Introduction

The concept of the doctrine of priority is regulated by the Transfer of Property Act, 1882 (TPA)
under Section 48. This doctrine helps the court in determining the correct party to whom the
rights are to be given priority over the other in a case where the court has conflicting interests.
The need for this doctrine arises in a situation where the transferor of the property deals with the
same property with two different people subsequently. Hence, this resolves the problem of the
courts to a large extent.

Doctrine of priority
This doctrine is based on the Principles of Natural Justice which states that if the rights are made
in favor of two different people at different times, then the one who has the advantage in time
will also get the advantage in law. However, this principle applies only in the cases where the
conflicting equities of the parties are involved are otherwise equal. The doctrine of priority under
Section 48 is inspired from the legal maxim, qui prior est tempore potior est jure which
ultimately means one who is first in time is better in law.

This Section lays down an important principle that states, no man can convey a title other than
what he has. This means when a transferor transfers the same property in favor of more than one
transferee, then each transferee will enjoy the property along with its right as the former
transferee. Under this doctrine, if a person has already created a transfer of the property in
motion, then he cannot ignore his grant and deal with the property free from the rights that were
created in an earlier transaction. This Section is absolute in nature and does protect or reserve in
favor of the transferee, who may not even know about the prior transfer. The principle of the
doctrine of priority explained under Section 48 is applicable where there is competition among
the mortgagee by retaining title deeds and a subsequent transferee.

Essentials of the doctrine of priority

1. There ought to be one owner or transferor of the property and more than one
transferee.
2. It is only applicable only to immovable property.
3. The transfer should be created at different times and at these different times there ought
to be created rights to the transferee.
4. This right cannot be exercised to the fullest at the same time.

Effect of the document registered under doctrine of priority

Under the rule of priority, registration of the document does not affect the rights of the prior
transferee. That means if the document of the prior transferee is unregistered whereas the
document of the subsequent transfer is registered, still the rule of priority would be applicable to
the prior transferee and not the subsequent transferee unless and until the subsequent transaction
is made with bonafide intention and without the knowledge of the prior transaction. Registration
does not create any right in the property. It is merely proof of intention to transfer the title of the
property.
Illustration
A mortgaged property to B where the deed is unregistered and will be registered at a later point
in time. Later A transfers the same property to C where the deed is registered and was made with
bonafide intention without the knowledge of the previous transfer. Here B’s right will have
priority over C’s right as the registration of the document does not affect the rule of priority.

In the case of Duraiswami Reddi v. Angappa Reddi (1945), it was observed that the prior
transferee would be entitled to enforce his rights though his documents were registered later. And
even if the subsequent transferee’s documents were registered earlier and he entered into a
transaction with bonafide intention and without the knowledge of the previous transaction, still
he is not entitled to the prior rights. It was also held that the result of the above case was implied
and was a direct impact of the fused operation of Section 47 of the Registration Act and Section
48 of the Transfer of Property Act. It was concluded that the right of priority of the earlier
transferee would be adjourned only if the latter transferee established any detailed incidents such
as fraud, esstoples, or gross negligence.

The Court was also of the opinion that if a document earlier registered should be considered and
prevailed over the document registered later then it would be an advantage for the vendors and
the subsequent transferee to enter into a transaction within the prescribed time for registration of
the earlier document and get the new deed registered immediately and thus defeat the first
transferee under the earlier deed.

Exceptions to the doctrine of priority

Postponement of prior mortgagee (Section 78)

Section 78 of the Transfer of Property Act is an exception to the doctrine of priority. According
to this Section, if the prior mortgagee creates some fraud, gross negligence, or misrepresentation
and induces any person to give security money for the same property, then the prior mortgagee is
postponed to the subsequent mortgagees. Hence, the subsequent mortgagee will have priority in
the rights of the property over the prior mortgagee.

For example, A mortgages a property to B, subsequently, A also mortgages the same property to
C. C unaware of the previous transaction inquiries about any debts (if any) in the property with
B. B fraudulently conceals his mortgage due to which B advances money for the same to A.
Here, though B is the prior mortgagee since B has committed fraud, his prior rights are
postponed.

Non-compliance with the procedure of law in prior transfer

If the prior transfer is created by non-compliance of the procedure laid down by the law, then
such subsequent transfer would be given all the rights prior to the previous transfer. For example,
A executed a lease deed of immovable property in favor of B for 5 years but did not get it
registered which was mandatory. Later, A sold the same property to C. Here the rights of C
would be given preference over B.
Estoppel

See the priority 1 explanation

By registration

Every instrument starts its operation from the date of its execution. In cases where subsequent
deeds are carried out on the same date and the order of execution is unknown, then all the deeds
will be carried out at the same time. And in cases where two deeds consist of different dates and
are registered on different days, then the priority, in this case, will depend upon the dates on the
deeds and not on their respective registered dates.

By notice

The presence of notice means being familiar with the facts. Therefore, when a bona fide contract,
whether oral or written, is created for the sale of property, and further the third party buys the
property concerning the notice of the earlier transfer, the title of the party claiming under the
previous transfer would get the priority over the subsequent purchaser. But the transfer that has
been created in time must be bona fide.

Section 50 of the Registration Act also provides various classifications of the registered
document which is related to the immovable property to draw effect against the unregistered
document. Hence, in cases where the holder of the registered deed had notice of the earlier
unregistered deed, at the time of execution, it gives the registered deed of the subsequent holder a
priority because of his deed over the previous holder of an unregistered deed for not being ought
to be registered.

By court

When the court orders or passes a decree to take the subsequent transfer or the second transfer,
then such transfer would prevail over the prior transfer and the rights of the subsequent transfer
would be given preference. Thus, the rule of priority will not be applicable in such cases.

Case laws on the doctrine of priority

Chouth Mal v. Hira Lal

In this case, the sale of the land agreement was executed in favor of one defendant in January
1932 however, the sale deed was executed in May 1932. During the period of execution that is
somewhere in February 1932, the owner of the property executed a usufructuary mortgage of the
same land in the favor of the plaintiff. The court, in this case, held that the usufructuary mortgage
will be given priority over the subsequent sale deed. It was observed by the court that if the
parties intended and delivered the possession of the properties to the transferee, then the mere
omission of the sale deed will not have any effect or consequence. It was opined that only
transfer does not confer any right or title in the property. It depends upon the date of execution of
the deed. It is also not mandatory to have a deed registered as it does not create any rights.
SFL Industries Ltd. v. Reliance Capital Ltd. (2015)

In this case, the court ordered the petitioner company to wind up on the recommendation of the
Board of Industrial and Financial Reconstruction (BIFR). The question that arose, in this case,
was whether the provision of the Companies Act shall have the effect of the doctrine of priority
which includes whether the claim of the first charge holder would prevail over the claim of the
second charge holder. The court held that there is no specific provision for the right of priority in
the Companies Act. In such cases, the rule of priority under Section 48 of the Transfer of
Property Act can be made applicable. Hence, in the present case, the court ordered that the claim
of the first charge holder would prevail over the claim of the second charge holder.

Conclusion
Section 48 determines the priority when there is more than one transferee. It safeguards the rights
of the first transferee in absence of a special contract or reservation. It describes the essential
principle that no person can carry their rights and titles better than himself. Thus, the transferor
cannot harm the rights of the transferee by making any further transactions with the property. It
cannot ignore the rights created by the earlier transfer. Also, the rule of priority has expanded its
scope of relevance to the Registration Act and Insolvency and Bankruptcy Code.

References

1. https://indianlegalsolution.com/the-doctrine-of-priority-in-tpa-1882/
2. https://www.studocu.com/in/document/karnataka-state-law-university/property-law/doc
trine-of-priority/8790100
3. https://thenationaltv.com/Tech/doctrine-of-priority-meaning-under-property-law
4. https://www.pathlegal.in/Doctrines—principles-udner-the-Property-Laws-blog-922
5. https://www.linkedin.com/pulse/doctrine-priorty-rajesh-a/
6. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3859143&download=yes