Unit III

Sale under Transfer of Property

Act, 1882
Table of Contents
 Introduction
 Contract to the contrary
 Seller’s duties or liabilities before the sale
o Disclosure of material defects in the property or title
 What is a material defect?
 Defect in title
o To produce the title deeds for inspection
o To answer relevant questions as to the title
o To execute conveyance
o To take reasonable care of the property and title deeds
o To pay the outgoings
 Seller’s duties after the sale
o Give possession to the buyer
o To covenant for title
o To deliver title deeds on receipt of the price
 Seller’s rights
o Rents and profits
o Payment of consideration
 Buyer’s duties before sale
o Duty to disclose material facts
o To pay the price
o Encumbrances on the property
 Buyer’s duties after sale
o To bear the loss to property
o To pay the outgoings
 Buyer’s rights
o Benefits of improvements
o Charge for prepaid consideration
o Earnest
 Conclusion

Introduction
Section 54 of the Transfer of Property Act, 1882 (hence referred to as the Act), defines what
constitutes a sale; how a sale is to be made; and what is a contract for sale. In a ‘sale’ there is a
“transfer of ownership” from the transferor to the transferee, in exchange for a price or consideration.
The price can be – a price paid, or promised, part-paid or part-promised. The transferor is called the
‘seller’ and the transferee is called the ‘buyer.’ For a sale to be valid, the buyer must transfer the
property with free consent (as per Section 10 of the Indian Contract Act, 1872).

The transfer of a property includes the transfer of 3 basic rights:

  Right to possess and enjoy the property;
 Right of alienation;
 Right of title;
This is an ‘absolute transfer’ – the seller does not retain any rights or privileges with respect to the
transferred property after a sale is made. There must be a total transfer of rights from the seller to the
buyer for it to constitute a sale. The intention and substance of a transaction are also important. For
example, if the owner is only putting up the property as a security or collateral for a loan taken from
the bank, then this would be a mortgage, not a sale. Similarly, if a house was to be put up for rent to a
tenant, then this would be a lease and not a sale. A power of attorney cannot be called a sale.

However, when studying the process of the sale of immovable property, it is not enough to merely
read Section 54. This article attempts to understand and examine the significance of the provisions
of Section 55 of the Transfer of Property Act, 1882, which is read along with Section 54 of the Act.

Section 55 of the Act, “in the absence of a contract to the contrary”, defines the duties, liabilities, and
rights of both the buyer and seller, respectively, where there is a transfer of immovable property. The
main objective behind Section 55 is to ensure fair dealings, prevent fraudulent acts, and keep the
property in circulation (avoid the property becoming stagnant and going to waste).

It is important to note, that Section 55 is applicable only where there is no contract to the contrary –
which implies that as long as there is a clause in the contract of sale outlining the rights, liabilities,
and duties of the buyer and seller, there is no need for the provisions of Section 55 to apply.

Contract to the contrary

This phrase implies that any liabilities or charges imposed by the provisions under Section 55 of the
Act, can be offset or nullified by a contract to the contrary. The contract can be expressed or implied,
but its terms should be clear. If there is ambiguity with respect to the terms of the contract, then the
decision regarding the same is usually made in favour of the buyer. Only a contract to the contrary
can allow the buyer and seller to avail an exception from the provisions of Section 55.

Seller’s duties or liabilities before the sale

The following sub-heads are the duties/liabilities of a seller before the sale of immovable property:-

Disclosure of material defects in the property or title

Section 55 imposes a duty on the seller to reveal or disclose all ‘material defects’ with respect to both
the property and seller’s title. This duty applies where the seller is aware of the said defect and the
buyer is not. The defect must also be of such a nature that despite practising due diligence, a prudent
man would not be able to discover the problem in the property or title. If the seller were to
deliberately neglect this duty, then it would amount to fraud or omission, on his part.

What is a material defect?

A material defect is a factor that can affect the decision of the buyer on whether to buy a certain
property or not, once he becomes aware of it. Material defects can be of the following types:

 Something which interferes with or obstructs the enjoyment of the property;

 Failure to disclose a defect in the title;
 Non-disclosure of street alignment, lack of right of way, or non-existence of independent
passage to the property;
 Right of way of public which cannot be discovered on first inspection of the property;
For example, ‘X’ wants to sell his farmhouse to ‘Y’ but does not disclose the fact that due to the
property being considerably old, the entire farmhouse is in urgent need of renovation and
refurbishment, else there could be danger of collapse. This is a material defect in the property, and
‘X’ as the seller who is aware of the defect, has a responsibility to inform ‘Y.’ If “X’ fails to make
the disclosure, then ‘Y’ has the right to rescind the contract.

Defect in title
It is the duty of the seller to convey a good title to the buyer. However, the burden of proof to show
that there has been non-disclosure with respect to a defect in the title lies with the buyer.

Another example, ‘Q’ wants to sell a flat to ‘Z’. However, the actual ownership of the title of the flat
in question is still in dispute. At the time of making the contract of sale, ‘Q’ does not possess the
authentic title to the property. This is a material defect in the title. ‘Q’ is bound to inform ‘Z’ of the
actual ownership of the title.

In some cases, there is a defect in both the property and the title. For example, when the property
which is the subject-matter of the transfer, is illegally built on government land. Consequently, the
seller receives a notice of demolition for the illegally built property.

In Haryana Financial Corporation v. Rajesh Gupta (2010), the seller ‘A’ wanted to sell a factory by
way of auction. The buyer ‘B’ deposited a certain amount with ‘A’, on the condition that ‘A’ must
ensure that there is an independent passage or way to the unit. The tacit understanding regarding this
condition was established through frequent communication between the parties. However, this
passage was in fact, too narrow and not broad enough to meet ‘B’s’ requirements. Ultimately, ‘A’
was not able to arrange for an adequate passage to the unit. Therefore, ‘B’ refused to pay the pending
amount for the property. In response, ‘A’ regarded the amount previously deposited by ‘B’ as a
forfeit and placed the property back for auction. Here, the Court, in light of Section 55(1)(a) of the
Transfer of Property Act, 1872, held that the seller ‘A’ was in the wrong for failing to disclose a
material defect – i.e., there was no adequate passage to the factory. The seller would not be allowed
to take advantage of this wrong to swallow up the deposited money.

To produce the title deeds for inspection

If the buyer asks for it, then the seller has to supply the title deed for inspection before the execution
of the sale deed. The main objective is to satisfy the buyer that there is no defect or problem with the
title, and it would not lead to any disadvantage if the buyer were to acquire it. The delivery of the
title is usually at the place of the seller/seller’s representative or lawyer. However, the legislature can
also make provisions with respect to the place of delivery.

To answer relevant questions as to the title

Before the sale, the seller also has the duty to answer all ‘relevant’ questions with respect to the sale.
If the seller fails to answer, then the buyer has the right to rescind the contract. Answering relevant
questions as to the title is the responsibility of the seller because it is his duty to ‘make out a good
title in himself.’ If the information contained in relevant documents leads to doubts or questions, the
seller must resolve them upon being asked by the buyer.

To execute conveyance
Conveyance is the legal process of transferring the property from the seller to the buyer. The
conveyance is executed before the execution of the sale deed to complete the process of the
sale. Section 55(1)(d) stipulates that the buyer must tender the instrument.

In Jamshed Khodaram Israni v. Burijori Dhunjibhai (1915), there was an agreement between the
buyer and seller to transfer property – a certain piece of land – for Rs. 85,000. The buyer deposited
Rs. 4000 as a deposit. Within 2 months from the date of the agreement, the conveyance was to be
signed, and Rs. 80,500 was to be paid by the buyer. After the registration and transfer, the remaining
balance of Rs. 500 would be paid by the buyer. However, if the buyer failed to make payment within
the time period mentioned in the agreement, then the deposited money could be forfeited by the
buyer. Ultimately, the buyer failed to make payment within the stipulated 2 months, and as a result,
the seller forfeited the deposited money. The buyer sued the seller for specific performance. The
Court held that the language of the plainly expressed stipulation must concretely show the intention
of the parties to make their rights dependent on the observation of prescribed time limits.

The duty to tender a conveyance and to pay t0he consideration at the time of the execution is subject
to a contract to the contrary.

To take reasonable care of the property and title deeds

The seller’s duty to take reasonable care of the property and title deeds begins before the execution of
the sale deed and continues till the delivery of property to the buyer. Section 55 stipulates that if there
is damage to the property or titles, within the time period specified by the Section, then the buyer has
the right to lower the price or consideration he has to pay. The buyer can also opt to sue for damages
and demand compensation from the seller.

To pay the outgoings

If there are any encumbrances on the property then it is the seller’s duty to clear them up before the
execution of the sale deed. Regardless of whether the seller has knowledge of the encumbrance or
not, the seller still has to resolve it. The buyer has the right to enforce this duty on the seller
through Section 69 of the Indian Contract Act, 1872. The seller has to pay any rents or charges
accrued to the property before the date of execution of the sale deed. The seller also has the duty to
deal with public charges, and in cases where necessary, gain the permission of the statutory authority
to make the sale.

Seller’s duties after the sale

The following are the seller’s duties/liabilities after the sale of immovable property:-

Give possession to the buyer

After the sale deed is executed, the seller must hand over possession of the property to the buyer.
Even if the buyer has not yet furnished the promised consideration, the seller cannot refuse to hand
over possession. The question of whether the buyer can be compelled to pay the consideration to the
seller has arisen and has been debated heatedly. The High Courts have taken the following views
regarding the delivery of possession:

 It is ‘equitable’ to make handing over possession of the property by the seller, conditional to
the payment of the price by the buyer.
 The language of Section 55(1)(f) must be followed and interpreted at face value. If the buyer
has paid the full consideration then he can acquire possession and ownership of the property
through the apparatus of the courts.
If the buyer asks for enforcement of specific performance with respect to the delivery of possession,
when the full price has not been paid by him, the court will require the buyer to deposit money with
the court to show his intention to pay the balance amount due. The court can also order the buyer to
present proof of his intention to make the due payment.

It was observed in B Rajamani v. Azhar Sultana (2005), that if the buyer fails to show his intention to
pay, additionally, failing to show that the amount was ready and available, it is indicative of his lack
of desire to fulfil the contract.
Nature of possession has a significant influence on the delivery of possession. The seller must vacate
the property, regardless of whether he himself occupies it or a tenant occupies it. The seller must also
clear out any trespasser illegally occupying the property. However, when there is already a tenant
occupying the property or in the case of a usufructuary mortgage, the buyer only gains a symbolic
possession.

To covenant for title

It is the duty of the seller to deliver a good title to the buyer, free from any defects or problems. In
order to enforce the right of specific performance against the buyer, the seller must ensure that the
title is beyond reasonable doubt and convince the court of its authenticity.

The seller must have a saleable interest in the property. Where the seller does not in fact have a
saleable interest, even if he is not guilty of fraud, he is still liable to pay damages to the buyer.

The seller cannot represent a higher title than that which he actually owns. If the seller misrepresents
the title, then he can be held liable to pay damages.

An incorrect description of the property is not covered under the covenant of title, however, if the
buyer finds out about it before the conveyance is executed, the buyer can cancel the contract or sue
for damages, depending on how severely distorted the description is.

In Ram Swarup and Another v. Fattu (1960), it was held that the buyer need not inquire into the
seller’s title. Mere suspicion of the buyer with respect to whether the seller’s title holds good or not,
does not prevent the covenant from operating. The English law doctrine – caveat emptor, i.e. buyer
beware – does not apply here.

To deliver title deeds on receipt of the price

Once the consideration has been paid by the buyer to the seller, it becomes the latter’s duty to deliver
all documents relevant to the property’s title that he owns/holds. The right to the deeds runs with the
land, therefore, there is an absolute transfer from the seller to the buyer. The buyer needs to be
careful to check if there is an unregistered mortgage with respect to the property and title deeds, and
his failure to inquire about this would amount to gross negligence.

Where only a part of the property is sold, while the seller retains a portion as well, he is entitled to
hold onto the title deeds. Where the property is sold to multiple buyers, the buyer of the lot of the
greatest value gains the right to hold the title deeds. When the sale is made at different time periods,
the last purchaser has the right to hold the title deeds. However, the holder of the title deeds has the
duty to furnish said documents to the other property-holders when asked, at the cost of the one who
asked for the deeds. The individual holding the title also has the duty to keep the title documents in
good condition, safe from damage and fire.
Seller’s rights
A seller has the following rights:-

1. The seller has the rights to rents and profits generated from the property till it is transferred to
the buyer
2. Payment of promised consideration from the buyer to the seller;

Rents and profits

Till the ownership is passed from the buyer to the seller, the latter is entitled to any income generated
from the property, including rent collected from tenants occupying the property. If the buyer takes
possession before the completion of the sale, then he can enjoy the income from the rent. However,
the buyer is also liable to pay interest on the unpaid consideration he had promised to pay when he
made the contract of sale. On the other hand, if the ownership of the property passes to the buyer, but
the seller still retains possession of the property, then the seller is not allowed to collect interest on
the purchase money. The seller cannot enjoy both possession and interest at the same time. The seller
must choose between the two – interest and possession.

Payment of consideration
A seller is entitled to full consideration as stipulated in the contract of sale. If the contract specifies
that the payment must be made within a certain time period, then the buyer must adhere to the said
time limit. The buyer failing to pay within the time limit specified in the contract would amount to a
breach of contract on his part.

In Nalamothu Venkaiya v. BS Neelakanta (2005), a contract of sale was made, and it was stipulated
that the payment must be made within a specified time. The buyer gave an oral promise, however, he
did not deposit any money as an assurance. When the buyer sued for specific performance, the court
held that the oral promise did not hold weight, and the fact that he did not make a deposit showed his
lack of intention to fulfil the contract.

In a case where a seller has already transferred the ownership to a buyer, but the latter has not paid
the entire consideration, a charge can be placed on the property. Even if the buyer transferred the
property further, the charge would still exist as long as the consideration remains unpaid. The seller
can also avail interest on the pending consideration from the date of transfer of possession. The
charge can be imposed only from the date the conveyance is executed.

An exception to this rule of charge – is oral sale and lease.

A seller’s charge on the pending consideration cannot be extinguished by a promissory note for
unpaid money. The rule that interest and possession are mutually exclusive still applies here.
Furthermore, the seller cannot forfeit deposited money, in the case where the amount remains unpaid,
taking into consideration a contract to the contrary.

Buyer’s duties before sale

The following are the duties/liabilities of a buyer before the sale:-

Duty to disclose material facts

When the buyer has knowledge or information about the nature and extent of the seller’s interest in
the property, and such knowledge or information indicates an increase in the material value of such
interest, the buyer has a duty to disclose such information to the seller. This duty applies when the
buyer has reason to believe that the seller is unaware of said information.

To pay the price

The duty of the buyer to furnish the promised consideration is paramount. He must pay or tender at
the agreed time and place of executing the sale, and to such person as per the instructions of the
seller. The duty to pay is “personal in nature” and the buyer upon refusal of the seller to accept it is
free to make a deposit with the court.

Encumbrances on the property

Generally, it is understood that the seller has the duty to get rid of any encumbrances before he sells
the property to the buyer. Before the sale deed is executed, if the buyer finds out that there are
charges/encumbrances on the property being sold, despite receiving assurances from the seller to the
contrary, the buyer can retain a portion of the purchase money to offset the charges on the property.
The buyer can upon finding out about the encumbrances before the sale, also choose to rescind the
contract or sue for damages.

Buyer’s duties after sale

The following are the duties/liabilities of a buyer after the sale:-

To bear the loss to property

Once the ownership of the property has been transferred from the seller to the buyer, any loss to the
property as a result of the destruction, injury, or decrease in value – not caused by the seller’s actions
– is to be borne by the buyer. This rule applies even where – possession has not been delivered yet by
the seller; full payment of consideration has not been furnished by the buyer. The key point to pay
attention to is the passing of ownership. Once the buyer attains ownership, even if he does not have
possession, he has to bear the losses.

To pay the outgoings

Similar to the case of bearing loss to the property, the key point to focus on is ownership. Once the
ownership passes to the buyer, he also gains the obligation to pay any public charges or rent payable
with respect to the property. Public charges may include taxes imposed by the municipality or
relevant authorities on the property. The authorities charge tax against the property itself and not on
the buyer or seller in particular. Before the sale, public charges are paid by the seller. After the sale,
public charges are paid by the buyer. Upon completion of the sale, the seller ceases to enjoy the
benefits from the property, however, he gains the right to be indemnified by the buyer with respect to
charges imposed after the completion of the sale.

Buyer’s rights
The buyer has the following rights:-

1. Benefits of improvements
2. Charge for prepaid consideration

Benefits of improvements
During the interval between the passing of ownership from the seller to the buyer, and payment of
consideration by the buyer, if there is an increase in the value of the property, the seller cannot
demand a price higher than the one agreed upon before. Here, the buyer is entitled to the increase in
value of the property. Where there is an increase in the material value of the property, and benefits
arising from rents and profits derived from such improvement or increase – it is the buyer’s right to
enjoy such benefits. The buyer can also enjoy the repairs, and improvements made by the seller after
the completion of the sale. Since the buyer has paid for the exclusive enjoyment of the property and
its associated benefits, the seller loses his right to derive benefits from the property after the sale.

Charge for prepaid consideration

Although the amount varies from case to case, the seller usually asks for a deposit from the buyer at
the time of making the contract of sale. The buyer can charge a lien on the property against the
interest of the seller and the people claiming under him, and the interest on the deposit money that he
had paid in anticipation of delivery. This is a statutory charge and commences from the date of
payment of consideration. Interest on the prepaid amount lasts from the date of payment till the date
of delivery of possession. However, the exception to this charge on prepaid consideration: is when
the sale is invalid or the buyer himself commits a default.

Earnest
Earnest is part of the purchase money or consideration deposited by the buyer with the seller when
the agreement is made. Earnest is kept as a security by the seller and indicates the intention of the
buyer to fulfil the agreement. If the buyer commits a default then the seller has the right to forfeit the
earnest. However, mere delay on the part of the buyer to make payment does not amount to a default.
If the seller commits a default then the buyer can avail of a refund by filing a suit. The seller’s
defaults include making a faulty title, not delivering possession in time, failing to obtain any
permissions necessary for the sale, etc.

In Shri Hanuman Cotton Mills v. Tata Air Craft Ltd (1969), the following observations about
earnestness were made:

1. When the contract is concluded it must be given.

2. It indicates the intention of the buyer to fulfil his part of the contract. It is symbolic of the
binding nature of the contract.
3. It is part of the consideration agreed upon between the parties for carrying out the transaction.
4. It is forfeited when the buyer commits a default (mere delay is not a default).
5. Unless there is a contract to the contrary, the earnest is forfeited when the buyer commits
default.

Conclusion
Section 55 of the Transfer of Property Act, 1882, lists the rights, liabilities, and duties of both the
buyer and seller, with respect to a transaction where there is a transfer of immovable property unless
there is a contract to the contrary. To understand the transfer of property, it is not enough to merely
read Section 54 of the Act which describes – what is a sale; how a sale is made, and what is a
contract of sale. Section 54 must be read along with Section 55 to gain a complete picture of the
intricacies that go into the entire process of transfer between the buyer and seller. Section 55 provides
a means for both the buyer and seller to protect their individual interests without worrying about
suffering a loss due to unfair means or fraud. Section 55 focuses on endorsing fair dealings and
encourages the transfer of property to prevent it from remaining stagnant or going to waste. This
Section is also based on the principles of fairness, equity, and good consciousness.
Rule of Marshalling and
Contribution: Which will prevail?

Introduction
The Rule of Marshalling and Contribution are concepts embodied in the Transfer of Property Act,
1882 (‘TPA”). Section 81 and 82 of TPA 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.

Rule of Marshalling
Marshalling means “to arrange” and the Rule is first introduced in TPA 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,
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.

The doctrine of Marshalling is thus based on the principle that a creditor who has the means of
satisfying his debt out of several funds shall not, by the exercise of his right, prejudice another
creditor whose security comprises only one of those funds.

Rule 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 TPA and may be divided as per the following:

Mortgaged Property Belonging to two or more persons

This is based on the following essentials:

1. A mortgaged property must belong to two or more persons based on a common loan,
2. 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 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.

Supersession of the Rule of Marshalling over the

Contribution
The proviso to Section 82 denotes that the rule of Marshalling under section 81 supersedes
Contribution under Section 82. The Hon’ble Madras High Court has even held it to be well settled
that the Right to Contribution is controlled by the Right of Marshalling. This may be best understood
by an example:

There is an owner of two properties X and Y, who mortgages property X to A then to B then X and Y
properties to C and lastly property X to D. Since X and Y both contribute to C’s mortgage, the value
of the said contribution must include a deduction from property X, the value of A’s mortgage and
from property Y, the value of B’s mortgage. However, D being the last mortgagee still has a right of
marshalling and he can ask C to pursue property Y first instead of property X. Thus, right of D to
marshal his securities supersedes his contribution that is to be made.
 The reason why marshalling supersedes contribution is because the last mortgagee is given an
opportunity to make the mortgagor discharge the mortgage debt from other mortgaged properties first
before he realizes the mortgage debt from the properties mortgaged to the person who holds the right
of marshalling. However, if after exercising the right of marshalling, the amount realized from the
other properties is insufficient, the last mortgagee must then contribute as his is the only mortgage
debt left to be realized.

Conclusion
Marshalling is the right of subsequent mortgagees whereas contribution is with respect to
mortgagors. Marshalling is if a creditor has multiple funds to realize his debt, he must first pursue the
multiple funds instead of prejudicing the creditor who is secured only by one fund. Whereas in
contribution all the co-mortgagors who have taken a debt by mortgaging their properties have to
make contributions towards debt proportionately according to their respective shares. The Proviso to
Section 82 of TPA gives precedence to the former over the latter.

EXCHANGE
Concept of exchange under property law

Table of Content
 CONCEPT OF EXCHANGE UNDER PROPERTY LAW
 INTRODUCTION
 ESSENTIALS OF AN EXCHANGE
o Mutual Exchange
o The object of exchange must be lawful
 SALE AND EXCHANGE
 RIGHT OF A PARTY DEPRIVED OF THING RECEIVED IN EXCHANGE; [Section 119 of
the Transfer of Property Act, 1882]
 RIGHTS AND LIABILITIES OF PARTIES TO THE EXCHANGE (Section 120)
 EXCHANGE OF MONEY (Section 121)
CONCEPT OF EXCHANGE UNDER PROPERTY LAW
INTRODUCTION
Exchange is defined under section 118 of the Transfer of Property Act, 1882 – when two
people mutually transfer the ownership of one thing for the ownership of another, the transaction
is called an ‘exchange’ when neither thing or both things are money only. A transfer of property
at the completion of an exchange can take place only in the manner provided for the transfer of
such property by sale.
The transaction is called an exchange when the ownership of one thing for the ownership of
another is mutually exchanged by two parties, neither thing or both things being money only. It
is a transaction in which each party acquires property in which it previously had no interest.
There must be a physical delivery of the property to the parties for a valid exchange, and each
party to the exchange has the rights and is subject to the seller’s liability as to what he gives, and
also has the rights and liabilities of the buyer as to what he takes.

ESSENTIALS OF AN EXCHANGE
1. There must be a minimum of two parties and two properties, one each belonging to each
of them;
2. A mutual transfer of these properties has to take place, i.e. A to transfer his property to B
and B to transfer his property to A;
3. Property can be exchanged for property that is either movable or immovable.
4. Besides these properties, no other consideration should be involved.
An exchange involves a mutual transfer of their respective properties between two parties. The
primary factor which distinguishes an exchange from a sale is that no monetary consideration is
involved in an exchange. A sale is the exchange of one property for money, and a barter is an
exchange of movable property with another movable property. An exchange of one stamp for
another, or as a consideration shares in a limited company, is an exchange. The consideration
must be specified in an exchange, since, if it is not mentioned, the transaction is not an exchange.
If one of the transferred items is coupled with money, the transaction is not an exchange, but a
sale.
Mutual Exchange
The term ‘mutually’ indicates that the parties need to be the same and two things need to be
exchanged. A transfers his property to B, for instance, and B transfers his own property in return
for A. It is not an exchange if the transfer is just from the hand of one of the parties. In the
discharge of her maintenance claim, a transfer by a husband to a wife is not an exchange, as the
wife does not transfer the possession of something. Similarly, a document in which one decree is
set off against another and the balance made up by the transfer of land is not an exchange, since
two items are not mutually transferred.

The object of exchange must be lawful

The object of exchange must not be unlawful. Exchange is primarily a contract, and if the object
is unlawful or aims at defeating the provisions of law, it will be invalid. A deed of exchange to
compromise criminal proceedings between the parties was executed in Srihari Jena v.
Khetramohun Jaina. The agreement between them specified that the deed of exchange could
not be taken from the Registrar’s Office until the proceedings had been compromised. The court
held that the exchange was not valid in light of section 23 of the Indian Contract Act, 1872.
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 comprised therein and do not affect any such
immovable property.
SALE AND EXCHANGE
In respect of the liabilities of both parties, the TP Act has kept both sales and exchanges on the
same footing. Often similar are the procedures and formalities for conducting a sale and an
exchange. Yet in two basic ways, the two are distinct. The following are the two main
distinctions between an exchange and a sale:
i) In a sale, only one property is usually exchanged for money, but in an exchange, one property
is exchanged for another property.

(ii) In a sale, money is a consideration, but money should not be a consideration in an exchange.
In John Thomas v Joseph Thomas, whether the written agreement for the mutual exchange of
properties amounted to a sale or an exchange was the question before the court. The parties had
known each other for a long time. One of the parties, A, owned property X, while the other party,
B, owned property Y. Since X was more valuable than Y, B paid an additional amount of one
lakh rupees towards equalization money when A exchanged X for Y. The court held that it
amounted to a sale and not an exchange, because money had been paid from one party to
another.
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.
An exchange, like a sale, is primarily an agreement between two parties; and unless the object of
exchange is illegal, all parties will be subject to the terms of the contract. A contract to the
contrary is also subject to the law enunciated in section 119. According to this section, each party
is entitled to the property to which it was entitled under the contract and provides the aggrieved
party with a remedy in the case that it does not receive what it was supposed to obtain under that
contract. A and B, for example, enter into a contract to mutually exchange their X and Y
properties, respectively. A supplies X to B, but B fails to supply Y to A. In accordance with the
rules laid down in this section, A’s rights will be determined. It provides the party so
dispossessed in the alternative with two remedies:

i) He can seek compensation for the loss of such dispossession caused to him.
(ii) He is entitled to take back the property he has transferred. This right may be exercised as
against:

(a) The other party to the exchange in whose hands there is possession;
(b) Where the possession is kept by the transferee’s legal representative;
(c) Where the possession is with the other party’s gratuitous transferee.
An exchange of land took place between A and the predecessor of B in 1941 in Ramsayivan v
Lalji Ram, but B sold the same illegally to a third party in 1988. It was decided that the
purchaser of the land would not have any locus standi to say anything about the exchange nor
that of A’s title. The principle of getting the property in return in the case of deprivation of the
exchanged property also extends to cases where there is no transfer at all instead of subsequent
deprivation of the transferred property. If a party to an exchange fails to acquire possession of
the property it is entitled to obtain in exchange, it shall also be entitled, at his option, to the return
of the assets which it has exchanged.
Jattu Ram V. Hakama Singh, where, due to false entries made by patwari, there was a defect in
the title of land obtained by one party for exchange and the party was deprived of some portion
of the land as per Deed of Exchange. It was held by the Supreme Court that entries made in the
official records by patwari do not generate title, so to the extent that the opposite party was liable
to return land (property).
1. The provisions of Section 119 shall apply only in situations where one of the parties to
the Transaction has been deprived of the things/property transferred because of a defect
in the title of another person transferring the things/property.
2. It is not necessary to invoke the provisions of Section 119 of the Transfer of Property
Act, 1882 in a situation where another person has forcefully disposed of the property /
things obtained by him by exchange.
Example: Assume that Mr. A and Mr. B were transferred ownership of their residential property
and Mr. C’s brother, Mr. A, was forcibly disposed of Mr. B’s possession of residential property,
the ownership of which was transferred in exchange to Mr. B.

RIGHTS AND LIABILITIES OF PARTIES TO THE EXCHANGE (Section 120)

The rights and liabilities of the parties to the exchange are not expressly stated in section 120. It
just provides that each party has the rights and is subject to a seller’s liabilities as to what he
gives and has rights and is subject to a buyer’s liabilities as to what he takes. The rights and
liabilities of the parties in the event of an exchange are therefore the same as in the case of a sale.
One thing is given in return and another thing has been taken, so parties play the role of both
seller and buyer. The rules of the Sale of Goods Act 1930 are also applicable in exchange for
movable property.
In exchange, all parties have equal rights over one another. He is considered to be in the role of a
seller when the person transfers the property to the other and he holds all the rights that a seller
has when selling property. The person who receives the property is called a buyer and, because
of being a buyer, he has all the privileges that a buyer possesses.

EXCHANGE OF MONEY (Section 121)

On an exchange of money, each party thereby warrants the genuineness of the money given by
him. Money can be exchanged with money, of the same or different denominations or even
different currencies. The term money here includes not only coins, but also currency notes.
 Mortgage and charge of
immovable property under
Transfer of Property Act, 1882
Table of Contents
 Introduction
 Mortgage under Transfer of Property Act, 1882
 Mortgage
 Kinds of Mortgage
o Simple Mortgage
o Conditional Mortgage
o Usufructuary Mortgage
o English Mortgage
o Deposit of title-deeds
o Anomalous Mortgage
 Rights and Liabilities of Mortgagor and Mortgagee
o Rights of Mortgagor
 Right of Redemption
 Right to transfer to a third party
 Right to inspection and production of documents
 Right to accession
 Right to a renewed lease
 Right to grant a lease
o Liabilities of Mortgagor
 a. Covenant for title
 b. Covenant for the defence of the title
 c. Covenant for payment of public charge
 d. Covenant for payment of rent
 e. Covenant for the discharge of prior mortgage
o Mortgagors liability for waste
o Rights and Liabilities of Mortgagee
o Rights of Mortgagee in Possession
 Right to foreclosure or sale
 Right to sue
 Right to sell
o Conditions to exercise of Power
 Right to appoint a receiver
 Right to accession to mortgaged property
 Right of Mortgage to spend the money
 Right to proceed of revenue sale or compensation on acquisition
o Liabilities of Mortgagee in Possession
 Duty to manage the property
 Duty to collect rents and profits
 Duty to pay rent, revenue and public charges
 Duty to make necessary repairs
 Duty not to commit any destructive act
 Duty towards the proper use of insurance money
 Duty to keep the accounts
  Duty to apply rents and profit
 Essential doctrines under mortgage
o
 Doctrine of Priority
 Doctrine of Marshalling
 Charge under Transfer of Property Act, 1882
o Charge
 Distinctions between a mortgage and a charge
 Distinctions between charge and lien
o No merger in case of subsequent encumbrance
 Conclusion

Introduction
The Transfer of Property Act, 1882 deals with a) various specific transfers relating to immovable
property. b) general principles relating to the transfer of movables and immovable property. Chapter
II of The Transfer of Property Act, 1882 deals with both movable and immovable property. Section
58 to 104 of the Transfer of Property Act, 1882 deals with mortgages and charges.

Mortgage under Transfer of Property Act, 1882

Section 58 to 104 of the Transfer of Property Act, 1882 deals with mortgages and charges.

Below mentioned sections are important sections.

As per Section 58 of Transfer of Property Act, 1882 the following words are defined

 Mortgage
A mortgage is the transfer of an interest in immovable property for the purpose of securing the
payment of money advanced, an existing or future debt or the performance of an engagement which
may give rise to a pecuniary liability.

 Mortgagor and Mortgagee

The person who transfers the interest in an immovable property is called the mortgagor.

The person to whom it is transferred is called the mortgagee.

 Mortgage Money
The principal money and interest of which payment is secured for time being is called mortgage
money.

 Mortgage Deed
The instrument by which the transfer is effected is called a mortgage deed.
Mortgage
A mortgage is a transfer of an interest in immovable property and it is given as a security for a loan.
The ownership of an immovable property remains with the mortgagor itself but some interest in the
property is transferred to the mortgagee who has given a loan.

Essential conditions of a mortgage:

1. There is a transfer of interest to the mortgagee.

2. The interest created in specific immovable property.
3. The mortgage should be supported by consideration.

Kinds of Mortgage
As per Section 58 of Transfer of Property, there are six kinds of mortgages

Simple Mortgage
 Simple Mortgage is defined under Section 58(b) of Transfer of Property Act, 1882.
 In a simple mortgage, the mortgagor does not transfer immovable property to the mortgagee
but agrees to pay the mortgage money.
 The mortgagee agrees on a condition that in the event of not paying the mortgage money the
mortgagee has every right to sell the property and can use the proceeds of the sale and such a
transaction is called a simple mortgage.

Conditional Mortgage
 Mortgage by conditional sale is defined under Section 58(c) of Transfer of Property Act,
1882.
 In this mortgagee places three conditions to the mortgagor, and the mortgagee shall have the
right to sell the property if:
1. mortgagor defaults in payment of mortgage money on a certain date.
2. as soon as the payment is made by the mortgagor the sale shall become void.
3. on the payment of money by the mortgagor, the property is transferred and such a transaction
is called a mortgage by conditional sale.
Usufructuary Mortgage
 Usufructuary Mortgage is defined under Section 58(d) of Transfer of Property Act, 1882.
 In this mortgage, the mortgagor delivers the possession of the property to the mortgagee and
authorises the mortgagee to retain such property until the payment is made by the mortgagor
and further authorise him to receive the rent or profit arising from such mortgaged property
and to appropriate the same instead of payment of interest. Such a transaction is called a
Usufructuary transaction.

English Mortgage
 English Mortgage is defined under Section 58(e) of Transfer of Property Act, 1882.
 In this mortgage, the mortgagor transfers the property absolutely to the mortgagee and binds
himself that he will repay the mortgage money on the specified date and lays down a
condition that on repayment of money mortgagee shall re-transfer the property. Such a
transaction is called an English mortgage transaction.

Deposit of title-deeds
 Deposit of title -deeds are defined under Section 58(f) of Transfer of Property Act, 1882.
 In this mortgage where a person is in Calcutta, Madras, Bombay and in any other towns as
specified by the state government and the mortgagor delivers to a creditor or his agent the
documents of title of immovable property with an intent to create security and then such a
transaction is called Deposits of title-deeds.

Anomalous Mortgage
 An Anomalous Mortgage is defined under Section 58(f) of Transfer of Property Act, 1882.
 A mortgage which is not any one of the mortgages mentioned above is called an anomalous
mortgage.

Rights and Liabilities of Mortgagor and

Mortgagee

Rights of Mortgagor
Right of Redemption
As per Section 60 of the Transfer of the Property Act, 1882 one of the important rights of the
mortgagor is the right to redeem the mortgage.

 Once the money has become due on the specified date the mortgagor has the right to get back
the mortgaged property on paying the money to the mortgagee.
 Right to redemption is a statutory and legal right which cannot be extinguished on the
entering into any agreement.

Right to transfer to a third party77

 As per Section 60A of the Transfer of Property Act, 1882 the mortgagor may direct the
mortgagee to assign the mortgage debt and authorise him to transfer the property to a third
party instead of transferring him the same.
 The object of this section is to enable the mortgagor to pay off the debt of the mortgagee by
taking a loan from another person on the security of the same property.

Right to inspection and production of documents

 As per Section 60B of the Transfer of Property Act, 1882 the mortgagor may inspect anytime
the document of title relating to the mortgaged property which is in the custody of the
mortgagee.
 The costs and expenses incurred while inspecting the documents may be borne by the
mortgagee.

Right to accession
 As per Section 63 of the Transfer of Property Act, 1882 during the subsistence of the
mortgage if any accession is made to the mortgaged property where the property is in
possession of the mortgagor itself and then the mortgagor has a right to take in accession after
the redemption of the mortgage.
 Accession can be of two types:
1. Natural accession.
2. Acquired accession.

Right to improvement
 As per Section 63A of the Transfer of Property Act, 1882 during the subsistence of the
mortgage if any improvement is made to the property where the property is in possession of
 the mortgagee and then the mortgagor has a right to take the improvements made to the
property upon the redemption.
 But where the improvements were at cost of the mortgage by preserving the property from
destruction then the mortgagor is liable to pay the cost which is incurred by the mortgagee in
preserving the property.

Right to a renewed lease

 As per Section 64 of the Transfer of Property Act, 1882 where the property which the
mortgagor has given for mortgage is a leasehold property if the mortgagee renews the leases
during the subsistence of mortgage the mortgagor shall obtain the benefit of the lease upon
the redemption of the mortgage.

Right to grant a lease

 As per Section 65A of the Transfer of Property Act, 1882 a mortgagor shall have the right to
grant a lease of which is lawfully in possession with the mortgagee and such lease shall be
binding on the mortgagee subject to the following conditions:
1. lease shall be according to the local laws, custom or usages.
2. no rent or premium shall be paid in advance.
3. the lease shall not contain a covenant for renewal.
4. the lease shall come into effect within six months from the date on which it is made.
5. in case lease of buildings, the duration of the lease shall not exceed not more than three years.

Liabilities of Mortgagor
Section 65 and 66 of the Transfer of the Property Act, 1882 deals with the liabilities of the
mortgagor.

Section 65 is the implied liabilities which are laid upon the mortgagor. Subject to the contrary, every
mortgagor is deemed to have made the following covenant.

a. Covenant for title

 As per Section 65(a) of the Transfer of the Property Act, 1882 there is an implied covenant
that the mortgagor transferring the interest in the property to the mortgagee belongs to the
mortgagor only.
 And it is necessary that the mortgagor possess the transferable interest in the property.
  In case mortgagor makes a breach in the covenant the mortgagor is liable to compensate.

b. Covenant for the defence of the title

 As per Section 65(b) of the Transfer of the Property Act, 1882 the mortgagor has a duty
impliedly to either defend the title if anyone tries to take away the title from the mortgagee or
help the mortgagee in defending the title.
 By doing so, the mortgagor bears all the expenses incurred while defending the title.

c. Covenant for payment of public charg

 As per Section 65(c) of the Transfer of the Property Act, 1882 there is an implied duty to the
mortgagor that upon the execution of the mortgage the mortgagor shall pay all the necessary
changes.
 If the mortgagor fails to meet the required charges the property would be sold by the public
authorities and realise the charges.

d. Covenant for payment of rent

 As per Section 65(d) of the Transfer of the Property Act, 1882 where the property mortgaged
by the mortgagor is a leasehold property there is an implied duty of the mortgagor to pay the
rent of the mortgaged property.

e. Covenant for the discharge of prior mortgage

 As per Section 65(e) of the Transfer of the Property Act, 1882 there is implied duty of the
mortgagor to discharge the prior mortgage if any.
 There is always a presumption that the mortgagor has a covenant with the subsequent
mortgages to pay off the mortgage on becoming due.
 In such subsequent mortgage if the mortgagor makes a breach the subsequent mortgagee
would have the right to sue for his mortgaged money.

Mortgagors liability for waste

 Section 66 of the Transfer of the Property Act, 1882 states there is an implied duty on
mortgagor that he shall not do any act which is injurious or destructive to the mortgaged
property.
 Mortgagee should also see that he also does not commit any act which results in reducing the
value of the mortgaged property.
  Following activities are considered as waste by the mortgagor:
1. Removing valuable fixtures from the mortgaged property.
2. Pulling down the mortgaged house and taking the price of the materials.
3. Cutting down the timber from the mortgaged property.
4. Mining under the mortgaged building which as a result may lead to placing the building in the
danger.
5. Working new mines on the mortgaged property.
 Whether any particular activity is considered as waste or not depends on the degree of the loss
of the mortgaged property.
 The mortgagor is liable only for the active waste and not the permissible waste.

Rights and Liabilities of Mortgagee

The rights and liabilities of a mortgagee are given from Section 67 to 77 of Transfer of Property Act,
1882.

Rights of Mortgagee in Possession

Right to foreclosure or sale

 As per Section 67 of the Transfer of Property Act, 1882 the mortgagee has a right to
foreclosure or sale.
 When the mortgagor does not pay the mortgage money after the specified date is over and the
mortgagor’s right to redeem the mortgaged money has become complete but he has failed to
avail that right then mortgagee gets a right to institute suit for a decree that the mortgagor is
absolutely debarred of his right to redeem the property.
 The difference between the right to redemption and right to foreclosure is that the former is an
absolute right whereas the right to foreclose is not.
 The mortgagor cannot limit the right of redemption but the right to foreclose can be made
subject to a contract between the parties.

Right to sue
 As per Section 68 of the Transfer of Property Act, 1882 the mortgagee has every right to sue
for the mortgaged money.
 The mortgagee can sue for mortgaged money in the following circumstances:
1. where mortgagor binds himself to repay the money to the mortgagee.
 2. where the property mortgaged to the mortgagee has been destroyed either wholly or partially
without the fault of the mortgagee.
3. where the property mortgaged, the mortgagee is deprived of the security due to some
wrongful act done by the mortgagor.
4. where the mortgagor fail to deliver the possession to the mortgagee.

Right to sell
 As per Section 69 of the Transfer of Property Act, 1882 the mortgagee has every right to sell
the mortgaged property if the mortgaged money has not been received
 This right can be exercised by the mortgagee when the mortgagor makes a default in payment
of the mortgaged money after the specified date is over.
 This right can be exercised without the intervention of the court but only in the following
cases:
1. if the mortgage is an English mortgage both the mortgagor and mortgage should not be
Hindu, Muslim, Buddhist, or a member of any other race as specified by the state
government;
2. when there is a contract between the mortgagor and mortgagee the sale would take place
without the intervention of the court in case of default in payment of mortgaged money;
3. to exercise the above right the mortgaged property should be situated either in Calcutta,
Madras, Bombay, Ahmedabad, Kanpur, Allahabad, Lucknow, Coimbatore, Cochin and Delhi.

Conditions to exercise of Power

Before the sale proceeding can take place the mortgagee has to fulfil the following conditions:

 The notice has to be served on the mortgagor in writing and three months have to be elapsed
from sending the notice.
 When the money is unpaid for three money and mortgaged money is at least INR 500 in
arrear.

Right to appoint a receiver

 A receiver is appointed only if there happens to be a sale under Section 69 of the Transfer of
Property Act, 1882.
 The appointment of the receiver is made according to the mortgaged deed.
 The person appointing as a receiver should be willing to act as a receiver if he is unable to act
as a receiver then the mortgagee can appoint the receiver if the mortgagor agrees. In case the
 mortgagor does not agree to the appointment made by the mortgagee then the mortgagee can
apply to the court for the appointment.
 The money received by the receiver shall distribute for the following to below case
1. he may discharge all the rents, taxes, land revenues, and any other charge which is affecting
the property.
2. he can claim back the payment along with the interest.
3. he can keep a sum of money as commission and he may pay premiums on the various
insurances insured.

Right to accession to mortgaged property

 As per Section 70 of the Transfer of Property Act, 1882 if there is a contract between the
mortgagor and mortgagee that after the date of mortgage that the mortgagee shall have the
right to the accession made to the mortgaged property then the mortgagee shall have right to
all the accessions made.

Right of Mortgagee to spend the money

 As per Section 72 of the Transfer of Property Act, 1882 the mortgagee has a right to spend the
money when it is necessary.
There are few circumstances in which the mortgagee has a right to spend the money:

1. the mortgagee can spend the money on preserving the mortgaged property from destruction,
forfeiture and sale.
2. the mortgagee can spend the money if circumstances arise to protect the mortgagor’s title to
the property.
3. when the mortgaged property happens to be a renewable leasehold property.
4. the mortgagee can spend the money on insuring the mortgagor’s property.

Right to proceed of revenue sale or compensation on acquisition

 As per Section 73(1) of the Transfer of Property Act, 1882 if the mortgaged property is sold
due to the non-payment of government dues then the mortgagee shall have every right to
claim back his mortgaged money from such sale.
 As per Section 73(2) of the Transfer of Property Act, 1882 if the mortgaged property is
acquired under the land acquisition Act or any other Act and the compensation is paid the
mortgagee can claim his debt from such compensation.
Liabilities of Mortgagee in Possession
As per Section 76 of the Transfer of Property Act, 1882 list down the duties of the mortgagee who is
in possession of the property which belongs to the mortgagor.

The duties mentioned under are the statutory duties except for the duties which are mentioned under
clauses (c) and (d) the duties under these clauses are mentioned in the contract by the parties.

Duty to manage the property

 The mortgagee has a duty to take reasonable care in the property of the mortgagor.
 Though he has a liability to take reasonable care in the property the mortgagee is not bound
by the directions given by the mortgagor and the mortgagee has acquired absolute rights in
managing the property.
 The only condition which is put forward by the mortgagor is that he cannot lease the property
beyond the termination of his interest in the mortgaged property.

Duty to collect rents and profits

 The mortgagee who is in possession of the mortgagor’s property can collect the rent and
profits arising from the property.
 One outstanding feature of usufructuary mortgagee is the rent and profits collected from the
property are appropriated by the mortgagee instead of payment of interest.
 Mortgagee becomes liable for the collection of rent and profit only to the property which he is
liable to acquire the rent and profits and not liable for the whole rental property.

Duty to pay rent, revenue and public charges

 If there is an agreement between the mortgagor and mortgagee that the mortgagee has to pay
the rents, revenue, taxes and outgoings then the mortgagee is liable to pay all of them which
have been agreed by him.
 The mortgagee is not allowed to take the benefits without paying the taxes etc.
 In case the money which has been obtained from the property is insufficient for paying the
charges, he may pay out of his own pocket and later add the amount which has been paid by
him to the debit account.

Duty to make necessary repairs

  If there is an agreement between the mortgagor and mortgagee that the mortgagee is bound to
carry out all the necessary repairs in the property then the mortgagee is liable to take care of
the necessary repairs.
 The necessary repairs in the property are to be made only when there is a surplus amount
from the rents and profits.

Duty not to commit any destructive act

 While the property is in the mortgagee’s possession he is prevented from committing any act
which is either in destructive nature or is injurious to the mortgaged property.
 He is prohibited from carrying out any acts which may result in reducing the value of the
property.
 If the property is destroyed because of acts of god then the mortgagee is not liable for the
property.

Duty towards the proper use of insurance money

 Where the mortgaged property has been insured against loss by fire it is the duty of the
mortgagee to apply for the insurance money in restoring the property.
 The mortgagee is also bound to apply the money received under the insurance policy in
reinstating the property.
 The property which is to be insured only for the two-third of its value.

Duty to keep the accounts

 The mortgagee has a statutory duty under this provision in keeping the correct accounts of all
incomes arose and expenses incurred by the mortgagee.
 The only exception is when the mortgagee is entitled to adjust the income against the interest
he is not allowed to give full accounts because something there may be no money left to use
for other expenses.

Duty to apply rents and profit

 This clause provides the manner in which the mortgagee who is in possession of the property
has to apply for rents and profits during the mortgage.

Essential doctrines under mortgage

Doctrine of Priority
 The doctrine of Priority is provided under Section 78 and 79 of the Transfer of Property Act,
1882.
 This doctrine is based on the principle “quite prior est tempore potior est jure”.
 It means that first in time prevails over the other.
 Where the immovable property is transferred by the mortgagor to different mortgagees the
successive mortgagee is paid only after the prior mortgagee is satisfied.
 Section 48 of the Transfer of Property Act, 1882 is an exception to this section.
 As per Section 78 of the Transfer of Property Act, 1882 in case a prior mortgage suffers from
fraud, misrepresentation or gross neglect then the subsequent mortgage shall have priority
over the prior mortgage.

Doctrine of Marshalling
 Marshalling is defined under Section 81 of the Transfer of the Property Act, 1882.
 In simple terms, marshalling means arranging things.
 The doctrine of marshalling means when there are two or more properties which belong to the
mortgagor and the mortgages those properties to one mortgagee and then subsequently
mortgage those properties which have been mortgaged to another mortgagee.
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.

Charge under Transfer of Property Act, 1882

Section 100 to 101 of the Transfer of Property Act, 1882 deals with Charges of Immovable property.

Charge
According to Section 100 of the Transfer of Property Act, 1882 Charge means where the immovable
property is transferred by one party to another party for the security of payment of money. The
transaction does not amount to a mortgage and all the provisions which are applicable to simple
mortgages shall apply to the charge. The charge does not transfer any interest in favour of the charge
holder but he has the right to recover his money from the property.

Essential points to take into consideration as mentioned under Section 100 of Transfer of Property
Act, 1882:
 1. A charge can be created either by an act of parties or through the operation of law.
2. It is created as a security for payment of money.
3. The transaction which is created does not amount to a mortgage.
4. A charge can be enforced by a suit.
5. A charge may be extinguished either by an act of parties by way of the release of debt or by a
novation or by a merger.

Distinctions between a mortgage and a charge

Mortgage Charge

A charge which is created as security for

A mortgage is always created only for the payment of a
the payment of money may not always be
debt.
for debt.

In a mortgage, there is an agreement between the parties In charge, there is no such formal
that a pasty will pay the money. agreement between the parties.

It is said that every mortgage is a charge. Every charge is not a mortgage.

A mortgage involves the transfer of an interest in an In charge, there is no transfer of an interest

immovable property. in favour of the charge holder.

A simple mortgage can be enforced within 12 years and a

mortgage other than a simple mortgage can be enforced A charge can be enforced within 12 years.
within 30 years.

Distinctions between charge and lien

Charge Lien

A charge can be created either by the act of the

A lien can be created by only the operation of law.
parties or by operation of law.

A charge can be created only on immovable A lien can be created either on movable property
property. and immovable property.
 A charge is not possessory in nature. A lien is possessory in nature.

No merger in case of subsequent encumbrance

According to Section 101 of Transfer of Property Act, 1882 states the mortgagee of immovable
property or the person who is having a charge on the immovable property or the transferee from such
mortgagee or charge-holder may acquire the rights in the property of the mortgagor without merging
the mortgage or the charge as between:

1. himself and the subsequent mortgagee of the same property.

2. himself and a person having charge upon the same property.
Such subsequent mortgage or charge cannot be sold or foreclose without redeeming the prior
mortgage or charge.

Conclusion
The concept of mortgage is one of the important concepts under the Transfer of Property Act, 1882
as it helps in securing the debt to the mortgagor and also helps in redeeming the property as soon as
the mortgagor pays back the amount due to the mortgagee.

Unit IV

Concept of gift under the Transfer

of Property Act, 1882
Table of Contents
 Introduction
 What may be referred to as a gift
o Gift
 Mt. Brij Devi v. Shiva Nanda Prasad & Ors (1939) : an analysis
o Parties to a gift transfer
 Donor
 Donee
o Essential elements
  Transfer of ownership
 Existing property
 Transfer without consideration
 Voluntary transfer with free consent
 Acceptance of gift
 Modes of making a gift
o Immovable properties
o Movable properties
o Actionable claims
 A gift of future property
 A gift made to more than one donee
 Provisions relating to onerous gifts
 Universal donee
 Suspension or revocation of gifts
o Revocation by mutual agreement
o Revocation by the rescission of the contract
o Bonafide purchaser
 Exceptions
o Donations mortis causa
o Muslim-gifts (Hiba)
 Conclusion

Introduction
A Gift is generally regarded as a transfer of ownership of a property where the sender willingly
brings into effect such transfer without any compensation or consideration in monetary value. It may
be in the form of moveable or immoveable property and the parties may be two living persons or the
transfer may take place only after the death of the transferor. When the transfer takes place between
two living people it is called inter vivos, and when it takes place after the death of the transferor it is
known as testamentary. Testamentary transfers do not fall under the scope of Section 5 of
the Transfer of Property Act, and thus, only inter vivos transfers are referred to as gifts under this
Act.

If the essential elements of the gift are not implemented properly it may become revoked or void by
law. There are many provisions pertaining to the gifts. All such provisions, for example, types of
property which may be gifted, modes of making such gift, competent transferor, suspension and
revocation of gift, etc. are discussed in this article.

What may be referred to as a gift

Gift
Section 122 of Transfer of Property Act defines a gift as the transfer of an existing moveable or
immovable property. Such transfers must be made voluntarily and without consideration. The
transferor is known as the donor and the transferee is called the donee. The gift must be accepted by
the donee. This Section defines a gift as a gratuitous transfer of ownership in some property that is
already existing. The definition includes the transfer of both immovable and moveable property.

Mt. Brij Devi v. Shiva Nanda Prasad & Ors (1939): an analysis
One of the few essentials of a Gift is, that in event of a transfer, there must be a transfer of all the
rights in the property by the donor to the donee; however, it is also permissible to make conditional
gifts. Such a clause is governed by Section 126 of the Act.

To delve into the issue, we must refer to the first important pre-independence judgment of the
Allahabad High Court, where the subject matter of dispute is the same as our concern. In the case
of Mt. Brij Devi v. Shiva Nanda Prasad & Ors (1939) Brij Devi had claimed possession of a land
which had formed the focus of a gift deed executed by her ancestors on 11th December 1914, in
favor of one Jain Bulaqi Shankar. The gift deed was executed with some conditions attached to it
which read as, “The material terms of the gift-deed are as follows: I have made a gift to Pt. Jain
Bulaqi Shankar for construction of the temple of Bhaironji, and residence, and removing my
possession from the property gifted, I have put the donee in proprietary possession and he will have
the right to construct a temple and a quarter… The donee or his successors will have no right to
transfer or mortgage it; if he does, the transfer will be invalid, and I and my successors will have a
right to get the gift revoked.” As per the gift deed, Jain Bulaqi did not succeed in building the temple
or a residential quarter for his own occupation, but subsequently he made a waqf of the property in
favour of one Shiva Nanda Prasad in 1927, which means, he transferred the property which had been
gifted to him by the plaintiffs’ ancestor. This action of the done was alleged to be in contravention of
the conditions of the gift deed itself. They alleged that in circumstances of property being alienated,
by virtue of the revocation clause mentioned in the gift deed, they were entitled to declare the
transfer done to the defendant as invalid and further have the right to take back the possession of the
land as per the gift deed.

The defendants argued that the transfer made by way of gift deed, was an absolute transfer of the
land to Jain Bulaqi, and that that transfer in the gift deed had been subject to a condition absolutely
restraining the transferee and his successors from parting with or disposing of his interest in the
property which is repugnant to the Transfer of Property Act itself. Section 10 of the Transfer of
Property act states that, absolute restraint on the transferee by the transferor is void, that is, the
condition restraining the alienation is void while the transfer of the property itself is valid. The
defendants’ argument was essentially based on the foundation of Section 10 of TPA, they argued that
such a restraint on the land was void and the contract must be allowed as if an unequivocal transfer of
the land was made to the donee.

Moreover, because the condition was void, the transfers in favor of Shiva Nanda Prasad were valid
and could not be set aside, nor were the plaintiffs entitled to revoke the gift deed. The plaintiffs then
took the defense of Section 126 of the Transfer of Property Act and contested that the transfer was
not void as per the mentioned section. The section essentially means that the donor and donee can
agree upon happening of certain conditions, when the condition is not fulfilled, the gift can be
revoked. The plaintiffs argued that the right to revoke the gift was contingent upon the alienation by
the donee of the land gifted and not upon the will of the donor.
The plaintiffs supported this claim by citing the case of Makund Prasad v. Rajrup Singh (1907), in
which the court held that a gift of property made on the condition that the land would be liable to be
taken back in the event of its Alienation, was valid and the power of revocation was not repugnant to
the original transfer under Section 10.

The court in this case rightfully upheld the defendants claim and ruled that the gift deed cannot be
revoked by the successors of the ancestor who had made the gift deed in favour of Jain Bulaqi as the
transfer was uncosniable in the first place as it restricted the donee completely to alienate such
property. This was the first major judgment which rightfully upheld the donee’s claim and rightfully
interpreted the law relating to sections 10 and 126, however the thing to note in this judgment was
the lower appellant court had ruled in favour of the plaintiffs and the high court had overturned the
decision which is a usual trend which we see in cases relating to the issue of our paper. Even after
such a judgment, we see cases relating to the same issue where the lower and high court’s decision is
overturned in the Supreme Court. In the case of Sridhar vs N. Revanna (2000), which is a case of
February, 2020, out of the many issues in the suit, the same issue, that is, whether a gift deed can be
revoked by virtue of Section 126 if such property is alienated had been raised in the Supreme Court
once again for which the court had to adjudicate the matter. In this case one Shri Muniswamappa,
great grandfather of the plaintiffs and grandfather of defendant No.1, was the absolute owner of the
suit schedule property who executed gift deeds in favour of the defendants with the same condition
that the property should not be alienated and if such property was to be alienated, then the gift deed
stands invalid. The defendants on the other hand had sold the property which they had received as a
gift to which the plaintiffs’ alleged that such a transfer was invalid as the gift deed specifically stated
that the mentioned property is not to be alienated and the plaintiffs demanded the property to be
transferred to them back.

The High Court in this case too decided that the condition of the gift deed was not fulfilled and thus
ruled that the sale made by the donee was invalid and the property is to be returned, but the Supreme
court in this too cited the ruling held in the case of Mt. Brij Devi v. Shiva Nanda Prasad & Ors
(1939) and overturned the High court’s decision and ruled that the gift deed cannot be revoked as at
the very inception of the gift deed, the donee was completely restricted to alienate such property
which is prohibited by Transfer of Property Act by virtue of section 10.

For an issue that has been a settled law as per the 1939 judgment of the Allahabad High Court, it is
important to analyze what is making the courts interpret such laws in different manners and why are
the higher courts being time and again invoked to settle such disputes. Firstly we would look at the
way Section 126 is drafted in the Transfer of Property Act and also the placement of such a section
would be beneficial for an in-depth analysis. Section 126 reads as: “donor and donee may agree that
on the happening of any specified event which does not depend on the will of the donor, a gift shall
be suspended or revoked; but a gift which the parties agree shall be revocable wholly or in part, at
the mere will of the donor, is void wholly or in part, as the case may be.”

The section as it appears has a highly generic wording and allows the donor to make some condition
while gifting it to the donee and if such condition is not fulfilled or abided by, the donor can revoke
the gift deed not on the basis of his will but subject to the condition that remained unfulfilled or
which has not been abided by. This section is type of a conditional clause as the gifts chapter starts
from Section 122 of the Transfer of Property Act. Chapter 2 of the Act is a general chapter which
puts some restrictions on the property while the gifts form a part of separate chapter, that is, ‘of
Gifts’ in the Act. Moreover if we look at the illustrations present in the section, it appears that the law
is silent upon such matters, that is, what if there is a complete restriction on the alienation of the
property. The courts while adjudicating the matter look at the placement of these conditional clauses,
where the presence of section 126, that is, the conditional clause is already present in the chapter, the
courts tend to think that the gifts are to be governed only by the set conditions that have been made in
the gift deed. Moreover, the courts also interpret that if such conditional clause is present in the
chapter ‘of gifts’ hwere parties can make own conditions in the gift deed, there must be a legislative
intent behind this structuring and the chapter ‘of gifts’ must be looked at aloof of other chapters,
specifically Section 10 (to which our analysis is limited). The illustrations (Section 126), being silent
on such conditions, also add to this mis-interpretation of the court. The first illustration provided in
the section is contingent upon the death of B and his descendants but in the first place, the donee is
not restricted from alienation of the property.

The second illustration provided also does not talk about the alienation issue rather it clarifies that if
an amount of 100 is gifted to someone by the donor and with both the donor and donee’s assent, they
agree that Rs 10 can be asked back at any time, this shows that the actual gift was of Rs 90 only as
the donee has to return back the Rs 10 to the donor back, that is, that amount of Rs 10 is inalienable.
The second illustration is somewhat related to the issue at hand but because it is talking about a
movable gift, that is, in cash, the courts tend to think that this may be applicable to only movable
gifts as we cannot gift land in such a way. Thus, due to the absence of such clarity in the issue, the
court thinks that the act is silent in the issue at hand and they tend to give different rationale and rule
that the property which forms center of a gift deed can be revoked if the condition of alienation is not
abided by the donee.

This interpretation or perception of the courts is wrong as section 10 of the act is part of the chapter
2, that is, ‘of transfers of property by act of Parties’ which is a general section and must apply to all
the chapters of the Act as it defines the ‘action’ of the parties per se which is void in the eyes of law.
Needless to mention, Parties of any transaction are an essential element for a transaction to take
place, thus a specific chapter has been created by the Act which gives some clarity of what all actions
of the parties entering into the transaction are good or bad in law. If there was a legislative intent for
a gift to be governed only by the conditions of the gift deed, that is, section 126 of the Transfer of
Property Act and section 10 would not apple to such conditions, then such an exception would be
specifically mentioned in the section 10 of the Act just like mortgage, which has been specifically
excluded in the section 10 of the Act. Thus, reading into the issues where the act appears to be silent
as section 126 and section 10 are a part of different chapters is the wrong approach that is often
followed by the court which leads to wrong judgments time and again. The same logic of free market
that is used to defend the creation of section 10 of the Act can also be extended to this issue as well.
The main reason for which such a section, that is, section 10 was created was to not allow
accumulation of the property. People in India hold a lot of sentimental value towers the land and
property they own and subsequently the ancestors do not want their future generations to alienate
such property.

To counter such problem, that is, a property does not start limiting to one family lineage; such a
section was created and is still needed as exclusion of such a section would pull us back to
the zamindari system as was prevalent in India as few years back. Moreover when a gift deed is
revoked the government too is not benefitted from this transfer in terms of taxes. A gift deed in the
first place when is executed, it does not attract any tax but there is a change in ownership as there is a
change in title of the property and when such a gift deed will be revoked, there will be again a change
in the title and ownership which would not attract any tax as the property which was owned by the
donor at some time is being handed back to him by way of revocation, thus two transfers of title are
made and the taxable amount is none on the property which is something not beneficial for a new
democracy to progress. Moreover the legal maxim, “alienation rei praefertur juri
accrescendi” meaning that Law favours Alienation instead of Accumulation can be extended to the
issue at hand and by way of alienation of the gifted property, even the government could benefit from
the amount of taxes that would be charged by way of transfer of such property to a third person.

Parties to a gift transfer

Donor
The donor must be a competent person, i.e., he must have the capacity as well as the right to make
the gift. If the donor has the capacity to contract then he is deemed to have the capacity to make the
gift. This implies that at the time of making a gift, the donor must be of the age of majority and must
have a sound mind. Registered societies, firms, and institutions are referred to as juristic persons, and
they are also competent to make gifts. Gift by a minor or insane person is void. Besides capacity, the
donor must also have the right to make a gift. The right of the donor is determined by his ownership
rights in the property at the time of the transfer because gift means the transfer of the ownership.

Donee
Donee does not need to be competent to contract. He may be any person in existence at the date of
making the gift. A gift made to an insane person, or a minor, or even to a child existing in the
mother’s womb is valid subject to its lawful acceptance by a competent person on his/her behalf.
Juristic persons such as firms, institutions, or companies are deemed as competent donee and gift
made to them is valid. However, the donee must be an ascertainable person. The gift made to the
general public is void. If ascertainable, the donee may be two or more persons

Essential elements
There are the following five essentials of a valid gift:

1. Transfer of ownership
2. Existing property
3. Transfer without consideration
4. Voluntary transfer with free consent
5. Acceptance of the gift
Transfer of ownership
The transferor, i.e., the donor must divest himself of absolute interest in the property and vest it in the
transferee, i.e., the donee. Transfer of absolute interests implies the transfer of all the rights and
liabilities in respect of the property. To be able to effect such a transfer, the donor must have the right
to ownership of the said property. Nothing less than ownership may be transferred by way of gift.
However, like other transfers, the gift may also be made subject to certain conditions.

Existing property
The property, which is the subject matter of the gift may be of any kind, movable, immovable,
tangible, or intangible, but it must be in existence at the time of making a gift, and it must be
transferable within the meaning of Section 5 of the Transfer of Property Act.

Gift of any kind of future property is deemed void. And the gift of spes successionis (expectation of
succession) or mere chance of inheriting property or mere right to sue, is also void.

Transfer without consideration

A gift must be gratuitous, i.e., the ownership in the property must be transferred without any
consideration. Even a negligible property or a very small sum of money given by the transferee in
consideration for the transfer of a very big property would make the transaction either a sale or an
exchange. Consideration, for the purpose of this section, shall have the same meaning as given
in Section 2(d) of the Indian Contract Act. The consideration is pecuniary in nature, i.e., in monetary
terms. Mutual love and affection is not pecuniary consideration and thus, property transferred in
consideration of love and affection is a transfer without consideration and hence a gift. A transfer of
property made in consideration for the ‘services’ rendered by the donee is a gift. But, a property
transferred in consideration of donee undertaking the liability of the donor is not gratuitous,
therefore, it is not a gift because liabilities evolve pecuniary obligations.

Voluntary transfer with free consent

The donor must make the gift voluntarily, i.e., in the exercise of his own free will and his consent as
is a free consent. Free consent is when the donor has the complete freedom to make the gift without
any force, fraud coercion, and undue influence. Donor’s will in executing the deed of the gift must be
free and independent. Voluntary act on a donor’s part also means that he/she has executed the gift
deed in full knowledge of the circumstances and nature of the transaction. The burden of proving that
the gift was made voluntarily with the free consent of the donor lies on the donee.

Acceptance of gift
The donee must accept the gift. Property cannot be given to a person, even in gift, against his/her
consent. The donee may refuse the gift as in cases of non-beneficial property or onerous gift.
Onerous gifts are such where the burden or liability exceeds the actual market value of the subject
matter. Thus, acceptance of the gift is necessary. Such acceptance may be either express or implied.
Implied acceptance may be inferred from the conduct of the donee and the surrounding
circumstances. When the donee takes possession of the property or of the title deeds, there is
acceptance of the gift. Where the property is on lease, acceptance may be inferred upon the
acceptance of the right to collect rents. However, when the property is jointly enjoyed by the donor
and donee, mere possession cannot be treated as evidence of acceptance. When the gift is not
onerous, even minimal evidence is sufficient to prove that the gift has been accepted by donee. Mere
silence of the donee is indicative of the acceptance provided it can be established that the donee had
knowledge of the gift being made in his favour.

Where the deed of gift categorically stated that the property had been handed over to the donee and
he had accepted the same and the document is registered, a presumption arises that the executants are
aware of what was stated in the deed and also of its correctness. When such presumption is coupled
with the recital in the deed that the donee had been put in possession of the property, the onus of
disproving the presumption would be on the donor and not the donee.

Where the donee is incompetent to contract, e.g., minor or insane, the gift must be accepted on his
behalf by a competent person. The gift may be accepted by a guardian on behalf of his ward or by a
parent on behalf of their child. In such a case, the minor, on attaining majority, may reject the gift.

Where the donee is a juristic person, the gift must be accepted by a competent authority representing
such legal person. Where the gift is made to a deity, it may be accepted by its agent, i.e., the priest or
manager of the temple.

Section 122 provides that the acceptance must be made during the lifetime of the donor and while he
is still capable of giving. The acceptance that comes after the death or incompetence of the donor is
no acceptance. If the gift is accepted during the life of the donor but the donor dies before the
registration and other formalities, the gift is deemed to have been accepted and the gift is valid.

Modes of making a gift

Section 123 of the Transfer of Property Act deals with the formalities necessary for the completion of
a gift. The gift is enforceable by law only when these formalities are observed. This Section lays
down two modes for effecting a gift depending upon the nature of the property. For the gift of
immovable property, registration is necessary. In case the property is movable, it may be transferred
by the delivery of possession. Mode of transfer of various types of properties are discussed below:

Immovable properties
In the case of immovable property, registration of the transfer is necessary irrespective of the value of
the property. Registration of a document including gift-deed implies that the transaction is in writing,
signed by the executant (donor), attested by two competent persons and duly stamped before the
registration formalities are officially completed. In the case of Gomtibai v. Mattulal, it was held by
the Supreme Court that in the absence of written instrument executed by the donor, attestation by two
witnesses, registration of the instrument and acceptance thereof by the donee, the gift of immovable
property is incomplete.

The doctrine of part performance is not applicable to gifts, therefore all the conditions must be
complied with. A donee who takes possession of the land under unregistered gift-deed cannot defend
his possession on being evicted. The following must be kept in mind regarding the requirement of
registration:

 Registration of the gift of immovable property is must, however, the gift is not suspended till
registration. A gift may be registered and made enforceable by law even after the death of the
donor, provided that the essential elements of the gift are all present.
 In case the essential elements of a valid gift are not present, the registration shall not validate
the gift.
It has been observed by the courts that under the provisions of the Transfer of Property Act, Section
123, there is no requirement for delivery of possession in case of an immovable gift. The same has
been held in the case of Renikuntla Rajamma v. K. Sarwanamma that the mere fact that the donor
retained the right to use the property during her lifetime did not affect the transfer of ownership of
the property from herself to the donee as the gift was registered and accepted by the donee.

Movable properties
In the case of movable properties, it may be completed by the delivery of possession. Registration in
such cases is optional. The gift of a movable property effected by delivery of possession is valid,
irrespective of the valuation of the property. The mode of delivering the property depends upon the
nature of the property. The only things necessary are the transfer of the title and possession in favour
of the donee. Anything which the parties agree to consider as delivery may be done to deliver the
goods or which has the effect of putting the property in the possession of the transferee may be
considered as a delivery.

Actionable claims
Actionable claims are defined under Section 3 of the Transfer of Property Act. It may be unsecured
money debts or right to claim movables not in possession of the claimant. Actionable claims are
beneficial interests in movable. They are thus intangible movable properties. Transfer of actionable
claims comes under the purview of Section 130 of the Act. Actionable claims may be transferred as
gift by an instrument in writing signed by the transferor or his duly authorised agent. Registration and
delivery of possession are not necessary.

A gift of future property

Gift of future property is merely a promise which is unenforceable by law. Thus, Section 124 of the
Transfer of Property Act renders the gift of future property void. If a gift is made which consists of
both present as well as future property, i.e., one of the properties is in existence at the time of making
the gift and the other is not, the whole gift is not considered void. Only the part relating to the future
property is considered void. Gift of future income of a property before it had accrued would also be
void under Section 124.

A gift made to more than one donee

Section 125 of the Act says that in case a property is gifted to more than one donee, one of whom
does not accept it, the gift, to the extent of the interest which he would have taken becomes void.
Such interest reverts to the transferor and does not go to the other donee.

A gift made to two donees jointly with the right of survivorship is valid, and upon the death of one,
the surviving donee takes the whole.

Provisions relating to onerous gifts

Onerous gifts refer to the gifts which are a liability rather than an asset. The word ‘onerous’ means
burdened. Thus, where the liabilities on a property exceed the benefits of such property it is known as
an onerous property. When the gift of such a property is made it is known as an onerous gift, i.e., a
non-beneficial gift. The donee has the right to reject such gifts.

Section 127 provides that if a single gift consisting several properties, one of which is an onerous
property, is made to a person then that person does not have the liberty to reject the onerous part and
accept the other property. This rule is based upon the principle of “qui sentit commodum sentire
debet et onus” which implies that the one who accepts the benefit of a transaction must also accept
the burden of it. Thus, when two properties, one onerous and other prosperous, are given in gift to a
donee in the same transaction, the donee is put under the duty to elect. He may accept the gift
together with the onerous property or reject it totally. If he elects to accept the beneficial part of the
gift, he is bound to accept the other which is burdensome. However, an essential element of this
Section is a single transfer. Both the onerous and prosperous properties must be transferred in one
single transaction only then they require the obligation to be accepted or rejected in a joint manner.

In case the onerous gift is made to a minor and such donee accepts the gift, he retains the right to
repudiate the gift on attaining the age of majority. He may accept or reject the gift on attaining
majority and the donor cannot reclaim the gift unless the donee rejects it on becoming a major.

Universal donee
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.

Suspension or revocation of gifts

Section 126 of the Act provides the legal provisions which must be followed in case of a conditional
gift. The donor may make a gift subject to certain conditions of it being suspended or revoked and
these conditions must adhere to the provisions of Section 126. This Section lays down two modes of
revocation of gifts and a gift may only be revoked on these grounds.

Revocation by mutual agreement

Where the donor and the donee mutually agree that the gift shall be suspended or revoked upon the
happening of an event not dependent on the will of the donor, it is called a gift subject to a condition
laid down by mutual agreement. It must consist of the following essentials:

 The condition must be expressly laid down

 The condition must be a part of the same transaction, it may be laid down either in the gift-
deed itself or in a separate document being a part of the same transaction.
 The condition upon which a gift is to be revoked must not depend solely on the will of the
donor.
 Such condition must be valid under the provisions of law given for conditional transfers. For
eg. a condition totally prohibiting the alienation of a property is void under Section 10 of the
Transfer of Property Act.
 The condition must be mutually agreed upon by the donor and the donee.
 Gift revocable at the will of the donor is void even if such condition is mutually agreed upon.

Revocation by the rescission of the contract

Gift is a transfer, it is thus preceded by a contract for such transfer. This contract may either be
express or implied. If the preceding contract is rescinded then there is no question of the subsequent
transfer to take place. Thus, under Section 126, a gift can be revoked on any grounds on which its
contract may be rescinded. For example, Section 19 of the Indian Contract Act makes a contract
voidable at the option of the party whose consent has been obtained forcefully, by coercion, undue
influence, misrepresentation, or fraud. Thus, if a gift is not made voluntarily, i.e., the consent of the
donor is obtained by fraud, misrepresentation, undue influence, or force, the gift may be rescinded by
the donor.

The option of such revocation lies with the donor and cannot be transferred, but the legal heirs of the
donor may sue for revocation of such contract after the death of the donor.

The limitation for revoking a gift on the grounds of fraud, misrepresentation, etc, is three years from
the date on which such facts come to the knowledge of the plaintiff (donor).

The right to revoke the gift on the abovementioned grounds is lost when the donor ratifies the gift
either expressly or by his conduct.

Bonafide purchaser
The last paragraph of Section 126 of the Act protects the right of a bonafide purchaser. A bonafide
purchaser is a person who has purchased the gifted property in good faith and with consideration.
When such a purchaser is unfamiliar with the condition attached to the property which was a subject
of a conditional gift then no provision of revocation or suspension of such gift shall apply.

Exceptions
Section 129 of the Act provides the gifts which are treated as exceptions to the whole chapter of gifts
under the Act. These are:

 Donations mortis causa

These are gifts made in contemplation of death.

 Muslim-gifts (Hiba)
These are governed by the rules of Muslim Personal Law. The only essential requirements are
declaration, acceptance and delivery of possession. Registration is not necessary irrespective of the
value of the gift. In case of a gift of immovable property worth more than Rupees 100, Registration
under Section 17 of the Indian Registration Act is must, as it is applicable to Muslims as well. For a
gift to be Hiba only the donor is required to be Muslim, the religion of the donee is irrelevant.
Conclusion
To constitute a transfer as a gift it must follow the provisions of the Transfer of Property Act. This
Act extensively defines the gift itself and the circumstances of the transfer of such a gift. The gift,
being a transfer of the ownership rights, must be in possession and ownership of the transferee and
must be existing at the time of making the transfer. The transferor must be competent to make such
transfer but the transferee may be any person. In case the transferee is incompetent to contract, the
acceptance of gift must be ratified by a competent person on his/her behalf. Gift of future property is
void. Partial acceptance of prosperous gifts and rejection of onerous gifts is not valid either. The
acceptance of a gift entails the acceptance of the benefits as well as the liabilities coupled with such a
gift. A gift may be revoked only by a mutual agreement on a condition by the donor and the donee,
or by rescinding the contract pertaining to such gift. The Donations mortis causa and Hiba are the
only two kinds of gifts which do not follow the provisions of the Transfer of Property Act.

Lease under Transfer of Property

Act, 1882
In India, transfer of property is not possible for every individual because of financial issues. The
permanent or absolute transfer is a luxury for some people, but a temporary transfer is something that
has given every citizen the right of enjoying any property. One of the modes of transferring property
for a particular period of time is Lease. Lease is a transfer of an interest in the property for a
stipulated period of time without transferring the ownership of that property. In a lease, right of
possession is transferred instead of the right of ownership. Transferor here is called the lessor and the
transferee i.e. the one enjoying the property for a period is called lessee. Lease is governed by
the Transfer of Property Act, 1882 and it is given from Sections 105 to 117.

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.

What are the essentials of a lease?

o Parties must be competent: The parties in a lease agreement should be competent
to enter into a contract. Lesser should be entitled to a property and have absolute
rights over that property.
 o Right of possession: Ownership rights are not transferred in a lease, only the
possession of the property is transferred.
o Rent: Consideration for a lease can be taken in the form of a rent or premium.
o Acceptance: Lessee, who is to get the interest in the property after lease, has to
accept the lease agreement along with the time period and terms & conditions
imposed on the transfer.
o Time Period: Lease always takes place for a particular time period which is to be
specified in the lease agreement. It can be relaxed at the option of the lessor.
Difference between lease and rent
What is a lease agreement?
Section 105 of The Transfer of Property Act, 1882, defines leases. According to
this Section, a lease ‘is a transfer of a right to enjoy a 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’.

For a rent agreement to qualify as a lease, it must fulfill the following

conditions:
 The landlord has to transfer the right to make use of a property, to the
tenant.
 This arrangement has to be for a specific period or for perpetuity.
 The landlord has to receive a monthly rent in exchange for transferring the
right to enjoy his property to the tenant. Apart from cash, the two parties
can enter into an agreement where the tenant could pay ‘a share of crops,
service or any other thing of value’.
 A lease contract must be signed, when the landlord plans to let out his
premise for a long period – this could range from 3 years to eternity. Also,
a lease deed needs to be stamped and registered. Owing of the registration,
lease agreements are generally not easy to terminate.

Lease vs Rent: A Comparative Table

Basis for
Lease
Differences

“Lease” is agreeing with the lessee (in simple terms, tenant) to use a property for a long
Definition
period of time.

Maintenance In a lease agreement, property maintenance responsibility lies on the lessee.

Changes in Once the agreement is signed, no changes can be made throughout the duration.
Agreement

Term Generally, a lease agreement lasts for 1-3 years.

What is a lease deed?

A lease deed is a written contract between the property owner and the tenant that
carries all the terms and conditions. A lease deed is signed between the two parties
at the time of renting of commercial property. A lease deed has to be registered, if
the lease period is for more than 11 months.
Leasing is more common in commercial renting
Owing to the high value involved in commercial transactions that require proper
legal protection to both, the landlord and the tenant, leasing is more common in
the commercial real estate segment. In such cases, the entire exercise is more
formalised. The same is not true about renting in the residential segment,
especially in the low-cost or mid-range property segments, where both, the tenant
and the landlord, often want to skip the hassle of doing the paperwork and base
their decisions pertaining to tenancy on their instinct or gut feeling.

What is a rent agreement?

Rent agreements signed for a 11-month period fall under leave and license
contracts and have no validity under the rent control laws. Rent control laws,
which differ from state to state, have under their purview all lease agreements that
are conducted for a period of at least a year. Landlords, who rent their premises
under the rent control laws, will find it extremely difficult to revise rents and evict
tenants.
Since the Model Tenancy law has now been approved by the union cabinet, all
rent agreements that are executed for period exceeding 11 months, will be guided
by the rules set up under the new law. However, states will come up with their
own version of the model tenancy law or change their existing rental laws before
that can happen.

What happens when the lease agreement does not

prescribe the time period of the lease?
Section 106 provides for the duration of the lease in the absence of the lease agreement. It lays
down that in the absence of a contract, lease can be ended by both parties to the lease by issuing a
notice to quit. The prescribed time period always commences from the date of receiving the notice to
quit. Following are the circumstances:

Purpose Term (Deemed) Notice Prescribed End

 Agricultural or manufacturing purpose. Year to Year 6 month 1 year

Any other purpose. Month to Month 15 days 1 month

In this table, there is a distinction of two purposes in regard to Section 106 i.e. Agricultural or
manufacturing and other purposes. Hence, two things can be derived from this table:

1. When a lease for Agricultural or manufacturing purpose is deemed to be of year to year, then
it will attract a 6-month notice that the lease will end on the expiry of 1 year from the date of
the commencement of the lease.
2. When a lease for any other purpose is deemed to be of the month to month, then it will attract
a 15-day notice that the lease will end on the expiry of 1 month from the commencement of
the lease.
There is proviso to this section which states that the notice to quit in this section should be written
and conveyed to the party who is required to abide by it. If this is not possible then it should be
attached to a conspicuous place in that property.

How is a lease executed?

Section 107 states about lease how made. This section covers three aspects:

1. When there is a lease of Immovable property for a term of 1 year or more – This can only be
made by a registered deed.
2. All other leases of Immovable property – Can be either made by a registered deed or an oral
agreement or settlement along with the transfer of possession of that property.
3. When the lease is of multiple properties that require multiple deeds, it will be made by both
the parties of the lease.
1. In the case of Punjab National Bank v. Ganga Narain Kapur AIR 1994 All 221, Court
held that if the lease is done through an oral agreement, then the provisions of Section 106
will apply.

Rights and liabilities of Lessor and lessee

Rights of the lessor are

1. A lessor has a right to recover the rent from the lease which was mentioned in the lease
agreement.
 2. Lessor has a right to take back the possession of his property from the lessee if the lessee
commits any breach of condition.
3. Lessor has a right to recover the amount of damages from the lessee if there is any damage
done to the property.
4. Lessor has a right to take back the possession of his property from the lessee on
the termination of the lease term prescribed in the agreement.

Liabilities of the lessor

1. The lessor has to disclose any material defect relating to the property which the lessee does
not know and cannot with ordinary supervision find out.
2. Lessor is bound by the request of the lessee to give him the right of possession over his
property.
3. Lessor can enter into a contract with the lessee if he agrees to abide by all terms and
conditions prescribed in the agreement, he can enjoy the property for the rest of the time
period without any interference with an obligation to pay the rent later on.

Rights of the lessee

1. During the period lease (when it is in effect) if any alteration is made (alluvion for the time
being in force) then that alteration will come under that same lease.
2. If a significant part of the property that has been leased is destroyed wholly or partly by fire,
by flood, by war, by the violent acts of the mob or by any other means resulting in its
inefficiency of being a benefit for the lessee. If this happens, the lease is voidable at his
option.
There is a proviso to this section that states if the damage is done due to any act of the lessee himself,
this remedy will not be available for him.

1. Lessee has the right to deduct any expenses he has made for repairs in the property from the
rent if the lessor has failed to in reasonable time.
2. Lessee has a right to recover any such payment which a lessor is bound to make by can
deducting it from the interest of the rent or directly from the lessor. He has this right when the
lessor has neglected to make that required payment.
3. Lessee has a right to detach all things that he may have attached in the property or earth. His
only obligation is that he has to leave the property in the same condition as he received it.
4. When a lease is of unspecified duration in the lease agreement, lessee or his legal
representative have a right to collect all the profits or benefits from the crops which were
sown by the lessee at that property. They also have a right of free ingress and egress from
such property even if the lease ends.
 5. Lessee has a right to transfer absolutely the property or any part of his interest in that property
by sub-leasing or through mortgaging. Lessee is not independent of the terms and conditions
mentioned in the lease agreement.

Liabilities of the lessee

1. Lessee is under an obligation to disclose all related material facts which are likely to increase
the value of the property for which the lessee has an interest in and the lessor is not aware of.
2. Lessee is under an obligation to pay the rent or premium which is settled upon in the
agreement to the lessor or his agent within the prescribed time.
3. Lessee is under an obligation to maintain the property in the condition that he initially got the
property on commencement of the lease and he has to return it in the same condition.
4. If lessee gets to know about any proceedings relating to the property or any encroachment or
any interference, then lessee is under an obligation to give notice to the lessor.
5. Lessee has a right to use all the assets and goods which are on the property as an owner would
use which is preserving it to the best of its nature. He is although under obligation to prevent
any other person from using that asset or good for any other purpose from what was
prescribed in the lease agreement.
6. The lessee cannot attach any permanent structure without the consent of the lessor except for
the purpose of agriculture.
7. Lessee is under an obligation to give the possession of the property back to the lessor after the
expiry of the prescribed term of the lease.

How does a Lease end?

Determination of lease
Section 111 states about the determination of the lease, which lays down the ways in which lease is
terminated:

1. Lapse of time – When the prescribed time of the lease expires, the lease is terminated.
2. Specified event – When there is a condition on time of lease depending upon a happening of
an event.
3. Interest – Lessor’s interest to lease the property may cease, hence resulting in the termination
of the lease.
4. Same owner – When the interest of both lessor and lessee are transferred or vested in the
same person.
5. Express Surrender – This happens when the lessee ceases to have an interest in the property
and comes into a mutual agreement with the lessor.
 6. Implied Surrender – When the lessee enters into a contract with another for the lease of
property, this is an implied surrender of the existing lease.
7. Forfeiture – There are three ways by which a lease can be terminated:
 When there is a breach of an express condition by the lessee. The lessor may get the
possession of the property back.
 When lessee renounces his character or gives the title of the property to a third person.
 When the lessee is termed as insolvent by the banks, and if the conditions provide for it, the
lease will stand terminated.
8. Expiry of Notice to Quit – When the notice to quit by the lessor to the lessee expires, the lease
will also expire.

What is notice to quit and what happens after it?

Notice to quit is a formal written statement that is issued to the lessee if the lessor desires to end the
lease agreement, whether on the expiry of the duration as stated under Section 106 or on grounds
specified in Section 111.

Any lease can be forfeited as mentioned in the sub-clause (g) of Section 111, by acceptance of the
notice to quit.

But Section 112, states that if the lessor after initiating the process of termination of the lease on the
grounds of forfeiture accepts any rent from the lessee, it will be understood that the lease will still
exist and the termination and notice to quit has been waived.

Section 113 provides two ways in which the notice can be waived, that is expressly or impliedly.

1.
1. Express Waiver of notice to quit – When a lessor accepts the rent from the lessee
after the notice to quit has been served, this is called express waiver of notice to
quit.
2. Implied Waiver of notice to quit – When a lessor issues notice to quit to the
lessee, and upon expiry of that notice, lesser issues another notice to quit to the
lessee. The first notice to quit is impliedly waived.
Waiver of notice also shows the intention to continue the existing lease.

Effect of Holding over

Section 116 states about the effect of holding overlays down that if there has been a waiver of
notice to quit, it will not be called a new lease instead it will be called as a lease on sufferance or
tolerance without objecting against it. The term ‘Holding over’ stands for retained possession of a
property which has been leased. After this, the lease is renewable as any normal lease and in the way
prescribed in Section 106.

This section provides that if the lessor agrees to the holding over of the property by the lessee, it will
be renewed. But if the lessor does not entertain the retained possession by the lessee, he can initiate
suit proceedings against him on grounds of trespass or tenant at sufferance.

Conclusion
Lease is a very important aspect of real life. Every person has witnessed a lease deal involving
renting of a house, car or etc. Therefore it is important for the general public to know about the rights
of every individual in a lease, and to know about the provisions that govern lease. The lease is
mentioned from Sections 105 to Section 117, out of which Sections which may help the general
public, law students and the legal fraternity have been discussed in this article to give clarification
and a basic idea about the lease.

Unit V

An Overview: Law of Easements

in India
Meaning and nature of Easements
The concept of easement has been defined under Section 4 of The Indian Easements Act, 1882.
According to the provisions of Section 4, an easementary right is a right possessed by the owner or
occupier of the land on some other land, not his own, the purpose of which is to provide the
beneficial enjoyment of the land. This right is granted because without the existence of this right an
occupier or owner cannot fully enjoy his own property.

It includes the right to do or continue to do something or to prevent or to continue to prevent

something in connection with or in respect of some other land, which is not his own, for the
enjoyment of his own land.

The word ‘land’ refers to everything permanently attached to the earth and the words ‘beneficial
enjoyment’ denotes convenience, advantage or any amenity or any necessity. The owner or
occupier referred to in the provision is known as the Dominant Owner and the land for the benefit
of which the easementary right exists is called Dominant Heritage. Whereas the owner upon whose
land the liability is imposed is known as the Serviant Owner and the land on which such a liability
is imposed to do or prevent something, is known as the Servient Heritage.

Illustrations-
1. ‘P’ being the owner of certain land or house has a right of way over Q’s house, adjacent to his
house, to move out of the street. This is known as right of easement.
2. A voluntary dedication of right by ‘X’ to the public for passing or re-passing over a surface of
certain land is not a right of easement.
3. X’s right to go on his neighbour Y’s household for fetching water from the well for the
purpose of his own household is a right of easement. Here, the way to the well is through Y’s
land only. Hence, X has an easementary right to pass through Y’s household.
In the words of great jurist Salmond, easement is that legal servient which can be exercised on
some other piece of land specifically for the beneficial enjoyment of one’s own land. Right of
easement is basically a form of privilege, the integral part of which is to do an act or prevent certain
acts on some other land for enjoyment of one’s own land.

Other examples of right of easement includes-

 Right of way
 Right to discharge rainwater
 Right to sunlight etc

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
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.

Classification of Easements
Section 5 of the The Indian Easements Act, 1882 classifies the easements as follows–

Continuous or Discontinuous
Continuous easements are the one whose enjoyment may be continued without the intervention of
any human conduct or act of a man. There is no interference by a man and it adds special quality to
the property. While, on the other hand, right of easement for the enjoyment which an interference of
a man is required is known as discontinuous. In this kind of easement, it is necessary that a human
act is done on the servient heritage.

Apparent or Non- Apparent

An apparent easement is one the existence of which can be seen through a permanent sign. It can be
visible by a careful examination and on reasonable foresightedness. It is also known as express
easement. An inspection is required to check the existence of a right. For example- There is a drain
from A’s land to B’s land and from there it led to an open yard. This can be visible through a clear
inspection and is an apparent easement.
Whereas, a non-apparent easement is just opposite of what apparent easement is. This kind of
easement is not visible through an inspection. There is no permanent sign as such. The right is in use
but is not visible and thus, is known as an invisible easement. For example, A’s right annexed to A’s
land to prevent B from building on his own house.

Another example to explain non-apparent easement is that the right to stop construction over a
certain height.

Limitations or Conditions of Easements

An easementary right may be permanent or for a period of years or for a limited term. It can also be
subjected to periodical interruption or may be exercisable at a particular place, between certain hours
and for a certain or particular purpose. This right can also be granted on a condition that such a right
shall become void or voidable on happening of some event or non performing of some act. These
limitations or conditions which regard to the right of easement has been specified under Section 6 of
the Act.

Restrictive Easements
Section 7 specifies that the easements are restrictive of certain rights which are as follows-

 Exclusive right to enjoy

 Right to advantages arising out of the situation

Profit a Prendre
According to The Indian Easements Act, 1882, profit a prendre is a part of the definition of
easements. An instance to explain the concept is, a right to take mud from the land of the other
person for making an earthenware is a profit a prendre. This is basically a profit made out of the land
of the other person. Other examples of profit a prendre-

 Right of fishery
 Right to take fruits of trees in the season
This is the right which is exercised on the land appurtenant to the dominant heritage. Hence, there
shall be the existence of two heritages i.e. dominant and servient. The owner of the dominant heritage
exercises this right on the property of the servient owner. Profit a prendre is a right to do something
on the land of servient tenement for more beneficial enjoyment of the dominant heritage.

Modes of Acquisition of Easements

Express Grant
The easement can be acquired through express grant made by inserting the clause of granting such a
right in the deed of sale, mortgage or through any other form of transfer. This involves expressing by
the grantor of his clear intention. If the value of the immovable property is Rs.100 or above then it
compulsory for it to be in writing and duly registered.

Implied Circumstances
Easementary right can be acquired in implied circumstances in the following ways-

 Easement of Necessity
Section 13 of the act deals with this. This consists of the circumstances where the owner or occupier
cannot use his property without exercising the right of easement over the servient heritage. Thus,
absolute necessity is the test and the convenience.

For example– X sells his land to Y for agricultural purpose. Here, Y cannot access his land without
passing through Z’s land (his neighbour). Thus, this is an easement of necessity.

When a joint property is partitioned amongst various coparceners and if right of easement over one
share of the property is essential for the enjoyment of the share of the other coparcener then latter
shall be entitled to easement.

 Quasi Easements
In the case of a person transferring his property to another person then-

 If an easement is continuous, apparent and necessary to enjoy, then in such a case the
transferee shall be entitled to it,
 If such an easement is continuous, apparent and necessary to enjoy the said property, the
transferor has a right to such easement over property transferred by him
 In case of partition of the property of the joint family, if an easement is continuous, apparent
and necessary to enjoy the share of one coparcener over the other coparcener, then he is
entitled to such a right of easement.
Easements are quasi as those are arising out of circumstances,i.e. When common properties are
converted into tenements by way of sale, mortgage, partition or through any other form of transfer. In
such a case, there is an implied grant of right of easement.
For example– P’s right attached to Q’s house to receive air and light through a window without any
obstruction by his neighbour. This is a continuous.

 Prescriptive Easements
Section 15 provides for this type. Following are the requisites-

 Right must be definite and certain,

 Right must have been independently enjoyed without any agreement with the servient owner,
 Must be enjoyed openly, peacefully and as of a right without any interruption for a continuous
period of 20 years and in respect of any government land the period of non-interruption shall
be 30 years.

 Customary Easements
An easement right can be acquired by virtue of a local custom. This is known as customary
easements. Section 18 of the Act provides for it. For example- people living in a particular city or
town having a right to bury the dead in a particular area or riparian right to use water.

Extinction of Easements
Section 37 to 47 of the The Indian Easements Act, 1882, provides for the mode of extinction of
easements.

 Dissolution of Servient Owner’s right

In the situation where the grantor ceases to have any right in the servient tenement because of some
reason, then the right of easements ceases to exist as well. This has been specified under Section
37 of the Act. For eg- X grants a piece of land to Y for a period of 20 years in the year 1970. In the
year 1971, Y imposed an easement in favour of Z. In 1990 Y’s interest came to an end. Thus,
easementary right granted to Z ceases to end as well.

 Expiry of time or happening of an event

When an easement is acquired on certain conditions or for certain purpose or for certain period of
time. On the fulfilment of such condition or purpose or expiry of the time, the right of easement
extinguishes as well as in accordance with Section 6 of the Act.
  Extinction by release
Where in a situation the owner of the dominant heritage releases the right of easement to the servient
owner, the right ceases to exist. Such a release can be both expressly or impliedly made. For eg- P
has a right to discharge water through the eaves to Q’s yard. P authorized Q to construct a building to
such a height as not be able to discharge water. Q builds it and P’s right comes to an end.

 Termination of necessity
When necessity terminates the easement of necessity terminates as well. For example- A grants a
piece of land to B on which easement of necessity for B is the right of his way over A’s land. Later
on, B purchases a part of the A’s land over which he may pass to reach his own land. Here, the
necessity has ended and so does the easement.

 Useless Easements
When easement is of such a nature that is not useful or becomes incapable of being beneficial at any
time or under any circumstances, then the right of easement ends.

 Permanent change in the Dominant Heritage

When the nature of the dominant heritage changes permanently with increase in burden on tenement,
then the right of easement ceases to exist as the purpose of it was the beneficial enjoyment of the
dominant heritage. For example- A’s house is located such that he has a right of way by passing
through B’s house. Later, due to earthquake, B’s house got cut off and thus, right of easement ends.

 Extinction by destruction of either of heritages

When either of heritages gets destroyed, the easement ends as it is essential for two properties to
exist for exercising the right.

 Unity by ownership
By unity of ownership it is indicated that when one person becomes the owner of both the dominant
and servient heritage then the right of easement terminates. For instance, A has right of easement
over B’s property. Later on, A purchases B’s property and becomes the owner of B’s property. In
such a case, easement extinguishes.
Another example which can be stated her to explain the concept is that A has a right of easement
over B’s land. In future A takes B’s land on rent, here A becomes the occupier of B’s land. Thus,
easement terminates.

Suspension of Easements
Section 49 of the Act provides that easement can be suspended under the following circumstances-

1. An easement is or can be suspended when the dominant owner becomes entitled to the
possession of servient heritage for a limited interest. An example which can be stated here to
explain the concept is that A has a right of easement over B’s land. In future A takes B’s land
on rent, here A becomes the occupier of B’s land. Thus, easement suspends.
2. When the servient owner becomes entitled to the possession of dominant heritage for a
limited interest, the easement is suspended.
Thus, where both the dominant and servient owner becomes one, easement is suspended.

Revival of Easements
Section 51 of the Act provides for the situations wherein easement suspended or extinguished can be
revived, which are as follows-

1. When an easement is extinguished by destruction of either of the heritages then it can be

revived-
 If the heritage is restored in 20 years.

 If the heritage is rebuilt in 20 years

2. In case of unity of ownership, if the unity breaks due to some reason, then easementary right can
be revived and also through an order of a competent court.

Licenses
Section 52 of the Act deals with the concept of licenses. Where one person grants to another person a
right to do or continue to do something in or upon the immovable property of the grantor, something
which if he does will be unlawful without the prior permission or the availability of the grant. Such a
right shall not amount to an easmentary right or creation of interest in the property.

Essentials of licenses
1. It is a permission granted, i.e a right arising out of permission.
2. Legalises an act.
 3. Is revocable on the act of the grantor.
4. It is a right in personam.

Revocation of licenses
License can be revoked in following ways-

1. If from the cause of preceding the grant, the grantor himself ceases to have any interest in the
property, the license gets revoked. Grantor’s interest comes to an end.
2. By express and implied release of the license by licensee.
3. There are certain cases wherein a license is issued under certain conditions or limitations.
This includes a license issued on a condition that if a certain act is doe or is not performed
then the license may become void. In such a situation wherein these acts are performed then
license can be revoked. Also, licenses are granted for the fulfillment of certain acts and once
it is fulfilled license can be revoked.
4. Where a property in relation to which a license was granted gets destroyed due to any reason,
then a license can be revoked.
5. Where, a licensee himself becomes the owner of the property for which license was granted,
then the purpose for which license was granted ceases to exist and thus, the license also
ceases to exist and gets terminated.
6. When licensee does not use it for a period of 20 years then the license gets revoked.

Transferable Licenses
According to Section 56 of the Act, a license can be transferable under the following conditions-

1. A license to attend a place of public entertainment may be transferred by the licensee. This
may be gathered from the grant or contract, or from surrounding circumstances or local usage.
For instance, P grants Q, a right to walk over P’s field whenever he pleases. The right is not
annexed to any immovable property of Q. The right cannot be transferred.
2. Transfer by licensee- The general rule is that the licensee cannot transfer his license. If he
transfers then the transferee becomes a trespasser and can be or may be ejected.

Irrevocable Licenses
Section 60 provides that license can also be irrevocable. If the license is coupled with a transfer of
property and the transfer is in force, it cannot be revoked. This is subject to the agreement. Hence,
the power can be reserved. The rule is that a bare license may be revoked but if coupled with a
transfer of the property, then it is irrevocable.
A license coupled with an interest in a land is binding. A license coupled with profit a prendre is
irrevocable, for example, Right to excavate earth and carry it to make earthen wares, right to cut and
carry timber on payment of royalty.

If the licensee, has executed some work which is permanent in nature and has incurred expenses, the
licence cannot be revoked and hence, is irrevocable. For example, there are two companies, namely
X and Y having lands adjoining to each other. The agents were common who managed to put up the
building and tank on X’s land for use by Y. License is irrevocable as the rule applied as was held in
Ramson V dyson.

Tabular difference between Licenses and

Easements
License Easements

1. License is a form of personal right 1. Right of easement is a right

attached to an immovable property. appurtenant to immovable property.

2. It is a right in personam. 2. It is a right in rem.

3. It is a right which can be annexed to the

3. This right cannot be attached.
property to which it is attached.

4. License is revocable. 4. Easements are not revocable at all.

5. It is a permission given by the licensor i.e the

5. It is acquired as of a right.
grantor.

Conclusion
The Indian Easements Act, provides for the whole concept of right of easements and its regulation
in India. Easement as defined under Section 4 of the Act is a right enjoyed by the owner of the
dominant heritage over the heritage of servient owner for the beneficial enjoyment of his own land. It
not only defines what actually easements consist of but also provides with its classification.
Easements can be prescriptive, customary, quasi and of necessity.
Thereafter, modes of acquiring easements has been provided under Section 7 of the said Act
according to which it can acquired through an express grant or is in certain circumstances
considered to be an implied right. If easement is to be acquired through the express grant then such
a clause has to be specifically mentioned in the deed of sale, mortgage or any other deed in
accordance with the mode of transfer. Easements is a right in rem, that is, it is available against the
whole world. It can be subject to limitations as well and can be restrictive too. Easements can be
both positive and negative. Whereas, on the other hand licenses can only be positive in nature.

Further, the Act talks about the provisions regulating the suspension, extinction and revival of the
easements. Also, how easements is different from licenses has been discussed. The article also
explains the concept of licenses along with its essentials. License can be revocable as mentioned in
the Act and irrevocable as mentioned under Section 60 of the Act. They can also be transferred
according to Section 56 of the Act. It is a right in personam which is not available against the whole
world but is granted personally.