.e. fixtures.
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3) Real and Personal Property -

In English law, the property has been divided into the real and personal
property. This division is identical to a great extent with that of immovable or
movable. The division into real and personal is not based on any logical principle
but is a result of the course of legal development in England.

a) Real property -
The real property includes all rights over land with such additions and exceptions,
as the law has deemed fit.

b) Personal property -
The law of personal property includes all other proprietary rights whether they are
in rem or in personam.

4) Public property and private property -

Having regard ownership property is either public or private -

(a) Public property-

Public property is that owned by the public as such in some governmental
capacity. Public property is used as a designation of which are Public Juris and
therefore, are considered as being owned by the public. the entire state or the
community and not restricted to the domain of private person or that which
belongs to a state or political constituents like provinces etc

(b) Private property -

The private property is that which is owned by an individual or some other
private person.
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1.3 OWNERSHIP
The concept of is one of the fundamental juristic concepts common to all
systems of law. This concept has been discussed by most of the writers before
that of possession. However, it is not the right method. The idea of possession
came first in the minds of people and it was later on that the idea of ownership
came into existence.

Ownership is a complex juristic concept which has its origin in the Ancient
Roman Law. In Roman law ownership and possession were respectively
termed as ‘dominium’ and ‘possessio’. The term dominium denotes absolute
right to a thing while possessio implied only physical control over it. They gave
more importance to ownership because in their opinion it is more important to
have absolute right over a thing than to have physical control over it.

In English law the concept of ownership developed much later than possession.
The earlier law gave importance to possession on the misconception that
possession includes within its ownership as well. Holdsworth observed that the
English law accepted the concept of ownership as an absolute right through
gradual the gradual development in the law of possession.

The concept of ownership consists of a number of claims such as liberty, power

and immunity in regard to the thing owned. Ownership is thus a sum-total of
possession, disposition and destruction which includes the right to enjoy
property by the owner. The owner has to side by side abide by the rules and
regulation of the country.

DEFINITION OF OWNERSHIP
Jurists have defined ownership in different ways. All of them accept the right of
ownership as the complete or supreme right that can be exercised over
anything. Thus, according to Hibbert ownership includes four kinds of rights
within itself.

1. Right to use a thing

2. Right to exclude others from using the thing
3. Disposing of the thing
4. Right to destroy it.

Austin’s definition:
Austin while defining ownership has focused on the three main attributes of
ownership, namely, indefinite user, unrestricted disposition and unlimited
duration which may be analysed in detail.

Indefinite User:
By the right of indefinite user Austin means that the owner of the thing is free to
use or misuse the thing in a way he likes. The pawner of a land may use it for
walking, for building house or for gardening and so forth. However Austin was
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cautious enough to use the term “indefinite”. He did not use the thing owned
infamy way he likes. His use if the thing is conditioned by requirements or
restrictions imposed by the law. The owned must not use the things owned as
to injure the right of others. The principle is the foundation of the well known
maxim ‘sie utere tero ut alierum non laedas’ the meaning of the maxims is that
to use your own property s not to injure your neighbour’s right. Again the use of
property may be restricted voluntarily e.g. town planning act, slum clearance
act, 1955 etc.

Unrestricted Disposition:
What Austin implies by unrestricted disposition is that the power of disposition
of the pawner is unhampered by law meaning thereby that he is absolutely free
to dispose it to remove it to anyone This is incorrect. In case of lease of
thousand years, servitudes and restricted, covenants, plenary control of a
property is not possible. Moreover, in the law of the some of the western
countries there is rule re relegitima portis which means that the person cannot
dispose of his entire property. He has to keep a certain portion of the property
for the members of his family. Under mohamdan law a similar rule prevails
namely a person cannot dispose and delaying creditors would be set aside. As
under Hindu law government by mitakashara law can’t alienate ancestral
immovable property without the consent of other co perceners except for legal
necessity.

Unlimited Duration:
It is incorrect since almost under every legal system the state possesses the
power to take over the property of any person in public interest.

The abolition of Zamindari system India , the abolition of privy purses,

nationalization of Bank etc. are some example of the fact that the
ownership can be cut short by the state for public purpose and its duration
is not unlimited.

Austin’s definition has been followed by Holland. He defines ownership as

plenary control over an object. According to him an owner has three rights on
the subject owned:
1. Possession
2. Enjoyment
3. Disposition

Planetary control over an object implies complete control unrestricted by any

law or fact. Thus, the criticism levelled against Austin’s definition would apply
to that given by Holland in so far as the implication of the term “plenary
control” goes.

Criticism Against Austin’s Definition:

Austin’s definition has been criticised by many writers.
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They argue that it is fallacious to think that ownership is a single right; in fact, it
is a bundle of rights including the right of enjoyment by the user. Even if the
owner gives away his few rights in ownership, the residue are still owned by
him. For example, mortgage of property by the owner.

Ownership is not merely a right but also a relationship between the right owned
and the person owning it.
Owner having an unrestricted right of disposition has also been criticised. His
right of disposition of the property can be curtailed by the state. For example,
under article 31(2) of the Indian Constitution the state can take away the
property of any person for public purpose.

Salmond’s Definition:
According to the Salmond ownership vests in the complex of rights which he
exercises to the exclusive of all others. For Salmond what constitute ownership
is a bundle of rights which in here resides in an individual. Salmond’s definition
thus point out two attributes of ownership:

1. Ownership is a relation between a person and right that is vested in him

2. Ownership is incorporeal body or form

Salmond’s definition does not indicate the content of the ownership. It does not
indicate the right, powers etc. which are implied in the concept of ownership.
Again, it is not wholly correct to say that ownership is a relation between a
person and right that is vested in him. As the most popular and common idea of
ownership is a relationship between a person and a thing.

Criticism against Salmond’s Definition:

Dugit says the thing is what is owned not the right which does not really exist.

According to Cook, there are many rights which a person may possess and to
use the term ‘owner’ to express the relationship between a person and a right is
to introduce unnecessary confusion. Ownership is the name given to the bundle
of rights.

Other Eminent Jurists

1. Fredrick Pollock improves upon other definition when he defines ownership as
the entirety of the power of use and disposal allowed.
2. Prof. Keeton expresses a similar view when he observed that ownership is the
ultimate right to the enjoyment in persons other than the one entitled to the
ultimate use are exhausted.

These two definitions give relatively a more proper connotation of the term
ownership. They bring out the most important fact that ownership is always
subject to limitation imposed by the law; it is ultimate right to the employment of
a thing subject to the condition or restriction imposed by law as to the use of the
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thing owned. Keeton has added another obvious dimension to the definition of
ownership when he speaks of ultimate use is exhausted. Thus the owner may
mortgage his house give it to tenant after the rights of the mortgagee or tenant
are exhausted.

OWNERSHIP UNDER ANCIENT HINDU LAW

Ancient Hindu jurist have said much about the means of acquiring ownership.
Manu declared that there are seven virtuous means of acquisition of wealth viz.
inheritance, gain, purchase, conquest, application, employment of the work and
of and acceptance of gifts from proper persons. Gautama gives almost the
same seven ways of acquiring ownership but he puts some modification to the
list given by Manu.

Narada enters in to more details and says that there are twelve different
modes of squiring wealth of which three are general i.e. open to all caste and
the rest are peculiar to several castes.

These specific modes of acquiring wealth are proper for several casts and
any contravention is reprehensible unless by pressing necessity.

MODERN LAW AND OWNERSHIP

Under modern law there are the following modes of acquiring ownership
which may be broadly classed under two heads,viz,.

1. Original mode
2. Derivative mode

The original mode is the result of some independence personal act of the
acquire himself. The mode of acquisition may be three kinds

a. Absolute when a ownership is acquired by over previously ownerless object

b. Extinctive, which is where there is extinctive of previous ownership by an

independence adverse act on the part of the acquiring. This is how a right of
easement is acquiring after passage of time prescribed by law.

c. Accessory that is when requisition of ownership is the result of accession.

For example, if three fruits, the produce belongs to the owner unless he has
parted with to the same. When ownership is derived from the previous
version of law then it is called derivate acquisition. That is derived mode
takes place from the title of s prior owner. It is derived either by purchase,
exchange, will, gift etc.Indian Transferee Acts of property rules for the
transfer of immovable property, Sale of goods Acts for the transfer of
property of the firm and the companies Act for the transfer of company
property.
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SUBJECT MATTER OF OWNERSHIP

Normally ownership implies the following:
1. The right to manage;
2. The right to posses;
3. The right to manage;
4. The right to capital;
5. The right to the income.

The owner of a thing has the right to possess it, to the exclusive of all others
i.e. the owner has exclusive physical control of a thing or such control
possesses the thing but this is not necessary and always so. Thus to cite only
a few examples, the owner may have been wrongfully deprived of it or may
has voluntarily devised himself of it. If A’s watch is stolen by B, the latter has
possession but the former remains the owner with an immediately right to
possess. In case of lease and mortgage, the owner (i.e. the leaser and the
mortgagor) owns the property without possession lies, with the lesser and the
mortgagee.

The owner has the right to use the subject matter of ownership according to
his own discretion. Here use means personal use and the enjoyment of the
thing by the owner. This right of enjoyment or use is not absolute; it can be
and is in fact, limited by law. This does not mean that an owner cannot there
by disturb the right of others. Suppose A owns a transistor, ha cannot tune it
at any time for listening music, for news or for commentary, but in doing so he
is to take care that he does not disturb the right of others. Thus he cannot
tune it at a high pitch and at an odd time so as to disturb the right of others.
Thus he cannot tune it at a high pitch and at an odd time so as to disturb the
sleep of others.

The owner has right to manage i.e., he has the right to decide how and by
whom the thing owned shall be used. The owner has the power contracting
the power to admit others to ones land, to permit others to use one’s things, to
define the limits of such permission, to create a right of easement over his
land in favour of a third person etc.

One who owns things has also the right to alienate the same or to waste,
destroy or to consume the whole or part of it. The right to consume and
destroy are straightforward liberties. The right to alienate i.e. the right to
transfer his right over object to another involves the existence of a power.
Almost all legal system provide for alienation is the exclusive right if the
owner. A non-owner may have the possession of a thing but he cannot
transfer the right of ownership of such thing to another e.g. , in case of lease,
a lessee may have the possession of the leased property but he cannot
transfer it because that is the exclusive right of the leaser who only can do so.

The ownership of the a thing has not only the right to possess the thing but
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also the right to the fruit and income of the things within the limits , if any, laid
down by the law. Suppose A’ has a land he has not only the right to possess
that the land but he can enjoy benefits resulting there from e.g., produce,
fruits, crops, etc. sometimes the use or the occupation of a thing to possess
that the land but he can enjoy benefits resulting there from e.g. produce fruits,
as the simplest way of deriving an income from it and of enjoying it.

CHARACTERISTICS OF OWNERSHIP
An analysis of the concept of ownership, it would show that it has the
following characteristics:
Ownership ma either be absolute or restricted, that is, it may be exclusive or
limited. Ownership can be limited by agreements or by operation of law.
The right of ownership can be restricted in time of emergency. For example,
building or land owned by a person can be acquired by the state for lodging
army personnel during the period of war.
An owner is not allowed to use his land or property in a manner that it is
injurious to others. His right of ownership is not unrestricted.
The owner has a right to posses the thing that he owns. It is immaterial
whether he has actual possession of it or not. The most common example of
this is that an owner leasing his house to a tenant.
Law does not confer ownership on an unborn child or an insane person
because they are incapable of conceiving the nature and consequences of
their acts.
Ownership is residuary in character.
The right to ownership does not end with the death of the owner; instead it is
transferred to his heirs.
Restrictions may also be imposed by law on the owner’s right of disposal of
the thing owned. Any alienation of property made with the intent to defeat or
delay the claims of creditors can be set aside.’

DIFFERENT KINDS OF OWNERSHIP

Experience shows that there are many kinds of ownership and some of them
are corporeal and incorporeal ownership, sole ownership and co-ownership,
legal and equitable ownership, vested and contingent ownership, trust and
beneficial ownership, co- ownership and joint ownership and absolute and
limited ownership.

Corporeal and Incorporeal Ownership

Corporeal ownership is the ownership of a material object and incorporeal
ownership is the ownership of a right. Ownership of a house, a table or a
machine is corporeal ownership.
Ownership of a copyright, a patent or a trademark is incorporeal ownership.
The distinction between corporeal and incorporeal ownership is connected
with the distinction between corporeal and incorporeal things. Incorporeal
ownership is described as ownership over tangible things. Corporeal things
are those which can be perceived and felt by the senses and which are
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intangible. Incorporeal ownership includes ownership over intellectual objects

and encumbrances.

Trust and Beneficial Ownership

Trust ownership is an instance of duplicate ownership. Trust property is that
which is owned by two persons at the same time. The relation between the
two owners is such that one of them is under an obligation to use his
ownership for the benefit of the other. The ownership is called beneficial
ownership. The ownership of a trustee is nominal and not real, but in the eye
of law the trustee represents his beneficiary. In a trust, the relationship
between the two owners is such that one of them is under an obligation to use
his ownership for the benefit of the other. The former is called the trustee and
his ownership is trust ownership. The latter is called the beneficiary and his
ownership is called beneficial ownership. The ownership of a trustee is in fact
nominal and not real although in the eye of law, he represents his beneficiary.
If property is given to X on trust for Y, X would be the trustee and Y would be
the beneficiary or cestui que trust. X would be the legal owner of the property
and Y would be the beneficial owner. X is under an obligation to use the
property only for the benefit of Y.
A trustee has no right of enjoyment of the trust property. His ownership is only
a matter of form and not of substance. It is nominal and not real. In the eye of
law, a trustee is not a mere agent but an owner. He is the person to whom the
property of someone else is fictitiously given by law. The trustee has to use
his power for the benefit of the beneficiary who is the real owner. As between
the trustee and the beneficiary, the property belongs to the beneficiary and
not the trustee.

Legal and Equitable Ownership

Legal ownership is that which has its origin in the rules of common law and
equitable ownership is that which proceeds from the rules of equity. In many
cases, equity recognizes ownership where law does not recognize ownership
owing to some legal defect. Legal rights may be enforced in rem but equitable
rights are enforced in personam as equity acts in personam. One person may
be the legal owner and another person the equitable owner of the same thing
or right at the same time. When a debt is verbally assigned by X to Y, X
remains the legal owner of it but Y becomes its equitable owner. There is only
one debt as before though it has now two owners.

The equitable ownership of a legal right is different from the ownership of an

equitable right. The ownership of an equitable mortgage is different from the
equitable ownership of a legal mortgage.
There is no distinction between legal and equitable estates in India. Under the
Indian Trusts Act, a trustee is the legal owner of the trust property and the
beneficiary has no direct interest in the trust property itself. However, he has a
right against the trustees to compel them to carry out the provisions of the
trust.
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VESTED AND CONTINGENT OWNERSHIP

Ownership is either vested or contingent. It is vested ownership when the title
of the owner is already perfect. It is contingent ownership when the title of the
owner is yet imperfect but is capable of becoming perfect on the fulfillment of
some condition. In the case of vested ownership, ownership is absolute. In
the case of contingent ownership it is conditional. For instance, a testator may
leave property to his wife for her life and on her death to A, if he is then alive,
but if A is dead to B. Here A and B are both owners of the property in
question, but their ownership is merely contingent. It must, however, be stated
that contingent ownership of a thing is something more than a simple chance
or possibility of becoming an owner. It is more than a mere spes acquisitionis.
A contingent ownership is based upon the mere possibility of future
acquisition, but it is based upon the present existence of an inchoate or
incomplete title.

Sole Ownership and Co-ownership

Ordinarily, a right is owned by one person only at a time. However, duplicate
ownership is as much possible as sole ownership. When the ownership is
vested in a single person, it is called sole ownership; when it is vested in two
or more persons at the same time, it is called co- ownership, of which co-
ownership is a species. For example, the members of a partnership firm are
co-owners of the partnership property. Under the Indian law, a co-owner is
entitled to three essential rights, namely

1. Right to possession
2. Right to enjoy the property
3. Right to dispose of

Therefore, if a co-owner is deprived of property, he has right to be put back in

possession. Such co-owner has interest in every portion of the property and
has a right irrespective of his quantity of share to be in possession jointly with
other co-owners.

Co-ownership and Joint Ownership

According to Salmond, “co-ownership may assume different forms. Its two
chief kinds in English law are distinguished as ownership in common and joint
ownership. The most important difference between these relates to the effect
of death of one of the co-owners. If the ownership is common, the right of a
dead man descends to his successors like other inheritable rights, but on the
death of one of two joint owners, his ownership dies with him and the survivor
becomes the sole owner by virtue of this right of survivorship.”

A joint ownership occurs when two or more persons are entitled to the same
right or bound by the same obligation in respect of a thing. For example, a
partnership property is owned by the persons constituting the firm jointly and
 16

trustees are the joint owners of the trust property. The essence of the
conception is that there is only one right and one obligation, so that anything
which extinguishes such right or obligation, releases all parties.

Absolute and Limited Ownership

An absolute owner is the one in whom are vested all the rights over a thing to the
exclusion of all. When all the rights of ownership, i.e. possession, enjoyment and
disposal are vested in a person without any restriction, the ownership is
absolute. But when there are restrictions as to user, duration or disposal, the
ownership will be called a limited ownership. For example, prior to the enactment
of the Hindu Succession Act, 1956, a woman had only a limited ownership over
the estate because she held the property only for her life and after her death; the
property passed on to the last heir or last holder of the property. Another
example of limited ownership in English law is life tenancy when an estate is
held only for life.
(2) Sale of Immoveable Property
Sale of immovable property has been defined as a transfer of ownership in
exchange for a price paid or promised or partly paid and partly promised by the
Transfer of Property Act.
Essential Elements of Sale:
a) Parties: in a sale there has to be a seller and buyer. The seller has to be
competent to transfer the immovable property to the buyer. Both parties
i.e. the seller and the buyer have to be competent to contract under the Indian
Contract Act.
b) Subject Matter of Sale: subject matter of a sale should be immovable property
c) Transfer of ownership: there has to be a transfer of ownership by the seller to
the buyer.
d) Price: price is the essence of the contract of sale. It may be paid in a lump sum
or in installments as agreed between the parties.
Duties of Seller:
i. To disclose any material defect: a seller is bound to inform the buyer of any
material defect in the property or the title of the property.
ii. To produce documents of title: a seller has to provide for the examination of all
documents of title that are in his possession.
iii. To answer questions about the property or title thereto: a seller is bound to give
relevant information and satisfy the buyer on any questions raised by the buyer
or his advocate.
iv. To execute conveyance: The seller is bound to execute the sale deed after sale
price is paid to him
v. To pay outgoings: the seller is bound to pay all public charges, tax and rent that
may be due on the property before date of sale.
vi. Lis pendens: a seller is bound to inform the buyer of any legal proceedings that
are pending on said property and that may come in the way of the sale or
transfer on said property.
vii. To deliver possession of the property: a seller is bound to hand over the
possession of the property at the time of the execution of the sale. Generally
 17

before the execution of the sale deed the buyer and seller enter into an
agreement of sale either orally or in writing. After entering into this agreement to
sell, the buyer would be advised to take all the necessary information that has
been listed above.
It is advisable that the buyer’s advocate should investigate the title of the
property after entering into an agreement for sale. The title should be traced for
at least 30 years. Besides, the title deed search should be also done in the office
of the Sub Registrar or relevant revenue authority to investigate whether there is
any encumbrance on the property whether there is any defect in the title and
whether the property stands in the name of the seller in the land revenue and
municipal records.
It is also advisable that the buyer’s advocate should enquire from the relevant
authorities and gather information on whether a notification has been issued for
acquisition of the property.
In major property deals the buyer through his advocate should give a public
notice in the newspaper stating his interest in purchasing the property.
The sale deed is chargeable with stamp duty under Article 23 of Schedule 1 to
the Indian Stamp Act and it has to be executed on stamp paper equal to that of
conveyance or else attracts duty penalty of 10 times that of actual stamp duty.
The sale deed transferring immovable property of the value of 100 or more
requires registration under Indian Registration Act 1908.
 18

2. DEFINITION AND MODE OF SALE AND EXCHANGE (SECTIONS 54 AND

118)
Section 54 of the Act defines ‘sale’ and specifies how a sale of immovable
property may be made. Herein, sale refers to the sale of immovable property
whether tangible or intangible (example – easement rights)
54. “Sale” defined.—‘‘Sale” is a transfer of ownership in exchange for a price
paid or promised or part-paid and part-promised. Sale how made.—3Such
transfer, in the case of tangible immoveable property of the value of one hundred
rupees and upwards, or in the case of a reversion or other intangible thing, can be
made only by a registered instrument. 1In the case of tangible immoveable
property of a value less than one hundred rupees, such transfer may be made
either by a registered instrument or by delivery of the property. Delivery of tangible
immoveable property takes place when the seller places the buyer, or such person
as he directs, in possession of the property. Contract for sale.—A contract for the
sale of immoveable property is a contract that a sale of such property shall take
place on terms settled between the parties. It does not, of itself, create any
interest in or charge on such property.
SECTION 118 OF TRANSFER OF PROPERTY ACT, 1882 defines as “when
two persons mutually transfer ownership of one thing for the ownership of another,
neither thing or both things being money only, the transaction is called an
“Exchange”.
From above we understand that for being an “Exchange”;
i. There must be two person transferring ownership of one thing for the
ownership of another;
ii. Neither thing or both things being money only.
We are aware that transfer of any property against consideration is called
“Sale”, and transfer without consideration is called “Gift”. Now when a
property has been exchanged with another property it is called
“Exchange”.
There may be both immovable or movable property, which can be transferred
through exchange. In some cases where transfer of ownership of a property
along with some money against some ownership of another property happen, it
also comes under definition of exchange.
Example: Suppose Mr. A is transferring his residential property in Banaras,
valued Rs. 20.00 Lakhs against property of Mr. B in Lucknow of Rs. 17.00
Lakhs. Now in this case Mr. B is transferring ownership of his property and
giving cash of Rs. 3.00 Lakhs against ownership of property belong to Mr. A.
This case also falls under definition of “Exchange”, and not “Sale”.
Note: Oral exchange is not permissible in view of the amendment of
Section 49 of the Registration Act, 1908 brought about by Act No. 21 of
1929 , which by inserting in Section 49 of the Registration Act, 1908 the words”
or by any provision of the Transfer of Property Act, 1882” , has made it clear
that the documents of which registration is necessary under the Transfer of
Property Act, 1882 but not under the Registration Act, 1908 fall within scope of
Section 49 of the Registration Act, 1949. And if not registered they are not
admissible as an evidence of any transaction affecting any immovable property
 19

comprised therein and do not affect any such immovable property.

Transaction by Exchange which requires to be affected through

registered instrument is if it was to affect any immovable property worth
of Rs. 100 or more. [ Satyvan Vs. Raghuvir, AIR 2002 P&H (2002) (3)
ICC112(Punj)LR467].
FEATURES OF EXCHANGE;
1. Transfer of ownership; Exchange involves transfer of ownership in some
existing property. In transfer of ownership, absolute interest of the owner is
transferred. A partition of immovable property is not considered as
exchange.
2. Property need not be immovable property; In Exchange properties may
be immovable or movable. An immovable property can be transferred against a
movable property and vice versa.
3. Exchange includes “Barter”; Exchange of one immovable property with
another immovable property is known as “Barter” and same in case of transfer
of one movable property against another moveable property.
4. Mode of Transfer;
i. Section 118 provides that a transfer of property in completion of an
exchange can be made only in a manner prescribed for transfer of such
property by “Sale”. The formalities of Section 54 (dealing with sale of
properties) will be complied with;
ii. Where both properties are of movable, then exchange may be affected by
delivery of properties and registration is not essential;
iii. Where properties are immovable, but value is less than Rs. 100, then
registration is optional;
iv. Where the properties exchange are immovable properties and their value
are more than Rs. 100/- then registration of exchange of ownership through
instrument is necessary.
Note:
1. it is necessary that Deed of Exchange is a valid contract and not void under
Contract Act. Suppose persons are exchanging ownership of their properties to
hide act of crime or financial crime or benami properties then the instrument of
exchange become void. [ Srihari Jena Vs. Khetramohan Jena, AIR (2002)
Orissa 195; 2002
(4) Civ LJ 279].
2. When in an exchange of properties one party did not get possession of the
property he was entitled to receive in exchange, he was held entitled to return
property transferred by him. Hari Shankar Mishra Vs. Vice Chairman, Kanpur
Development Authority, AIR 2001 All 139 ;2001(42) ALL LR 839.
3. Balakrishnan Bhagwanji Lodi Vs. Prakash Sheshrao Lodi, AIR 2005
NOC 89(Bombay); it was held that in case of partition of joint family property,
once partition is affected, whether by way of family arrangement or deed of
partition, there is severance of jointness of properties. Two brothers thereafter
exchanged properties which were held by them seperately. The properties
being worth more than Rs. 100/- in value. They could exchange them only
 20

through registered instruments.

LET’S CONSIDER DIFFERENCE BETWEEN EXCHANGE AND PARTITION;

1. Exchange is mutual transfer of ownership by two persons of different two

properties.
A partition is mere an arrangement by which the several co-owners hold
property seperately, which they held in common pool previously.
2. Exchange is brought about a contract between the parties.
The right of partition is a natural right and there is not need to enter into a
contract.
3. In an Exchange the parties exchanging their properties has not interest prior
to exchange in each other properties.
In a partition each party has as much interest in the entire property as the
other. There is no exclusive ownership under partition.
LET’S CONSIDER RIGHT OF A PARTY DEPRIVED OF THING
RECEIVED IN
EXCHANGE; [ Section 119 of the Transfer of Property Act, 1882]
if any party to an exchange or any person claiming through or under such party
is by reason of any defect in the title of the other party deprived of the thing or
part of the thing received by him in exchange , then, unless a contrary intention
appears from the terms of the exchange , such other party is liable to him or
any person claiming through or under him for loss caused thereby, or at the
option of the person so deprived for the return of thing transferred , if still in the
possession of such other party or his legal representative or a transferee from
him without consideration.
From above we understand that if a party has deprived from the thing, whose
ownership has been transferred in exchanged due to defective title of other
party, he has two remedies under Section 119;
i. He can recover for compensation for loss suffered to him;

ii. He can take back thing transferred by him.

Note: Second remedy is available only in below mentioned cases;
i. Where property is still in possession of other party, or
ii. In possession of his legal representatives, or
iii. A transferee from him without consideration.
Jattu Ram Vs. Hakama Singh, AIR 1994 SC 1653; 1994 where there was
defect in title of land received by one party to exchange due to false entries
made by patwari and party was deprived from some portion of land as per Deed
of Exchange. It was held by Supreme Court that entries made by patwari in the
official records do not create title, therefore the opposite party was liable to
return land(property) to the extent.
Note:
i. The provisions of Section 119 are applicable only in cases, where one party
in an Exchange has been deprived of the thing/property transferred due to
defect in title of other person transferring that thing /property.
 21

ii. The provisions of Section 119 of the Transfer of Property Act, 1882 cannot
be invoked in a case where a person has been forcefully disposed by another
person from the property /thing acquired by him by exchange.
Example: Lets’ suppose Mr. A and Mr. B was transferred ownership of
their residential properties and Mr. C brother of Mr. A has forcefully
disposed Mr. B for taking possession of residential property, whose
ownership was transferred under exchange to Mr. B.
RIGHTS AND LIABILITIES OF PARTIES TO THE EXCHANGE; [
Section120 of
the Transfer of Property Act,1882]
Section 120 does not specifically mention the rights and liabilities of the parties
to the Exchange. It provides only that each party has the rights and is subject to
the liabilities of a seller as to that he gives and has rights and is subject to
the liabilities of a buyer as to that which he takes. Therefore, the rights and
liabilities of parties in case of exchange are the same as in case of sale. In
Exchange, one thing is given and another thing has been taken, so parties play
role of seller as well as a buyer, both. In case of movable properties, the
provisions of Sale of Goods Act, 1930 are applicable in exchange also.
EXCHANGE OF MONEY [ Section 121 of the Transfer of Property Act,
1882]; “On an exchange of money, each party hereby warrants the
genuineness of the money given by him”. In this case the money transferred
must be genuine money and not be a counterfeit currency or fake money.
 22

3.1 MORTGAGES
DEFINITIONS
MORTGAGE
A mortgage is a kind of security given by the borrower for repayment of the
loan to the lender. The object of a mortgage is to secure the debt or other
obligation. It protects a lender for even if the borrower becomes insolvent the
money can be realized from the property given by way of security.

Section 58 (a) of the Transfer of Property Act states that a mortgage is the
transfer of an interest in the specific immovable property for the purpose of
securing the payment of money advanced or to be advanced by way of loan, an
existing or future debt, or the performance of an engagement which may give
rise to a pecuniary liability.

The transferor is called a mortgagor, the transferee a mortgagee; the principal

money and interest of which payment is secured for the time being are called
the mortgage-money, and the instrument (if any) by which the transfer is
effected is called a mortgage-deed.

Unlike sale or gift, a mortgage is not the transfer of an absolute interest in the
property. In a mortgage, a right of possession and enjoyment of the usufruct
may not necessarily be given.
3.2 Mortgagor
The person who transfers the interest in the property in a mortgage is known
as a mortgagor. Under section 59A, a person deriving title under the original
mortgagor is included in the term mortgagor too
3.2Mortgagee
A mortgagee is a person in whose favour the mortgage is created. A person
deriving title under the original mortgagee is also included. Every deed of
mortgage must have the name of the mortgagee otherwise the deed will not be
a valid one.
3.3Mortgage Money
According to section 58, the principal money and interest of which the
payment is secured for the time being are called mortgage-money.
3.4Mortgage Deed (Section 58)
The instrument by which transfer is effected in a mortgage is known as
mortgage deed.
Charge (Section 100)
Charge is a concept which is defined under Section 100 of Transfer of
Property Act, 1882 [1] (hereinafter TPA) and its registration is covered under
Companies Act, 2013. [2] A charge is an interest or a right which is created
 23

over an asset or a property. It can be either on immovable property like land

or building or on movable property like a car, gold etc.

3.4“Charge” as defined in TPA, 1882

Section 100 of the TPA, 1882 defines charge as, “Where immovable property
of one person is by an act of parties or operation of law made security for the
payment of money to another, and the transaction does not amount to a
mortgage, the latter person is said to have a charge on the property; and all
the provisions hereinbefore contained which apply to a simple mortgage shall,
so far as may be, apply to such charge.

Nothing in this section applies to the charge of a trustee on the trust-property

for expenses properly incurred in the execution of his trust, and, save as
otherwise expressly provided by any law for the time being in force, no charge
shall be enforced against any property in the hands of a person to whom such
property has been transferred for consideration and without notice of the
charge.” [3]

Essentials of a Valid Charge

There are certain essentials which need to be fulfilled to create a valid charge.

Immovable property

• The charge must be created against an immovable property which can be a

current or future property belonging to the borrower.

It is nothing but a device to create security which can be enforceable in

court. [4] To create charge against immovable property, it is necessary that it
should be in written form. [5] The most essential thing to be kept in mind is that
there must be a clear intention to use the property as a security for the
payment of the money. [6]

• A charge cannot be created if the immovable property is not owned by the

person from whom the payment is due. For example- A wife sought for the
creation of a charge on house property in a maintenance suit. The court held
that since the property was neither constructed nor owned by the husband, no
charge can be created against such property. [7]

Does not amount to a Mortgage

• A charge is not a mortgage as there is no transfer of property nor any right is

transferred but a personal obligation is created or a right to payment out of a
specified property is generated. [8]
 24

• It has been specifically mentioned in section 100 that a charge doesn’t amount
to mortgage, although all the provisions which apply to a simple mortgage
shall also be applicable to charge. [9] In simple mortgagee, the mortgagor is
not required to give the possession of his property to the mortgagee. Under a
mutual agreement, it is decided that if the mortgagee fails to pay the money
within the prescribed time period, then the property can be sold as per the law.
There is a transfer of an interest in the property in a simple mortgage, but
there is no such transfer in a charge. Despite this difference, the section says
that “The provision hereinbefore contained which apply to a simple mortgage
shall, so far may be, apply to charge.”
• A charge is a wider term as it also includes a mortgage i.e. every mortgage is
a charge but not every charge is a mortgage. [10]

The Calcutta High Court held that:

“If an instrument is expressly stated to be a mortgage and gives the power of

realization of the mortgage money by the sale of the mortgaged premises, it
should be held to be a mortgage. The fact that the necessary formalities of
due execution were wanting would not convert the mortgage into a charge. If,
on the other hand, the instrument is not on the face of it a mortgage, but
simply creates a lien, or directs the realization of money from a particular
property, without reference to sale, it creates a charge.” [11]

The charge created by an act of parties

• The parties themselves create a charge by entering into an agreement. No

particular form of words or language is required to create a charge.

It will be sufficient to create a charge if it can be seen from the document that
there is a clear intention to use the property as a security for the payment of
the money, without transferring any interest or right in the property. [12]

The remedy of the holder of the charge is against the property charged only.
[13]

For example- A inherited a property from his grandmother. He receives a

certain amount of rent from that property. Now on his own volition, he
executed an agreement to pay a certain portion of the rent to B. B will have a
charge over the said property.

In the said transaction A doesn’t owe any money to B nor does B have any
right over the rent accruing from that property. But by entering into an
agreement for payment of some amount to B, A by his own act has created a
charge over the property which can be duly enforceable by B if A fails on his
part.
 25

Charges arising by operation of law

• A charge can also be created by the operation of law. It means the charge is
created without the will or intention of the parties, but the law enforces them to
comply with certain obligations.

For example- B made full payment of purchase money to A in advance. But A

is neither transferring the property nor registering it in the name of B. A charge
will be created by the operation of law over the said property in favour of B.

Exception
Section 100 provides two exceptions under which no charge can be created.
They are as follows:

1. The charge which is created on an immovable property which is also a trust

property in favour of a trustee for incurring expenses in the execution of his
trust i.e. maintaining the trust property.

For example- A and B entered into an agreement for the transfer of a property
with a condition that B will maintain A’s grandson C, from the rent occurring out
of the said property until C turns 18. The expenses incurred by B will be a
charge upon the trust property, but this charge cannot be enforced by selling
the said property as it would lead to the destruction of the trust which is
prohibited under Section 32 of Trust Act. [14]
B can only be reimbursed from the income coming out of such property and can
stop any further disposition of the property until his expenses are paid.

2) A property upon which a charge had been created is brought by a person in

consideration without having any notice of the said charge, then such charge
cannot be enforced against him.

Types of Charge Fixed Charge

• The charge is created over ascertainable assets i.e. land, building,
machinery, goodwill, copyright etc.
• At the time of the creation of the charge, there is a clearly specified and
defined property, the identity of which doesn’t change during the period of the
loan.
• In such an arrangement, the borrower is only left with the possession of the
asset and the lender has full control over the asset.
• The borrower doesn’t have the right to sell, transfer or dispose of and prior
permission is required.
• ‘There is an obligation to pay off the due amount first.

Floating Charge
• The charge is created over unascertainable assets i.e. assets, vehicles,
 26

debtors, etc.
• It is dynamic in nature i.e. the value and quantity fluctuate periodically.
• The borrower has the right to sell, transfer or dispose of and no prior
permission is required.
• No obligation to pay off the due amount first.

Crystallization is a process in which the floating charge is converted into a

fixed charge. It generally occurs when:
• The borrower defaults on payment and the lender takes action to
recover the debt.
• At the time of winding up of the company.
• The company ceases to exist or carry on the business.
• Appointment of a receiver by court.

Registration of Charges
Under section 77 of the Companies Act, 2013 every company creating a charge
shall register the particulars of charge signed by the company and its charge-
holder together with the instruments created. [15]

Therefore all types of charges are required to be registered in accordance with

the Act, whether created within or outside India.

A company must file with the Registrar detailed information of the charge, along
with the Charge Instrument or its authenticated copy, in respect of certain
charges, within 30 days of the creation of a charge. If it is not filed, it shall be
void as against the liquidator and any other creditor of the company. This does
not, however, mean that the charge is altogether void and the debt is not
recoverable. So long as the company does not go into liquidation, the charge is
good and maybe enforced. [16]

Condonation of Delay
If the registrar is satisfied that the company had sufficient reason for not filing the
details and instrument of charge within 30 days of the formation of such charge,
then it can allow for such registration after 30 days but within 300 days after the
creation of the charge. The request for extension shall be submitted in Form No.
CHG-10 and shall be accompanied by a statement from the corporation signed
by the secretary or director claiming that owing to such late filing, the rights of the
intervening creditors of the company shall have no adverse impact. If the
corporation fails to file the charge even during this three- hundred-day span, it
may ask the Central Government to prolong the duration in compliance with
Section 87.

Difference between Mortgage and Charges

A mortgage is a legal process whereby a person borrows money from another
person and secures the repayment of the borrowed money and also the payment
of interest at the agreed rate, by creating a right or charge in favour of the lender
 27

on his movable and/or immovable property. [17]

According to Section 58 of the Transfer of Property Act, “A mortgage is the

transfer of an interest in specific immovable property for the purpose of securing
the payment of money advanced or to be advanced by way of loan, an existing
or future debt, or the performance of an engagement which may give rise to a
pecuniary liability.” [18]
 28

3.5 KINDS OF MORTGAGE

The nature of right transferred in a mortgage depends upon the form or kind of the
mortgage. There are six kinds of mortgage:

a. Simple mortgage
Where, without delivering possession of the mortgaged property, the mortgagor
binds himself personally to pay the mortgage-money, and agrees, expressly or
impliedly, that, in the event of his failure to pay according to his contract, the
mortgagee shall have a right to cause the mortgaged property to be sold and the
proceeds of the sale to be applied, so far as may be necessary, in payment of the
mortgage money, the transaction is called a simple mortgage and the mortgagee
a simple mortgagee.
However, there is no transfer of possession of the property to the mortgagee i.e.
there is no transfer of ownership in a simple mortgage. The mortgagee acquires
only right to sale and that too through the court. The mortgagee may also sue on
the personal covenant, in as much as the simple mortgagor binds himself to repay

b. Mortgage by conditional sale

Where the mortgagor ostensibly sells the mortgaged Property on condition that on
default of payment of the mortgage money on a certain date the sale shall become
absolute, or on condition that on such payment being made the sale shall become
void,
or on condition that on such payment being made the buyer shall transfer the
property to the seller, the transaction is called mortgage by conditional sale and
the mortgagee a mortgagee by conditional sale.
The transaction shall be deemed to be a mortgage unless the condition is
embodied in the document which effects or purports to affect the sale.
The word ‘ostensible’ means that it has an appearance of sale but is really not a
sale. The ostensible sale need not be accompanied with possession.

In this form of mortgage, there is no personal liability on the part of the mortgagor
to pay the debt. The remedy of the mortgagee is by foreclosure only.

c. USUFRUCTUARY MORTGAGE
Where the mortgagor delivers possession or expressly or by implication binds
himself to deliver possession of the mortgaged property to the mortgagee, and
authorises him to retain such possession until payment of the mortgage money,
and to receive the rents and profits accruing from the property or any part of such
rents and profits and to appropriate the same in lieu of interest, or in payment of
the mortgage money, or partly in lieu of interest or partly in payment of the
mortgage-money, The transaction is called a usufructuary mortgage and the
mortgagee a usufructuary mortgagee
If the mortgagee is not in possession or if he loses such possession he may sue
to obtain possession and also mense profits; he may also sue for mortgage
money.
 29

In a usufructuary mortgage, the mortgagee has the advantage to repay himself.

d. English mortgage
Where the mortgagor binds himself to repay the mortgage money on a certain
date, and transfers the mortgaged property absolutely to the mortgagee, but
subject to a proviso that he will re-transfer it to the mortgagor upon payment of the
mortgage-money as agreed, the transaction is called an English mortgage.
The word ‘absolutely’ emphasizes that the characteristics of a sale are more
pronounced in the case of an English mortgage but it does not suggest that there
is absolute transfer in the nature of a sale. An absolute transfer can never be a
mortgage. What really passes is only an interest in the property and not the whole
property.

e. Mortgage by deposit of title-deeds (Equitable Mortgage)

Where a person in any of the following towns, namely, the towns of Calcutta,
Madras, and Bombay, and in any other town which the State Government
concerned may, by notification in the Official Gazette, specify in this behalf,
delivers to a creditor or his agent documents of title to immovable property, with
intent to create a security thereon, the transaction is called a mortgage by deposit
of title-deeds.
There is no writing or formalities required. The object of the legislature in providing
for this kind of mortgage is to give facility to the mercantile communities. Physical
delivery of documents by the debtor to the creditor is not the only mode of deposit.
There may be a constructive delivery.

f. Anomalous mortgage
A mortgage which is not a simple mortgage, a mortgage by conditional sale, a
usufructuary mortgage, an English mortgage or a mortgage by deposit of title-
deeds within the meaning of this section is called an anomalous mortgage.

In such a mortgage the possession may or may not be delivered. The mortgagee’s
remedy is by sale, and also foreclosure if the terms of the mortgage permit it.

Sub Mortgage
A mortgage debt being an immovable property the mortgagee can assign his
interest in the mortgaged property. A mortgage by the mortgagee of his interest
under the original mortgage is called a sub mortgage. A sub mortgagee is entitled
to a decree for sale of the mortgage rights of his mortgagor.
 30

3.6 Mode of Formalities for Creation of Mortgage

(Section 59)
Section 59 - Mortgage when to be by assurance : Transfer of Property
Act, 1882
Mortgage when to be by assurance? Section 59 of Transfer of Property Act,
1882
 Section 59 of Transfer of Property Act 1882 : "Mortgage when to be by assurance"
59. Where the principal money secured is one hundred rupees or upwards,
a mortgage other than a mortgage by deposit of title deeds, can be effected
only by a registered instrument signed by the mortgagor and attested by at
least two witnesses.

Section 59A - References to mortgagors and mortgagees to include

persons deriving title from them : Transfer of Property Act, 1882
Are References to mortgagors and mortgagees to include persons deriving
title from them? Section 59A of Transfer of Property Act, 1882

Section 59A of Transfer of Property Act 1882 : "References to mortgagors

and mortgagees to include persons deriving title from them"
59A. Unless otherwise expressly provided, references in this Chapter to
mortgagors and mortgagees shall be deemed to include references to
persons deriving title from them respectively.
 31

3.7 RIGHT TO REDEEM

Redemption is the act of buying back the property after tendering the amount due
to the creditor. In a transaction of mortgage, the mortgagor has the right to redeem
his property after paying off the debt amount. The right of redemption is statutory
and inalienable, meaning thereby, that it cannot be taken away by the provisions
of the contract. Section 60 of the Transfer of Property Act, 1882 (hereinafter,
'TPA') confers the right of redemption on the mortgagee. It lays down that after the
principal money becomes due, the mortgagor can tender the money and require
the mortgagee to deliver the possession of the property or the deed/documents to
him. The proviso to section 60 puts a restriction on the exercise of this right. It can
only be exercised till the time it is not extinguished by the act of the parties or by
decree of a court.
The Hon'ble Supreme Court of India recently pronounced a judgment on the
extinguishment of this right of redemption in Allokam Peddabbayya & Ors. v.
Allahabad Bank & Ors.1 it was laid down categorically that right to redemption
exists only till the time sale of the mortgaged property has been confirmed.
Once the sale is confirmed, the right to redeem is lost within the meaning of the
proviso.

The facts of the case were that the mortgagor had created an equitable mortgage
of their property in favour of the Allahabad Bank by deposit of title deeds in 1979.
The bank had instituted proceedings for sale of the mortgaged property and it was
sold to the Respondents. The Respondents executed the decree and were put in
possession in 1997. Meanwhile, the original mortgagor had sold the property to
the Appellants in 1985. Before the execution of the decree, the Appellant brought
suit asserting their possession and seeking permanent injunction restraining
defendant from interfering with their peaceful possession of the property. They did
not ask for redeeming the property or to set aside the sale. It was after execution
in 1997 that they brought a suit under Order XXXIV Rule 1 of the Code of Civil
Procedure (hereinafter referred to as 'the CPC').
It was contended that the Appellants had purchased the property and by virtue of
Order XXXIV Rule 1, CPC, they were necessarily to be impleaded as party
defendants before institution of the suit for foreclosure by the Bank or sale of the
mortgaged property. Because the same was not done, the decree was not binding
on them and did not affect their right to redemption. They also relied on section 91
of TPA which gives right to persons other than the mortgagor to redeem the
mortgaged property.
The Supreme Court recognized the interest of the Appellants in the mortgaged
property as per section 91 and held them to be competent to bring a suit for
redemption. However, in light of the facts of the case, the court denied the right of
redemption to the Appellants. It held that the conduct of the Plaintiffs amounted to
a waiver of their right. The court concluded that the Appellants preferred a suit
seeking permanent injunction against any interference by the auctionpurchaser.
All the facts regarding mortgage, foreclosure suit, and consequent sale were
disclosed by the Respondents. Despite this, they did not take any steps for
redeeming the property or setting aside the sale. Action for redemption was taken
 32

after the sale was confirmed in favour of the Respondents, when the right to
redeem had become irrelevant. In words of the court:
"The right to enforce a claim for equity of redemption is a statutory right under the
Act. It necessarily presupposes the existence of a mortgage. The right to redeem
can stand extinguished either by the act of the parties or by operation of the law in
the form of a Decree of the Court under the proviso to Section 60 of the Act."
Thus, the law emerges to be that actions to redeem property and to claim it back
should be such that a clear intention is evinced to protect the property. Court does
not entertain claims of those who appear to be sleeping on their rights and
approach it at their own sweet will.2
With respect to the query that whether the right to redemption gets extinguished
on passing of decree or its execution, the court relied on following paragraph in
L.K. Trust v. EDC Ltd.3:
"...What is held by this Court is that, in India it is only on execution of the
conveyance and registration of transfer of the mortgagor's interest by registered
instrument that the mortgagor's right of redemption will be extinguished but the
conferment of power to sell the mortgaged property without intervention of the
court, in a mortgage deed, in itself, will not deprive the mortgagor of his right of
redemption..."

Furthermore, for availing right of redemption after decree for sale of mortgaged
property has been passed, it is not enough that a suit for redemption is filed, it is
necessary that objection is raised against the decree or sale certificate.4 It has
been observed as follows in Embassy Hotels Pvt. Ltd. vs. Gajaraj & Co. & ors.5:

"15..........In such circumstances, in our considered view, the only option was to
directly challenge the court auction of the suit property and the issuance of sale
certificate........it is not possible to accept the contention on behalf of the plaintiff
that the first defendant being a mortgagor will continue to have a right of
redemption although the sale of mortgaged property to a third party through a
court auction became final."

Therefore, based on the aforesaid discussion it becomes clear that the right to
redemption is not an absolute right. It is extinguishable in terms of section 60 of
the TPA. As pointed out in the aforesaid judgment, the right gets extinguished if
the sale is confirmed. The mortgagor can still redeem before the confirmation of
the sale, but once it is confirmed and he raises no objection to the validity of the
sale, the right to redeem gets extinguished. The courts provide no relief to the
person who has been sleeping on his right before and did not claim the same
even after being provided opportunity. Nevertheless, it is an important right and
given utmost superiority by the courts. It is based on the principle 'once a
mortgage, always a mortgage' and imbibes that a person is not deprived of his
property if he is willing to make good his dues. The right to redemption is an
incident of a subsisting mortgage and is inseparable from it such that the right is
coextensive with the mortgage itself.
 33

3.8 PARTIAL REDEMPTION

In a partial redemption, the issuer elects to exercise or call only a portion of the
outstanding par value of the security outstanding. In such a case, some investors
may have all or a portion of their position redeemed, while others may not have
any portion of their position redeemed. It should also be noted that the issuer, not
the investor, has the right to exercise a call or redemption.

Description of Partial Redemptions Allocation Process

The redemption process begins when an issuer notifies the Depository Trust
Corporation (“DTC”) that it will exercise a partial call of the shares outstanding for
a specific issue. DTC provides depository services to approximately 3.5 million
security issues located in the United States and other countries. The issuer
provides the specific security and the amount to be redeemed. After receiving a
redemption notice from the issuer, DTC, using an impartial, random lottery
system, allocates security positions to broker-dealers that hold securities in “street
name.” In a partial call, participants may not receive an allocation from DTC
because of the random lottery process.

Upon notification of a partial call by an issuer, a third-party vendor of RBC CM

conducts a lottery to allocate the calls in a fair and impartial manner among
customers holding the specific security.

Partial Redemption Lottery System

FINRA Rule 4340 requires, among other things, that RBC CM have procedures
that are fair and impartial to allocate securities to be redeemed or selected in the
event of a partial redemption or call. When a partial call is offered on terms
favorable to owners of the security, the member firm must take measures to
prohibit the allocation of the call to its “proprietary accounts or those of an affiliate
or certain associated persons, before all of its customers’security positions have
been redeemed. Likewise, if a redemption or call is made on unfavorable terms, a
firm may not exclude its position from those that may be called or put itself ‘last in
line
 34

3.9 CLOG ON REDEMPTION, (SECTION 60)

In India, the doctrine of Clog on redemption can be understood in relation to
Section 60. This section states the right to redemption and along with it there
are conditions attached to it. All the rights mentioned in the sections cannot be
taken away by mere declaration by the mortgagee or by making a contract.
Every act which stops the mortgagor from redeeming his property back refers
to clog on redemption. Even the mortgagor cannot stipulate his right to
redemption. There are some basic instances that result in clog. Such
conditions are mentioned below.
Instances of Clog On redemption
There are many instances that creates a clog on redemption by the mortgagor.
They are void ab initio. Such instances are as follows:

1. Postponement by mortgagee as an advantage of his position:

Mere postponement of the redemption does not amount to clog as it may be for
the benefit of both mortgagor and mortgagee. Also. Sometimes the postpones
may be because of some unavoidable reasons. In cases where it is found that
the mortgagee is intentionally postponing the redemption and takin g due
advantage of his position, it is a clog.
In the case of Seth Ganga Dhar v. Shankar lal[1], it was held that the
postponement of 85 was not a clog because of the conditions that existed at
that time. In the case
of Bhullan v. Bachcha,[2] it was held that in a usufructuary mortgage, the
condition of redemption after 60 years on a particular was a clog.
Therefore, the time period amounts to clog after taking in consideration some
of the important conditions such as terms and conditions of mortgage, money
advanced etc. Â

2. Conditional Sale of property:

Sale of property by the mortgagee in any condition is a clog. When the
contract between the mortgagor and mortgagee shows that if mortgagor will
not pay the amount on time, the mortgagee will be eligible for selling the
property, such condition is considered as void. Right of redemption is an
equitable right and thus cannot be taken way by selling the property in any
condition.
In case of Kanaram v. Kuttooly[3], it was held that the non-payment of money
on due date did not allow the mortgagee to sell the property and any such
condition contained in the contract as it amounts to clog.

3. Restraint on other mortgage:

In the mortgage, the mortgagor only transfers the interest and not the
ownership in the property. The mortgagor holds a right of mortgaging the
property for advancing another loan too. Any condition in the first mortgage
deed if states that the mortgagor cannot mortgage the property subsequently is
a clog.
 35

4. Collateral benefits in case of usufructuary mortgage to mortgagee:

In the case of usufructuary mortgage, the mortgagee has the right of taking the
rents of that property, these are not illegal. If above all such benefits, the
mortgagee takes advantage of the needy condition of mortgagor and enjoys
collateral benefits, it is a clog.

in the case of Krelinger v. New Pantagonia Meat & Cold Storage Co. Ltd.
[4], certain conditions were explained related to collateral benefits of
mortgagee which result in clog, they are: if the benefit is unfair, if it is in a
condition that clogs the redemption or it is inconsistent with right to redeem.

All such conditions amount to clog and cannot be enforced in a mortgage as

the right to redemption is related to equity and every mortgagor has the right to
redeem the property back after the payment of amount.

Exceptions to Clog on Redemption: Every rule has an exception to it, so

even the right to Redemption has some limitations, even though it cant be
extinguished but it may be restricted.

The major exceptions on Clog on Redemption

1. The right of redemption cannot be finished in mortgage deed of the agreement
but after it can be finished by submission of the right of redemption or by sale or
by any method by the free transaction.
2. The right can be finished by the decree of court. the mortgagor only has the
right to get such decree the right of redemption can be awaited till exercising
after the degree for forfeiture of the right of redemption can be passed by the
court.
3. If the right of redemption and interest of mortgage vested in one person then
the right is finished.
4. If the mortgaged property is vested in-state or if the mortgaged property
acquisition by the government the right.
5. If the mortgagee himself acquires a share in the mortgaged property, the
indivisibility of the mortgage is broken, and sharer in the remaining or integrity
property is then entitled to redeem his share.

Case Laws on Exceptions to Clog on Redemption

1. Narandas Karsondas vs S.A. Kamtam & Anr[5]
It is only on execution of the conveyance and registration of transfer of the
mortgagor's interest by registered instrument that the mortgagor's right of
redemption will be extinguished. The conferment of power to sell without
intervention of the Court in a Mortgage Deed by itself will not deprive the
mortgagor of his right to redemption. The extinction of the right of redemption
has to be subsequent to the deed conferring such power. The right of
redemption is not extinguished at the expiry of the period. The equity of
redemption is not extinguished by mere contract for sale. The mortgagor's right
 36

to redeem will survive until there has been completion of sale by the mortgagee
by a registered deed.
L.K. Trust Vs EDC Ltd. and Others Respondent[6] The mortgagor under Indian
law is the owner who had parted with some rights of ownership and the right of
redemption is the right which he exercises by virtue of his residuary ownership to
resume what he has parted with. In India this right of redemption, however, is
statutory one. A right of redemption is an incident of a subsisting mortgage and
subsists so long as the mortgage itself subsists. The judicial trend indicates that
dismissal of an earlier suit for redemption whether as abated or as withdrawn or
in default would not debar the mortgagor from filing a second suit for redemption
so long as the mortgage subsists. This right cannot be extinguished except by
the act of parties or by decree of a court.

3. Jaya Singh D. Mhoprekar and Anr.v. Krishna Balaji Patil and Anr.[7]

The right of redemption under a mortgage deed can come to an end only in a
manner known to law. Such extinguishment of the right can take place by
contract between the parties, by a merger or by statutory provision which
debars the mortgager from redeeming the mortgage. The mortgagor’s
right of redemption is exercised by the payment or tender to the mortgagee at
the proper time and at the proper place of the mortgage money. When it is
extinguished by the act of parties, the act must take the shape and observe the
formalities which the law prescribes. A mortgage being a security for the debt,
the right of redemption continues although the mortgagor fails to pay the debt
at the due date. Any provision inserted to prevent, evade or hamper
redemption is void.
The doctrine of clog on redemption is necessary to be existed because it is the
sole way to protect the rights of the mortgagor. In the absence of this doctrine,
it would be very easy to alienate the mortgagors right of redemption. This
doctrine imposes restrictions and works on the principle of justice, equity and
good conscience. The exceptions that exist are logical and legal in which no
rights of any party are harmed. Hence, this doctrine safeguards the rights and
imposes duties on mortgagee towards mortgagor.
 37

3.10 MARSHALLING AND CONTRIBUTION (SECTIONS 81

AND 82)
The Rule of Marshalling and Contribution are concepts embodied in
the Transfer of Property Act, 1882 (‘TOPA”). Section 81 and 82 of
TOPA deals with the Rule of Marshalling and contribution respectively.
Before the supersession of the rules are discussed, an understanding
of the concepts themselves is imperative.

Marshalling means arranging things, systematize, or regulate things

which mean the things arranged in a proper manner or order. In the
Transfer of Property Act, section 56, 81 and 82 deals with the doctrine of
marshalling and contribution. According to section 56 of the transfer of
property act, the marshalling applies on seller and buyer. Section 56, the
rule of marshalling by the subsequent purchaser only deals with the sale
not mortgage. Section 56 incorporates the rule of marshalling by a
purchaser. And for a mortgage, section 81 is the rule of marshalling in
which the subsequent mortgagee has the right to claim to marshal. The
right of marshalling securities is not absolute.

The rule of contribution described in section 82 of the transfer of property

act. The meaning of the rule of the contribution means providing money
for a common fund. The doctrine of marshalling and contribution are
very vital section (81, 82) for the transaction of the mortgage.

Doctrine Of Marshalling
Marshalling means arranging something. Section 81 of the transfer of
property act says that if the owner of two or more properties mortgages
them to one person and other property mortgages to other people, the
new mortgagee is in the absence of a contract to the contrary, entitled
to have the mortgaged debt satisfied out of the properties not mortgaged
to him, so far as the same will extend, but not to prejudice the rights of
the prior mortgagee or persons claiming under him or of any other person
who has for consideration acquired an interest in any of the properties.
The right given to the subsequent mortgagee under this section
contemplates a situation where a mortgagor mortgages more than two
or more than two properties firstly to a mortgagee and after that
mortgages some of these properties to the other person.

For Example-
· X mortgages properties A, B and C to Y for securing a loan of 30,000
rupees.
· After that X mortgages property B to Z for securing another loan of
10,000 rupees.

In this Y is the first mortgagee on properties A, B and C which are

 38

securities for a loan of 30,000 rupees. And property B mortgages to

X for loan 10,000 rupees. Here Y is the prior mortgaged and Z is
the subsequent mortgagee. The right is given to Z (subsequent
mortgagee) entitles him to say that the loan of rupees 30,000, it should
be satisfied out of sale proceeds of properties A and B only and it is
not from C which has been mortgaged to him. In the case, A and B
could be sold for less than 30,000 rupees, property C mat be sold to
complete the amount. Although Z is a subsequent mortgagee and his
claim is not before the Y but Z has right of marshalling or in other word
he has right to arranging the securities in his favour.

According to this, the subsequent mortgagee under section 81 has

right of marshalling securities.

Here the Right of Marshalling Securities Is Not Absolute, It

Follows Some Conditions-

1. The mortgagees may be two or more than two-person and the

mortgagor must be same.

2. Mortgagor mortgages two or more than two properties to another new

mortgagee without prejudice the prior mortgagee.

3. There exists not a contract to the contrary.

4. The new mortgagee entitled to have the mortgage debt satisfied out of
the property.

5. At last new mortgagee must not be prejudiced to the first mortgagee as

well as a third person or other person claiming as the purchaser.

Landmark Cases
In the case of Devatha Pullaya v. Jaldu Manikyala Rao[1], where a
puisne mortgagee has taken the mortgage expressly on condition of
discharging certain amount due on the prior mortgage but fails to fulfil
that term, he cannot exercise the right of marshalling.

In the case of Fiatallis North America, Inc Et Al v. Pigott Construction

Limited Et Al[2]held that there must be a single or common mortgagor or
debtor.

In the case of Nova Scotia saving & loan v. O’Hara et al[3], held that the
doctrine, whose object is to achieve fairness, will not be applied to the
prejudice of the third party.
 39

Section 82, Contribution to Mortgage-Debt

Contribution means providing money for the common fund. Section 82
of the transfer of property act deals with the rules relating to the
contribution of money towards mortgaged debt. It is the right of a
person who has discharged a common liability to recover proportionate
share from others. The doctrine of contribution requires that the persons
under common liabilities that liabilities equitable.

Section 82 contemplates a situation in which there are two or more

than two mortgagors who take a common debt by mortgaging
different properties in one property. The nature of the doctrine of
contribution is based on the principles of equity, justice and good faith
or good conscience. Each mortgagor or debtor must be liable to
contribute to such common debt. When two or more properties of
different persons are mortgaged to secure a loan, the mortgagee has
the right to recover the debt from the property of any one person.

Rule of Marshalling
Marshalling means “to arrange” and the Rule is first introduced in TOPA
under Section 56. Section 56 may be explained in the following manner:

1. There must be an owner of two or more properties,

2. He must mortgage two or more of his properties to any person,
3. Thereafter, he must sell one or more of these properties to any person other
than the one he mortgages the properties to. The sale must include at least one
property that has been mortgaged by the owner,
4. The buyer of such properties is entitled to have the owner satisfy the
mortgage-debt out of the property or the properties not sold him before he
purchases the property. This can be subject to a contract stating the contrary,
5. The rule of marshalling should not be so exercised so as to prejudice the rights
of the mortgagee, any persons claiming under the mortgagee, or any person who
has acquired an interest with consideration in any of the properties.

In short, the Rule of Marshalling provides the buyer, in the above case, the right
to demand from the owner that the property be free from any and all
encumbrances before the buyer purchases the property.

Section 81 also adopts the Rule of Marshalling but in cases of Mortgages.

Section 81 may be understood in the following manner:

1. There must be an owner of two or more properties. He must mortgage two or

more of these properties to any person,
2. He must then mortgage one or more of these properties to another person,
3. The subsequent mortgagee is entitled to have the mortgage-debt of the prior
mortgagee satisfied out of the properties not sold to him. This can be subject to
a contract stating the contrary too,
 40

4. Similar to Section 56, the rule of marshalling here too should not be so
exercised so as to prejudice the rights of the mortgagee or any person who has
acquired an interest with consideration in any of the properties.

Marshalling, in this context, may be explained by an illustration. If the mortgagor

mortgages three of his properties X, Y and Z to A and then mortgages X to B, B
is entitled to have the mortgagor satisfy his debt from the sale proceeds of the
properties Y and Z and only if the said sale proceeds fall short, can property X
be sold.

In Barness v. Rector, W mortgaged two of his properties A and B to X. W

then mortgaged property A to Y and property B to Z. Here, the court held
that X’s mortgages will be apportioned proportionately between properties A and
B and the surplus of A will go to Y and surplus of B will go to Z.

Rules of Contribution
The Rule of Contribution relates to the collective contribution towards a
mortgage debt by mortgagors. It gives one mortgagor the right to have the
other’s property contribute to the discharge of the mortgage debt. When a
creditor has a single claim against several debtors, he can realize the debt from
any one of them, but as per the rule of contribution he can claim contribution to
the debt by the other debtors, so that the burden might fall on all equally. The
rule is encapsulated under Section 82 of TOPA and may be divided as per the
following:
Mortgaged Property Belonging to two or more persons
This is based on the following essentials:
i. A mortgaged property must belong to two or more persons based on a
common loan,
ii. Each mortgagor, in absence to a contrary contract, is liable to contribute as per
his share of the mortgage,
For example, X, Y and Z mortgaged their properties to D mortgaging a common
debt. Now if D can recover the entire debt from the properties mortgaged by X, X
is entitled to demand Y and Z to contribute their portion of the debt out of their
mortgaged properties. The Privy Council has lucidly explained it in Kampta
Singh v. Chaturbhuj. The Privy Council held that if a person owns one property
subject, with the property of other persons, to a common mortgage, and has
paid off the mortgage debt, he is entitled to call upon the owners of the other
property to bear their proper proportion of the burden.

When One Property is Mortgaged First and then again mortgaged with another
Property

When the mortgagor has two properties and he mortgages one to secure one
debt and then mortgages both to secure another debt, if the former debt is paid
out of the former property, each property is then liable to contribute to the latter
debt after deducting the amount of the former debt from the value of the
 41

property from which it has been paid.

In Bohra Thakur Das v. Collector of Aligarh,the mortgagor mortgaged the village

of Kachaura to one, Nand Kishore. He again mortgaged villages, Kachaura and
Agrana, to Nand Kishore. The Plaintiffs purchased the equity of redemption from
Agrana. The first mortgagees purchased Kachaura by a decree. The plaintiffs
sued and contended that the first mortgagees were liable to pay the
proportionate share of the debt for redemption of the second mortgage. The
court held that since the whole of Kachaura was swallowed up by the first
mortgage by the decree, the entire burden of the second mortgage fell entirely
on Agrana. The Privy Council, in appeal, overruled the decision of the court and
held that the first mortgagees would have to contribute to the second mortgage,
as they purchased Kachaura.
However, in Sesha Iyer v. Krishna Iyenger, the situation was quite different. Two
properties X and Y were mortgaged to R and properties X and Z were mortgaged
to P. R executed his decree on the mortgage by sale of X. P then sued to
enforce his mortgage. However, X had already been sold. P sought to sell Z and
also demanded contribution against Y. The Court held that if the plaintiffs had
bought part of the mortgaged property subsequently sold under R’s decree, they
might by paying off the debt and saving the property from sale, have acquired a
right to contribution by securing a lien on the other property.
However, since the plaintiffs did nothing, no right to contribution arose.
Difference between doctrine of marshalling and contribution
Doctrine of Marshalling
• The right of marshalling is available to mortgagees.
• It settles right of subsequent mortgagees.

Doctrine of Contribution
• Contribution determines the right of one mortgagor against other
mortgagors.
• It rights of mortgagors inter se.
 42

3.11 SUBROGATION (SECTIONS 91 AND 92)

Section 91 of Transfer of Property Act 1882: "Persons who may sue for
redemption"
91. Besides the mortgagor, any of the following persons may redeem, or
institute a suit for redemption of, the mortgaged property, namely:-
(a) any person (other than the mortgagee of the interest sought to be redeemed)
who has any interest in, or charge upon, the property mortgaged or in or upon
the right to redeem the same;
(b) Any surety for the payment of the mortgage-debt or any part thereof; or
(c) Any creditor of the mortgagor who has in a suit for the administration of his
estate obtained a decree for sale of the mortgaged property.
Section 92 - Subrogation: Transfer of Property Act, 1882
What is Subrogation? Section 92 of Transfer of Property Act, 1882
Section 92 of Transfer of Property Act 1882: "Subrogation"
92. Any of the persons referred to in section 91 (other than the mortgagor) and
any co-mortgagor shall, on redeeming property subject to the mortgage, have,
so far as regards redemption, foreclosure or sale of such property, the same
rights as the mortgagee whose mortgage he redeems may have against the
mortgagor or any other mortgagee.
The right conferred by this section is called the right of subrogation, and a
person acquiring the same is said to be subrogated to the rights of the
mortgagee whose mortgage he redeems.
A person who has advanced to a mortgagor money with which the mortgage
has been redeemed shall be subrogated to the rights of the mortgagee whose
mortgage has been redeemed, if the mortgagor has by a registered instrument
agreed that such persons shall be so subrogated.

Nothing in this section shall be deemed to confer a right of subrogation on any

person unless the mortgage in respect of which the right is claimed has been
redeemed in full.

The Doctrine of subrogation in the Transfer of Property Act, 1882, has

been laid down under section 92, inserted after an amendment in the year
1929.

The plain text of the section is as under:

Subrogation: Any of the persons referred to in section 91 (other than the

mortgagor) and any co- mortgagor shall, on redeeming property subject to the
mortgage, have, so far as regards redemption, foreclosure or sale of such
property, the same rights as the mortgagee whose mortgage he redeems may
have against the mortgagor or any other mortgagee.

The right conferred by this section is called the right of subrogation, and a
person acquiring the same is said to be subrogated to the rights of the
mortgagee whose mortgage he redeems. A person who has advanced to a
 43

mortgagor money with which the mortgage has been redeemed shall be
subrogated to the rights of the mortgagee whose mortgage has been redeemed,
if the mortgagor has by a registered instrument agreed that such persons shall
be so subrogated. Nothing in this section shall be deemed to confer a right of
subrogation on any person unless the mortgage in respect of which the right is
claimed has been redeemed in full.

From the above we can conclude that section 92 provides for:

I. any person other than the mortgagor referred to in section 91, and any co-
mortgagor,
II. on redeeming the mortgaged-property,
III. shall have the same rights as the mortgagee whose mortgage he redeems
may have against the mortgagor or any other mortgagee,
IV. the rights are regarding redemption, foreclosure or sale of the mortgaged
property.
V. This right is known as the right of subrogation and the person acquiring the
same is said to be subrogated to the rights of the mortgagee whose mortgage
he redeems.

As defined under the Black’s Law dictionary , ‘Subrogation’ is:

the substitution of one person in the place of another with reference to a lawful
claim, demand or right, so that he who is substituted succeeds to the rights of the
other in relation to the debt or claim, and its rights, remedies, or securities.

Historical Perspective
Subrogation is a roman term, which means ‘substitution’. Lord Hardwicke in his
decision in Randal V. Cockran marked its identification with equity, in his opinion
expressed, he suggested a possible theoretical basis for the doctrine and a
justification for the role of equity in the area of contribution. In a letter to Lord
Kames, he had noted that new commercial conditions, new methods of dealing
with property, and different forms of property made it necessary for equity to play
a novel part in the further development of subrogation.
The above case arose out of a decree by King George II allowing compensation
to be paid to those that suffered loses in a war with Spain. Some individuals had
already been indemnified by their insurers for the losses that they had suffered,
and the insurers successfully sought to be subrogated to the rights of their
insured to receive this compensation.

The first English case to adopt the word ‘subrogation’ was Stringer V. The English
and Scotch Marine Insurance Co. In this case, the plaintiffs insured a ship cargo
with the defendants for ‘taking at sea, arrests, restraints, and detainment of all
Kings, princes and people.’ The ship was subsequently captured by a United
States cruiser and taken into New Orleans, where a suit for its condemnation was
instituted. The plaintiffs contested the action successfully and the captors
appealed. The court ordered the plaintiffs to furnish security against costs, which
 44

they could not afford. As a result, the ship was condemned; the plaintiffs gave
formal notice of abandonment of the cargo, and requested the insurers pay for
their total loss. The court, in holding for the plaintiff, noted that the plaintiff as the
assured was free to choose between defending the appeal before the American
court or claiming a loss under the policy. Because the assured chose the latter,
the insurers were obligated to pay. However, having paid, the insurers were
entitled ‘to be subrogated to them, and get what they can out of the hands of the
Americans for their own benefit.’
Though, there has been some disagreement in English courts about whether
subrogation is an equitable or legal doctrine. Canadian courts have treated it as
the former. The leading case in Canada is National Fire Insurance Co. V.
McLaren which states:
The doctrine of subrogation is a creature of equity not founded on contract, but
arising out of the relations of the parties. In cases of insurance where a third party
is liable to make good the loss, the right of subrogation depends upon and is
regulated by the broad underlying principle of securing full indemnity to the
insured on the one hand, and on the other of holding him accountable as trustee
for any advantage he may obtain over and above compensation for his loss.
Being an equitable right, it partakes of all the ordinary incidents of such rights,
one of which is that in administering relief the Court will regard not so much the
form as the substance of the transaction.
The primary consideration is to see that the insured gets full compensation for the
property destroyed and the expenses incurred in making good his loss.
The next thing is to see that he holds any surplus for the benefit of the insurance
company.
Whether the doctrine is equitable or not, the Canadian and English jurisprudence
is agreed that subrogated rights do not come from the contract of indemnity but
arise by operation of the common law to govern the relationship that such a
contract creates.
At common law, no subrogated rights arise until the insured is fully indemnified for
its loss. Once full indemnity is made, the insurer has the right to commence
proceedings against the wrongdoer in the insured’s name and make all decisions
in the litigation. The insured has a duty to co-operate in the litigation in matters
such as giving evidence at trial.
It was in the case of London Assurance Co. V. Sainsbury the principles of
subrogation established by equity were taken and forged into the common law.
However, the common law also assumed a major role in fashioning the future
progress of the purely equitable doctrine. The Court of Exchequer in the case of
Deering v. Winchelsea, held that The basis of ‘bottom of contribution’ was said to
be a fixed principle of Justice, and is not founded in Contract:

[t]his contribution is considered as founded in Equity; Contract is not mentioned.

The principle operates more clearly in a Court of Equity than at Law. At Law the
party is driven to an Audita Querela or Seire Facias to defeat the execution, and
compel execution to be taken against all.
 45

In Craythorn V. Swinburn , the court explained the grounds upon which the courts of
law could justify the application of equitable rules in the field of contribution:

It has been long settled that, if there are co-sureties by the same instrument, and
the creditor calls upon either of them to pay the principal debt, or any part of it, that
surety has a right in this Court, either upon a principle of Equity, or upon Contract,
to call upon his co-surety for contribution; and I think, that right is properly enough
stated as depending rather upon a principle of Equity than upon Contract: unless in
this sense; that, the principle of Equity being in its operation established, a Contract
may be inferred upon the implied knowledge of that principle by all persons, and it
must be upon such a ground of implied assumption, that in modern times Courts of
Law have assumed a jurisdiction upon this subject.

The Privy Council in the case of Gokuldas V. Puranmal held that Gokuldas was
subrogated to the rights of the prior mortgagee whom he had paid off and that this
claim could not be disposed unless it was redeemed. As per the facts of the case
Gokuldas, was the creditor of the mortgagor, purchased the equity of redemption
at a sale in execution of a money decree and got possession.
He paid off a prior mortgagee but was sued for possession by a puisne
mortgagee. Further the council through this decision declared the inapplicability of
the rule in Toulmin V. Steere in India, according to the principle laid down by this
case when a purchaser of equity of redemption is redeeming a mortgage there is
no presumption that he intend to keep it alive against subsequent encumbrance of
which he has no knowledge but may have had constructive notice.

As recognized by the American courts, the one who initially discharges the
obligation is called the ‘subrogee’ and the party who is compensated is the called
‘subrogor.’

KINDS OF SUBROGATION

1. Legal Subrogation

This kind of subrogation takes place by operation of Law, and is based on the
principle of reimbursement. Where a person is interested in making some payment,
which another is legally bound to make, than such person must be reimbursed
when he makes the payment. Legal or equitable subrogation is not available to
volunteers, and is not available until full compensation has been paid. It is based on
equitable considerations.

The following people can claim Legal Subrogation :

a) Puisne mortgagee
He is a subsequent mortgagee, who redeems a prior mortgage; he has a right to be
subrogated to the position of the prior mortgage.
 46

b) Co-mortgagor
He is liable only to the extent of his share of the debt. When, besides redeeming his
own share, he pays off the share of the other mortgagor also, he becomes entitled
to be subrogated in place of such other mortgagor. In the case of Krishna Pillai
Rajasekharan V. Padmanabha Pillai the question arose whether arose that what
were the rights and liabilities the parties qua each other and whether a suit for the
partition was maintainable. The court here held that it was not a case of
subrogation by agreement but by the operation of law. Section 92 does not have
the effect of a substitute becoming a mortgagee. The provision confers certain
rights on the redeeming co- mortgagor and also provides for remedies of
redemption, foreclosure and sale being available to the substitutes as they were
available to the substituted.
Therefore, the suit for declaration, partition and recovery of possession by non-
redeeming co-mortgagor was held to be maintainable.

c) Surety
The person, who stands as a surety in a mortgage for repayment of loan in case
mortgagor fails to do so, is also entitled to redeem the mortgaged property under
section 91. When the surety of the mortgagor redeems the property he is
subrogated to the position and rights of the creditor.

d) Purchaser of equity of redemption

There were certain doubts regarding the purchaser of equity of redemption that
whether he can be subrogated or not. Equity of redemption is regarded as a
property of the mortgagor, which he can sell or assign. The purchaser of such
equity becomes owner of the property. The Privy Council in the case of Malireddy
Ayyareddy V. Gopi Krishnayya held
‘it is now settled law that where in India there are several mortgages on q property,
the owner of the property subject to a mortgage may, if he pays off an earlier
charge, treat himself as buying it and stand in the same position as his vendor, or
to put it in another way, he may keep the encumbrance alive for his benefit and
thus come in before a later mortgagee. This rule would not apply if the owner of the
property had covenanted to pay the later mortgage- debt but in this case there was
no such personal covenant.’

2. Conventional Subrogation
The conventional Subrogation takes place where the person paying off the
mortgage- debt is a stranger and has no interest to protect, but he advances the
under an agreement, that he would be subrogated to the rights and remedies of the
mortgagee who is paid off. The right to subrogation can be claimed only if the
mortgagor has agreed by registered instrument that he shall be subrogated.

INDIAN COURTS ON SECTION 92

The question before the court in the case of Isap Bapuji Amiji’ V. Umarji Abhram
Adam , was whether, Section 92 of the Transfer of Property Act, 1882, has
retrospective effect or not; as per Broomfield, J., the retrospective effect should
 47

be taken as a guide for determining in cases, where there is a conflict of

authority, what equitable rules not inconsistent with the Act should be adopted as
valid in India; whereas according to N.J. Wadia, J., Section 92 of the Transfer of
Property Act, as amended in 1929, has a retrospective effect.

It was held in the case of Narain V. Narain , that where the mortgagor himself
redeems the property this doctrine couldn’t be invoked. The mortgagor who
discharges a prior debt is not entitled to be subrogated to the rights and remedies
of his creditor. This is because by discharging a prior encumbrance created by
himself, he is discharging his own obligation to his creditor.
In the case of Vishnu Balkrishna Naik’V. Shankareppa Gurlingappa Wagarali , the
Bombay High Court has opined that:

Where a person himself redeems a mortgage, that is to say, pays the mortgage
money out of his own pocket and not merely discharges a contractual liability to
make the payment, he is entitled to the right of subrogation under the first
paragraph of Section 92, if he is one of the persons, other than the mortgagor,
enumerated in Section 91. Where, however, such person does not himself
redeem the mortgage, that is to say, does not himself pay the money out of his
own pocket in excess of his contractual liability but advances money to a
mortgagor and the money is utilized for payment of a prior mortgage, whether
the money is actually paid through the hands of the mortgagor or is left for such
payment in the hands of the person advancing the money and it is then paid to
the prior mortgagee through the hands of that person, the latter acquires the right
of subrogation under the third paragraph of Section 92, only if the mortgagor has
by a registered instrument agreed that he shall be so subrogated.

The Supreme Court in the case of Ganesh Lal V. Joti Prasad discussed the nature
and extent of a redeeming co-mortgagors right to recover contribution from his co-
debtor, The court here held that,

Equity insists on the ultimate payment of a debt by one who in justice and good
conscience is bound to pay it, and it is well recognized that where there are
several joint debtors, the person making the payment is the principal debtor as
regards the part of the liability, he is discharged and a surety in respect of the
shares of the rest of the debtors. Such being the legal position as among the co-
mortgagors, if one of them redeems a mortgage over the property which belongs
jointly to himself and the rest, equity confers on him a right to reimburse himself
for the amount spent in excess by him in the matter of redemption; he can call
upon the co-mortgagors to contribute towards the excess which he has paid over
his own share… while it can be readily conceded that the joint debtor who plays
up and discharges the mortgage stands in the shoes of the mortgagee… he will
be subrogated to the rights of the mortgage only to the extent necessary for his
own equitable protection… so far as it is necessary to enforce his equity of
reimbursement’…. It is as regards the excess of the payment over Ms own share
that the right can be said to’ exist…. The redeeming co-mortgagor being only a
 48

surety for the other co-mortgagors, his right, strictly speaking is a right of
reimbursement or contribution.

The above mentioned judgment has been upheld time and again by the Supreme
Court itself and various High courts.

The same view was upheld by the Supreme Court in the case of Valliamma
Champaka Pillai’V.’ Sivathanu Pillai and Ors. , where it was held that the rights
created in favor of a redeeming co-mortgagor as a result of discharge of debt are
‘so far as regards redemption, foreclosure or sale of such property, the same
rights as the mortgagee whose mortgage he redeems’. Further Subrogation rests
upon the doctrine of equity and the principles of natural justice and not on the
privity of contract, One of the principles is that a person, paying money which
another is bound by law to pay, is entitled to be reimbursed by the other. This
principle is enacted in Section 69 of the Contract Act, 1872. Another principle is
found in equity: he who seeks equity must do equity’

The High Court of Kerala in the case of Sivasankara Pillai & Anr.’V. Narayana Pillai
& Ors. Has drawn a distinction between section 92 of the TP Act and section 69 of
the Indian Contract Act, 1872 on the basis of the fact that, Subrogation rests upon
the doctrine of equity and principles of natural justice and not on privity of contract
S. 92 of the Transfer of Property Act and S. 69 of the Contract Act recognises the
principle of equity of reimbursement.

When the scope section 92 of the Transfer of Property act and the extent of rights
and powers of subrogee, came into consideration before the court in the case of
Krishna Pillai Rajasekharan Nair V. Padmanabha Pillai , the court summarized the
principles laid down in the case of Ganeshi Lal as under:

Having examined the issue from all-possible angles and having referred to Sir
Rashbehary Ghose on Law of Mortgage in India, Harris on Subrogation, Sheldon
on Subrogation, Pomeroy on Equity Jurisprudence and a few English and Indian
authorities available on the point, what Their Lordships conclusion in Ganeshi Lal
case may be summed up as under:
1. When the co-debtor or co-mortgagor pays more than his share to the
creditor for the purpose of redeeming a mortgage, the redeeming mortgagor is
principal debtor to the extent of his share of the debt and a surety to the extent of
the share in the debt of other co-mortgagors. The redeeming co-mortgagor being
only a surety for the other co-mortgagors, his right is, strictly speaking, a right of
reimbursement or contribution.
2. The substitution of the redeeming co-mortgagor in place of the mortgagee
does not precisely place the new creditor (i.e. the redeeming co-mortgagor) in
place of the original mortgagee for all purposes. If, therefore, one of the several
mortgagors satisfies the entire mortgage debt, though upon redemption he is
subrogated to the rights and remedies of the creditor, the principle has to be so
administered as to attain the ends of substantial justice regardless of form; in
 49

other words, the fictitious cession in favor of the person who effects the
redemption, operates only to the extent to which it is necessary to apply it for
his indemnity and protection.
3. The doctrine of subrogation must be applied along with other rules of equity
so that the person who discharges the mortgage is amply protected and at the
same time there is no injustice done to the other joint debtors. He who seeks
equity must do equity.
4. There is a distinction between a third party who claims subrogation and a
co-mortgagor who claims the right. The co-mortgagors stand in a fiduciary
relationship qua each other. The redeeming co-mortgagor can only claim the
price, which he has actually paid together with incidental expenses. Strictly
speaking, therefore, when one of several mortgagors redeems a mortgage, he is
entitled to be treated as an assignee on the security, which he may enforce in the
usual way for the purpose of reimbursing himself. The subrogation to the rights of
the mortgagee by the redeeming co-mortgagor is confined only to the extent
necessary for his own equitable protection. The redeeming co- mortgagor can,
just as the surety would, ask to indemnify for his loss and he can invoke the
doctrine of subrogation as an aid to the right of contribution.

Further in the case of Oriental Fire & General Insurance Co. Ltd.’V. American
President Lines Ltd. and Anr. , Maharashtra High Court drew an distinction
between section 92 and section 135A of the act:

The difference between subrogation under Section 92 of the Transfer of Property

Act, 1882, and Section 135A of the Act is that under Section 92 the subrogation
results in the extinction of the original mortgagee’s rights and, therefore, the
original mortgagee has no more rights under the mortgage, whereas a subrogee
under Section 135A acquires rights only to the extent of his payment which may
be less than the rights of the assured himself. Another distinction is that the
person who redeems under Section 91 is an interested person or a surety or a
creditor and under that section that subrogee would get the rights conferred
under Section 69 of the Indian Contract Act, 1872, because it would be a
payment made by a person interested; but in the case of subrogation under
Section 185A the insurer pays under his own contract of insurance and he is not
interested in discharging the liability of the wrongdoer or the tortfeasor. The third
distinction is that Section 92 confers on the person redeeming rights of the
mortgagee ‘against the mortgagor or any other person’. It is these words that
confer the right to sue. There are no such words in Section 135A(2) and (3) as
‘against the wrongdoer or tortfeasor.’

In the case of Velayudhan Padmanabhan’V.’ K. Thyagarajan, the court held

that, as under section 92 of the act:
A co-mortgagor is entitled to file a suit for redemption of mortgage. A co-
mortgagor who redeems the mortgage would have the same rights as the
mortgagee whose mortgage he redeems may have against the mortgagor, in so
far as regards redemption, foreclosure or sale of the property, as per Section 92
 50

of the Transfer of Property Act. Such redeeming co-mortgagor gets subrogated to

the rights of the mortgagee whose mortgage he redeems. The redemption sought
for in the present case is in respect of the whole of the mortgaged property and
not the one-half share of the plaintiff. The bar contained in Section 92 of the
Transfer of Property Act is that a right of subrogation would not be available to
any person unless the mortgage in respect of which the right is claimed has been
redeemed in full.

In the case of Maheswaradhathan Nambudiri’V.’ Narayanan Nambudiri and

others , Kerala High Court has further held that:
When a mortgagor redeems a mortgage what happens is the extinction of the
mortgage right by its satisfaction, and the question of redemption partaking the
nature of an assignment, thus keeping the mortgage right alive, can arise only in
cases where the redemption gives the person redeeming the right of subrogation
to the rights of the mortgagee whose mortgage he redeems Section 92 makes it
clear that the mortgagor has no such right and it is clear that when a mortgagor
redeems a mortgage the mortgage is extinguished and is in no sense kept alive
even if there be some intervening interest like a puisne mortgage.
In the case of Thamattoor Chelamanna and Anr.’V.’ Thamattoor Kurumbikkat
Pare Manakkal Parameswaran and Ors. the question that arose before the Kerala
High Court was, whether person redeeming has right of subrogation in respect of
redeemed sub-mortgage, The court here held that, where person redeeming is a
mortgagor no such right of subrogation arises, further, there is no question of
mortgagor holding redeemed sub-mortgage as separate right.

Additionally, in the case of Raghavendracharya Appacharya Katti’V.’Vaman

Shriniwas Deshpande the Bombay High court drew analogy between subrogation
and substitution, as under:
Subrogation means neither more nor less than substitution. A person who is
subrogated to the status of a mortgagee has all the rights of a mortgagee, not
merely some of the rights, and those rights must include rights in connection with
the particular mortgage by redeeming which he gets the benefit of Section 92 of
the Transfer of Property Act. One of the implications of the doctrine of
subrogation is that the subrogee keeps the mortgage alive for his own benefit.
The mortgage that is paid off is not extinguished but is treated as assigned to the
subrogee.

Subrogation and Assignment

It was held in the case of Gujrath Andhra Road Carriers Transport Contractors
V. United India Insurance Co. Ltd., an assignment or transfer can take place only
with specific acts of parties. The assignee or transferee acquires all the rights in
the property. A transfer operates as a transfer of the totality of the rights. Similar
principle has been laid down by the American courts in the case of Western Cas.
& Sur. Co. V. Bowling and Hospital Serv. Corp.V. Pennsylvania Ins. Co.
Whereas Subrogation is the effect of the situation where a mortgage is redeemed
by a person other than the mortgagor, and he subrogated only to the rights of the
 51

mortgagor and no more. While subrogation is not an assignment, in a broad

sense subrogation may be considered as assigning a cause of action by
operation of law and typical contractual subrogation provisions may use
assignment language. Further assignment and subrogation may apply in a single
case.

Contribution, Indemnity and Subrogation

Technically speaking, ‘contribution’ and ‘indemnity’ are mutually exclusive
remedies but are often asserted as alternative causes of action in the same
lawsuit. ‘Indemnity’ shifting less than complete liability is really contribution and
‘contribution’ shifting all liability is actually indemnity.
Additionally, Contribution and indemnity actions sometimes appear to seek the
same relief as subrogation allows and are often asserted as alternative theories
to subrogation recovery. The distinction between contribution/indemnity and
subrogation lies in the person claiming the right and the person whose debt is
paid is because contribution and indemnity require a common liability with the one
against whom contribution and indemnity are sought.
 52

(4) LEASES OF IMMOVEABLE PROPERTY DEFINITION

OF LEASE (SECTION 105) AND LICENSE
4 . 1 DEFINITION OF LEASE
Section 105 states the definition of a lease which states that it is a transfer of
immovable property for a particular time period for a consideration of which the
transferee has accepted the terms surrounding the agreement.
A lease of immoveable property is a transfer of a right to enjoy such property,
made for a certain time, express or implied, or in perpetuity, in consideration of a
price paid or promised, or of money, a share of crops, service or any other thing
of value, to be rendered periodically or on specified occasions to the transferor
by the transferee, who accepts the transfer on such terms.

Lessor, lessee, premium and rent defined.—The transferor is called the lessor,
the transferee is called the lessee, the price is called the premium, and the
money, share, service or other thing to be so rendered is called the rent.
Lessee
A lessee of a property has a right to possession and enjoyment of the devise to
the exclusion of the lessor whereas a licensee does not have such a right. Since
the appellant had the right to exclusive possession and enjoyment of the
disputed property, he was a lessee and not a licensee; Ajab Singh v. Shital Puri,
AIR 1993 All 138.
Lease
(i) If the agreement between the parties shows an intention to create an interest
in the property in favour of the grantee what results is said to be a lease. A
licensee on the other hand does not create an interest in property; Mrs. Karuna
Manoharlal Ohri v. Vipinbhai U. Sanghani, AIR 1993 Bom 177.
(ii) The furniture and fittings and the tools and implements which have been
given alongwith the shop were not meant for the beneficial use of the shop but
were meant exclusively for running of the hair dressing saloon, thus creating a
lease of the business and not a lease of the shop; Vidya Wati v. Hansraj, AIR
1993 Del 187.
Licence
The Corporation had all the supervisory powers to regulate the running of the
refreshment stall. No exclusive right was created in favour of the caterer to run
the refreshment stall in the manner the caterer choose to do so. Since there is
no transfer of interest in the stall and as per the terms of agreement, the
document can be termed as licence only and not a lease; Udai Pratap Singh v.
Collector Varanasi, AIR 1991 All 104.
DIFFERENCE BETWEEN LEASE AND LICENCE
The term ‘lease’ and ‘license’ are defined under Section 105 of the Transfer of
Property Act and Section 52 of the Indian Easements Act respectively.
Section 105 of Transfer of Property Act:

“Lease Defined. A lease of immovable property is a transfer of a right to enjoy

 53

such property, made for a certain time, express or implied, or in perpetuity, in

consideration of a price paid or promised, or of money, a share of crops, service
or any other thing of value, to be rendered periodically or on specified occasions
to the transferor by the transferee, who accepts the transfer on such terms.”
Section 52 of the Easements Act, 1882:
“License, Defined. Where one person grants to another, or to a definite number
of other persons, a right to do, or continue to do, in or upon the immovable
property of the grantor, something which would, in the absence of such right, be
unlawful, and such right does not amount to an easement or an interest in the
property, the right is called, a license.”

“Lease” is a word which everyone is aware of, and hears it day in and day out
while dealing the transactions related to immovable property. Lease can be
defined as the right to enjoy an immovable property for a certain period of time,
in consideration of a price paid by the person getting possession of the property.

Under Black’s Law dictionary, “Lease” can be defined as a conveyance of lands

tenements to a person for life, for a term of years, or at will, in consideration of
rent or some other recompense. Oxford Dictionary of Law defines it as “a
contract under which an owner of property grants another person exclusive
possession of the property for an agreed period, in return for rent and sometimes
for a capital sum known as a premium.
Section 105 of Transfer of Property Act, 1882 defines lease and one would be
easily able to derive some of the important characteristics of a lease such as
transfer of an interest, parties to the lease, subject matter of lease etc. But, there
is another provision or legal principle which at sometimes is confused with the
concept of lease i.e. Licence.
Black’s Law Dictionary defines “Licence” in the context of property law as an
authority to do a particular act or series of acts upon another’s land without
possessing any estate therein. Oxford Dictionary of Law defines it as Permission
to enter or occupy a person’s land for an agreed purpose.
Both the provisions look similar, then what make them different is a very
important question, which has to be resolved, and it is abstruse to do so.
Sometimes, there arise some situations, which abridge difference between them.
In order to understand the difference between these two provisions and to know
the situation, which they may conflict, it becomes very important to understand
the basic features of both Lease and Licence
 54

4.2 LEASES HOW MADE (SECTION 107)

According to Section 107, A lease of immovable property from year to year, or
for any term exceeding one year or reserving a yearly rent, can be made only by
a registered instrument.
All other leases of immovable property may be made either by a registered
instrument or by oral agreement accompanied by delivery of possession.
Where a lease of immovable property is made by a registered instrument, such
instrument or, where there are more instruments than one, each such instrument
shall be executed by both the lessor and the lessee:
PROVIDED that the State Government from time to time, by notification in the
Official Gazette, direct that leases of immovable property, other than leases from
year to year, or for any term exceeding one year, or reserving a yearly rent, or
any class of such leases, may be made by unregistered instrument or by oral
agreement without delivery of possession.
COMMENTS
Lease of immoveable property
The legislature intended that a lease of immoveable property for a period of
more than one year should be made by a registered deed. But if a lease of
immoveable property for a term of more than one year is not made by a
registered deed or is made orally, then in such cases the presumption about the
duration of lease under section 106 will apply; Punjab National Bank v. Ganga
Narain Kapur, AIR 1994 All 221.
Lease not to apply agricultural lease
Principle of section 107 which envisage mode in which lease is to be made do
not apply to agricultural lease; Atar Singh v. Jiledar Singh, AIR 2005 MP 157.
Nature of lease
If a lease agreement is neither a registered document nor an oral argeement
accompanied by delivery of possession, it cannot create lessor and lessee
relationship. Such document shall not effect any immoveable property nor be
received as evidence of any transaction affecting such property; Chemical Sales
Agencies v. Naraini Newar, AIR 2005 Del 76.
 55

4.3 DETERMINATION OF LEASE (SECTION 111)

A lease may be determined in the following ways:
• Efflux of Time: The most straight forward way for a lease with a fixed time
specified beforehand is to determine on the expiry or such time. Here,
determination occurs automatically when the given date is passed. This cannot
take place in an unregistered Lease deed. Also, in a (ease with a fixed time no
notice to quit needs to be served upon the lessee. This aspect shall be dealt with
in detail later.
• On Occurrence of a Condition: If the lease agreed to have a term that on the
occurrence of an event, it shall determine then on such occurrence, it is deemed
to be determined. Say, the Land is leased out for restructuring on the basis that
the Lease comes to an end when the restructuring is finished, or on the expiry of
a year whichever is earlier. Here, on the occurrence of the event of a
restructuring, the lease is determined.
• Termination of Lessor’s Interest in Property: The person leasing out the
property needs to have a valid interest in the property. When the interest of the
Lessor in the property ends, so does the Lease.
• Merger: This clause has also conferred the name ‘Doctrine of Merger’. It simply
states that a person cannot be both the Lessor and the Lessee at the same time.
The Bombay High Court explained in Ramesh Kumar Jhambh v. Official
Assignee, High Court Bombay that if the lessee buys the property from the
lessor, the Lease comes to a determination as he cannot be the tenant and the
Landlord. Hence, there cannot exist conflicting interest on a property.
• Express Surrender: The Lease is determined when the Lessee voluntarily
surrenders the possession of the property through an agreement with the lessor.
For surrender, possession must be relinquished. No written statement or act is
suffcient to constitute it without delivery of possession. However, the act of
delivery of possession itself is enough to constitute implied surrender without any
written or oral declaration.
• Implied Surrender: As said, the act of relinquishing possession by the Lessee
implies his surrender. Another instance would be where the parties agree to a
new Lease and the Lessee accepts the same. This determines the existing
Lease from that time of acceptance. Any other scenario where the new
relationship comes to existence with respect to the property while an old
relationship continues to exist, the older being incompatible with the new will
cease to exist. When the Lessee directs his sub tenant to pay directly to the
Lessor, it can be an implied surrender. In PMC Kunhiraman Nair y. CR
Nagaratna Iyer [2], it was held that if the Lessor enters into a [ease with a third
party and the existing lessee accepts it and delivers the possession accordingly,
this will constitute implied surrender.
• Forfeiture: Determination by forfeiture may occur in the three ways Listed in this
provision (111(g)).
• Breach of an express condition: If the Lessee violates a condition expressly
agreed upon, and the Lease has a term that says the breach of said condition
will allow the lessor to claim back possession, then the Lease can be determined
on such breach. Here, two things are necessary to be shown. One, the fact that
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the condition in question was in fact violated. Two, that the deed contained a
provision for re-entry of the Lessor on such breach. In absence of such provision
which enables the lessor to claim back possession, the [ease is not determined,
as held in Nil Madhab y. Narottam.
• Renouncement of Character: This is when the Lessee denies the fact that the
Lessor is the true title holder of the property. That is, the Lessee claims that the
true owner of the property is not the Lessor but a third person or himself. Since a
conflict of rights and interests occur over the property, the tenancy becomes
Liable to be forfeited by the Lessor and the Lease stands determined. It was said
in GuruAmarjeetSingh y. Ratan Chand[4] that this denying of title shall be clear,
and relatable to the knowledge of the Lessor.
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4.4 EFFECT OF HOLDING OVER (SECTION 116)

If a lessee or under-lessee of property remains in possession thereof after the
determination of the lease granted to the lessee, and the lessor or his legal
representative accepts rent from the lessee or under-lessee, or otherwise
assents to his continuing in possession, the lease is, in the absence of an
agreement to the contrary, renewed from year to year, or from month to month,
according to the purpose for which the property is leased, as specified in section
106.
Illustrations
(a) A lets a house to B for five years. B underlets the house to C at a monthly
rent of Rs. 100. The five years expire, but C continues in possession of the
house and pays the rent to A. C’s lease is renewed from month to month.
(b) A lets a farm to B for the life of C. C dies, but B continues in possession with
A’s assent. B’s lease is renewed from year to year
COMMENTS
Tenant at sufferance

A person who is a tenant at sufferance has no estate or interest in the leasehold

property. A tenant holding after the expiry of his term is a tenant at sufferance,
which is a term useful to distinguish a possession rightful in its inception but
wrongful in its continuance from a trespass which is wrongful both in its inception
and in its continuance. A co-owner can maintain a suit by himself in ejectment of
a trespasser or a tenant at sufferance; B. Valsala v. Sundram Nadar Bhaskaran,
AIR 1994 Ker 164.
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(5) GIFT
5.1 DEFINITION OF GIFT (SECTION 122)
“Gift” is the transfer of certain existing moveable or immoveable property
made voluntarily and without consideration, by one person, called the
donor, to another, called the donee, and accepted by or on behalf of the
donee.

Acceptance when to be made.—Such acceptance must be made during

the lifetime of the donor and while he is still capable of giving.

If the donee dies before acceptance, the gift is void.

Sec 122 of the Transfer of Property Act defines a gift which

has

The following essential requisites:-

i) There must be a transfer of ownership of a property;
ii) The property should be of existing property;
iii) The transfer should be voluntary;
iv) It shall be without consideration;
v) It can be of movable or immovable property;
vi) The transfer should be accepted by the Donee from the Donor;
vii) The acceptance of the transfer must be during the lifetime of the donor
and he must be still capable of giving.

In the event of the donor dying before acceptance, the gift is void.

There is no mention of delivery of possession of property in Sec 122

which defines a ‘gift’. The requirement of acceptance by the donee would
mean the donee agreeing or giving consent to the said gift. Conditional
gifts can also be made by the donor but the condition must not be
repugnant to any of the Sections 10 to 34 of the Transfer of Property
Act. Even in the definition of conditional gifts also, no mention of delivery
of possession.

Essential Elements Of Gift:

Parties to the gift - There must be two parties i.e. the donor and the
donee. The transferor is called the donor and he must be a competent
person (competency as defined in Indian Contract act 1872). The
transferee is called the donee and he need not be competent to contract.

A gift made to a minor or an insane person or even if it is made to an

unborn person is valid and can be accepted by their guardian.
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Transfer of ownership: When a property is transferred through gift, the

right created in favor of donee is an absolute right i.e. ownership of
property is transferred.

Subject matter: The subject matter of gift can be moveable or

immovable property, but it should be in existence and the donor should
have vested right in that property and not contingent.

Without consideration: A gift must be gratuitous i.e. without

consideration. It must be a pecuniary consideration.

Voluntarily: It must be made with donor’s free will and free consent
without any force, coercion, undue influence. If it is not done voluntarily
then the gift is void. Voluntarily done also means that donor had full
knowledge about the transaction and its nature.

Acceptance of gift: A gift must be accepted by the donee. Acceptance

made can be expressed or implied but it must be accepted before the
death of the donee and before the revocation by the donor.
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5.2 TRANSFER HOW EFFECTED (SECTION 123)

According to section 123 of the Transfer of Property Act, there are two ways to
execute the transfer:
• By registration
• By delivery
The method of execution mainly depends upon the nature of the property. When
it is a movable property, delivery of possession is sufficient but when it is an
immovable property registration is compulsory irrespective of the valuation of the
property.
For the purpose of making a gift of immovable property, the transfer must be
effected by a registered instrument signed by or on behalf of the donor and
attested by at least two witnesses.
For the purpose of making a gift of movable property, the transfer may be
effected either by a registered instrument signed as aforesaid or by delivery.
Such delivery may be made in the same way as goods sold may be delivered.
A gift deed registered by the done after the death of the donor without the
consent of the legal representative is valid as it is not necessary that the deed
should be registered by the donor himself.
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5.3 ONEROUS GIFT (SECTION 127) PRINCIPLES OF

ONEROUS GIFT
Onerous Gift is based upon the maxim 'qui sntit commodum sentire debet et
onnus' It means he who receives advantage must bear the burden also.
DEFINITION OF ONEROUS GIFT-
Where a gift is in the form of a single transfer to the same person of
several things of which one is , and the others are not , burdened by an
obligation , the donee can take nothing by the gift unless he accept it fully .

Where a gift is in the form of two or more separate and independent transfer to
the same person of several things, the donee is at liberty to accept one of them
and refuse the others , although the former may be beneficial and the letter
onerous .
Onerous gift refers to a gift that is subject to conditions. These conditions
are imposed on the recipient of the gift. Sometimes, onerous gift takes the nature
of a sale because it involves the element of consideration.
Onerous Gift Case Laws
Section 127 of Transfer of Property Act, 1882 states: Onerous gifts.—Where a
gift is in the form of a single transfer to the same person of several things of
which one is, and the others are not burdened by an obligation, the donee can
take nothing by the gift unless he accepts it fully. Where a gift is in the form of
two or more separate and independent transfers to the same person of several
things, the doneee is at liberty to accept one of them and refuse the others,
although the former may be beneficial and the latter onerous. Onerous gift to
disqualified person.—A donee not competent to contract and accepting property
burdened by any obligation is not bound by his acceptance. But if, after
becoming competent to contract and being aware of the obligation, he retains the
property given, he becomes so bound.

MAXIM
Onerous Gift is given under section 127 of Transfer of Property Act. Onerous Gift
is based on the maxim “quis ensit commodum debet et sintiue onus.” It literally
means that he who enjoys the benefit ought also to bear the burden, he who
enjoys the advantage of a right should also take the accompanying
disadvantage.

MEANING
Now let us understand the meaning of the Onerous Gift.

Onerous means “burdened with obligation“. Obligation here means debt, interest
etc on the property. Gift is defined under section 122 which means transfer of
existing immovable or movable property without consideration.

So, Onerous gift is when one person transfer several gifts, i.e., more than one
gifts to another in a single transfer, out of these gifts one is not burdened by
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obligation but other is burdened with obligation, so here donee has to accept in
full, he cannot accept one which is beneficial and reject burdened with obligation.

But where gift is in the form of two or more separate and independent gifts to
same person off several things, then donee can accept one and reject other
because the gift is not in single transfer but independent transfer.
ILLUSTRATIONS -
A has share in X , a prosperous joint stock company , and also shares in Y ,
a Joint stock company i difficulties. heavy calls are expected in respected in
respect of the shares in Y . A gives B all his shares in joint stock companies. B
refuses to accept the shares in Y. He cannot take the shares in X .
ONEROUS GIFT TO A DISQUALIFIED PERSON -
A donee not competent to contract and accepting property burdened by
any obligation is not bound by his acceptance . but if after becoming competent
to contract and being aware of the obligation , he retains the property given , he
become so bound .
Some features of onerous gift are:
1. The onerous gift is subject to certain charges or obligations imposed on the
donee by the donor ;
2. The donee is at liberty to accept any transfer of gift which is beneficial to
him/her and refuse any gift which are onerous to the donee.
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5.4 UNIVERSAL DONNIE (SECTION 128)

The concept of universal donee is not recognised under English law, although
universal succession, according to English law is possible in the event of the
death or bankruptcy of a person. Hindu law recognises this concept in the form of
‘sanyasi’, a way of life where people renounce all their worldly possessions and
take up spiritual life. A universal donee is a person who gets all the properties of
the donor under a gift. Such properties include movables as well as immovables.
Section 128 lays down in this regard that the donee is liable for all the debts and
liabilities of the donor due at the time of the gift. This section incorporates an
equitable principle that one who gets certain benefits under a transaction must
also bear the burden therein. However, the donee’s liabilities are limited to the
extent of the property received by him as a gift. If the liabilities and debts exceed
the market value of the whole property, the universal donee is not liable for the
excess part of it. This provision protects the interests of the creditor and makes
sure that they are able to chase the property of the donor if he owes them.
Section 128 – Subject to the provisions of section 127, where a gift consists of
the donor’s whole property, the done is personally liable for all the debts due by
[and liabilities of] the donor at the time of the gift to the extent of the property
comprised therein.
Universal donee is such a person who gets the whole property of the donor
under a gift. Both movable, as well as immovable properties of the donor, are
given in a gift to him. English law does not recognise the concept of universal
donee. Section 128 provides that the universal donee is liable personally for all
the debts due and liabilities by the donor at the time of the gift to the extent of the
property comprised therein.

Therefore, the donee which has taken all the properties of the donor in a gift
becomes liable to pay all the debts due by the donor and also to discharge all the
liabilities of the donor because nothing is Left with the donor to discharge them.
However, his/her Liability is only to the extent of the property comprised in the
gift. This section incorporates on the equitable principle that one who gets certain
benefits under a transaction must bear the burden also.
The object of this section is to protect the interests of the creditors of the donor.
This section is similar to section 53 in protecting the interests if creditors of the
donor but section 128 is applicable to both movable as well as immovable
properties while section 53 is applicable only to immovable properties. Section 53
lays down a general principle which is applicable to all transfers of the immovable
property, whereas section 128 Lays down a specific principle which is applicable
to onerous gifts only. Section 53 deals with Fraudulent transfers also, but this
section does not deal with them.
The essential requirement of this section is that all the properties of the transferor
(donor) should be transferred to the donee. However, even if a Life interest in a
part of the property id retained by the donor, the donee is nevertheless a
universal donee. Even if only a small, insignificant part of the property is retained
by the donor, the donee will be treated as a universal donee.
The section applies only where the gift is of the donor’s whole property. Where
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after such a gift, the donee gives back some property to the donor for which the
donor agrees to pay to the donee, this fact does not prevent him from being a
universal donee; since—
1. for all practical purposes, the applicant holds the entire property of the donor,
2. transactions subsequent to the gift cannot affect the nature of the gift after it has
become completed

Where a person seeks to hold a donee liable on the ground that he/she is a
universal donee, the onus lies on him to prove that the whole property of the
donor has been gifted to the donee
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(6) EASEMENTS 6.1 DEFINITION

1) Introduction
An easement is a right of use the land of other person for a specific purpose
without possessing it. In other words, when someone is granted an easement, he
is granted to use the land but the title of ownership remains with the owner of the
land. Actually an easement is a right of way; according to this a person can use
other person’s land to access to the main road. Easement can only be taken if
the person who has been granted easement, is an owner of home locked land, in
this situation he can take easement otherwise he is not eligible to take easement
2) Meaning of easement
An easement is a right of use the property of other person for a specific purpose
without possessing which is not yours
3) Definition of easement
When someone is granted an easement, he is granted to use the land but the
title of ownership remains with the dominant tenement and the dominant owner
only can use the land without possessing it
4) Examples of right of easement
Following are the examples of right of easement. Details are as under
1) Right of way, a person who is possessor of a piece of land has a right of way.
2) Right of air, a person who is possessor of a piece of land has a right of air.
3) Right of free access to air, a person who is possessor of a piece of land has a
right free access of air.
4) Right of light, a person who is possessor of a piece of land has a right of light.
5) Right of privacy, a person who is possessor of a piece of land has a right of
privacy.
6) Right of water flow, a person who is possessor of a piece of land has a right of
water flow that his used water to be flowed without any issue
7) Common rights, a person who is possessor of a piece of land has a lot of
common rights which have been recognized by the law.
8) Right of support, a person who is possessor of a piece of land has a right of
support means that he is to be provided safety
9) Right of prospectus, a person who is possessor of a piece of land has a right of
prospectus that if a person wants to publicize his business he can acquire this
right.
Essentials of Easements
1. Dominant and Servient Heritage
For the enjoyment of right of easement, necessary existence of two properties
i.e dominant and servient heritage is a must. This is because as per the
definition, it is the right exercised by the owner or occupier of one land for
enjoying the benefit of his/her land, over the land of some other person.
Dominant and servient heritage cannot be one. Thus, the existence of two
properties and that to be separate from each other is essential.
2. Separate owners
For exercising the right of easements, owners of the two properties shall be
different and not a single person.
3. Beneficial Enjoyment
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The object of easements is that the dominant owner enjoys it in a way which
includes express and implied benefits.
4. Positive or Negative
Easements can be both positive or negative. Former refers to a right through
which the dominant owner does some act to exercise the right over the land of
the servient owner. Whereas, the latter denotes an act of prevention. In a
negative easement the dominant owner prevents or restricts the servient owner
from doing certain act or acts.
In a right of easement an owner of dominant heritage can do an act or prevent
the servient owner from doing something but he cannot bind the servient owner
to do something for him.
The easementary right exists only when two heritages are adjacent to each
other. It is a right in rem, which means a right available against the whole world.
Easement as a right is always annexed to the dominant tenement. It is a right of
re-aliena which means a right over a servient tenement and no on one’s own
land.
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6.2 ACQUISITION AND KINDS OF EASEMENTS (SECTIONS

4 TO 18)
MODES OF ACQUISITION OF EASEMENT
Following are the modes of acquisition of easement
1. By Express grant
Express grant is a mode of acquisition of easement. Express grant is such grant
which is given by making a written agreement between the dominant tenement
and dominant owner for a specific purpose.it must be in writing and must be
signed by both parties. But the title of the land will remain with the dominant
owner

2. By Implied grant
Implied grant is a mode of acquisition of easement. Implied grant is such grant
which has been given without making any written agreement between dominant
tenement and dominant owner. There is no written document

3. By Prescription
Acquisition of an easement by prescription means when one person gains the
title of rights of use of a certain land against the real owner under the legal rules.
But dominant owner will have to prove before the court that he is using the piece
of land since a long time

4. By custom
Acquisition of an easement by custom is also a mode of acquisition. Such
easement which can be acquired by virtue of local customs. By the custom of a
certain village such as every farmer of the village can pass his cattle through the
common fields such acquisition of rights is called acquisition by custom

5. Persons Who can acquire easement

Following are the persons who can acquire easement. Details are being given
below

1. Co-owner
Under the easement act one of Co-owners can acquire an easement from the
other co-owners of immoveable property without their consent for the beneficial
enjoyment of the property. But in case of co-owner, he cannot transfer his rights
to others without the consent of co-owners

2. Co-tenants
Under the easement act one of co-tenants can acquire an easement from other
co-owners without their consent for the beneficial enjoyment of the property. But
in case of co-tenants, he cannot transfer his rights to others without the consent
of other co-tenants
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3. Lesser
Under the easement act, a lesser being a possessor of the property can acquire
easement from his lessee for the beneficial enjoyment of the property

4. Trespasser
Under the easement act, trespasser is a such person who is using the land of
someone else since a long period of time without any interruption, under the
easement act, a trespasser can acquire easement for the beneficial enjoyment of
the property

5. Possessor
Under the easement act, if a person who is using the piece of land for the time
being and a he is person is possession, he can acquire the easement without the
consent of real owner of the land for the beneficial enjoyment of the property

6. Mortgagee
Under the easement act, a mortgagee being a possessor of the property can
acquire easement from his mortgager for the beneficial enjoyment of the property

Kind of Easement
Section 5 of The Indian Easement Act, defines different kinds of easements like
Continuous and discontinuous, apparent and nonapparent easements.
A continuous easement is one whose enjoyment is or may be continual without
the act of man.
A discontinuous easement is one that needs the act of man for its enjoyment.
An apparent easement is one the existence of which is shown by some
permanent sign, which, upon careful inspector by a competent person, would be
visible to him.
A nonapparent easement is one that has no such sign.
Illustrations
(a) A right annexed to B’s house to receive light by
the window without obstruction by his neighbour A. This is a continuous
easement.
(b) A right of way annexed to A’s house over B’s land. This is a discontinuous
easement.
(c) Rights annexed to A’s land to lead water thither across B’s land by an
aqueduct and to draw off water thence by a drain. The drain would be
discovered upon careful inspection by a person conversant with such
matter. These are apparent easements.
(d) A right annexed to A’s house to prevent B from building oil his own land. This
is a non apparent easement.
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